Investment Opportunities

Fiscal Terms

Fiscal Terms

As a progressive regulator of Malaysia’s oil and gas resources, MPM has continuously introduced variations to the contractual model and fiscal terms to address the increasing industry complexities and to facilitate investments in specific asset types. The Production Sharing Contract (PSC) continues to evolve since its introduction in 1976 to replace the concession-based system. The PSC fiscal terms today are tailored to match the opportunities offered, providing optimum sharing of the profit oil and profit gas between PETRONAS and investors.

Under the terms of the PSCs, the oil companies (Contractors) are responsible for the exploration, development and production of the hydrocarbon resources in Malaysia. The Contractors bear the risks associated with petroleum activities in the contract area while enjoying entitlement from the hydrocarbon production.

The majority of the existing PSCs are premised on a Revenue over Cost (R/C) structure with profit tranches based on the ratio of revenue against cost incurred and additional claw back functions built in. For 2021 and onwards, 3 new fiscal terms have been drawn up, applicable for small fields assets, late life assets and shallow water exploration blocks. These terms are the Small Field Assets (SFA), Late Life Assets and Enhanced Profitability PSC fiscal terms, designed to provide equitable returns to match the associated risks and the opportunity to accelerate development and monetisation.

Malaysia offers innovative fiscal terms tailored to match specific asset types and provide optimum returns to investors PETRONAS Brand

Concession Agreement
Contractors previously fully owned fully owned the asset and only paid royalty and tax to the government. Upon introduction of the PDA 1974, concession agreements were replaced with Production Sharing Contracts (PSC).

1976 PSC
PETRONAS had sole ownership of the assets. Contractors were allowed to recover costs. Profits were shared among PETRONAS and Contractors.

1985 PSC
New terms were introduced based on potiential resources oil price and cost structure to pen up investment opportunities.

Deepwater/Ultra Deepwater (DW/UDW) PSC
Terms were based on water depth to cater for high risk deepwater environments, targeting major players with deepwater experience.

Revenue over Cost (R/C) PSC
Profitability-based on a sliding scale aimed at attracting investments and promoting cost-effective technology in exploring high risk areas.

High Pressure/High Temperature (HP/HT) PSC
R/C PSC terms were improved to attract investments in challenging conditions of deeper reservoirs.

Risk Service Contract (RSC)
Modifications were made in structuring risk/reward sharing, to attract niche players and develop local capability.

Progressive Volume-Based
Profit sharing to Contractors became progressively better by accelerating cost recovery upon resource monetisation to attract new development in brownfields.

Deepwater R/C PSC
Profitability-based fiscal terms with self-adjusting mechanism that offers greater flexibility to investors & improve the competitiveness of deepwater assets.

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Late Life Asset (LLA) PSC
Simplified commercial arrangement designed to empower contractors and reward efficiency by encouraging cost savings.

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Small Field Asset (SFA) PSC
Simple & straightforward fiscal model to facilitate effective monetisation of small fields, with flexibility to optimise operational costs and maximise profit margins.

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Enhanced Profitability Terms (EPT)
Innovative terms offering more attractive returns to contractors with a more equitable sharing of upside rewards.

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Note: Deepwater fields are defined as fields at water depths of more than 200 meters

PSC: Production Sharing Contract;
DW/UDW: Deepwater/Ultra Deepwater
RSC: Risk Service Contract
R/C: Revenue over cost
HP/HT: High Pressure/High Temperature

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