As a progressive regulator of Malaysia’s oil and gas resources, MPM has introduced variations to the contractual model and fiscal terms to address increasing industry complexities and to facilitate investments in specific asset types. The Production Sharing Contract (PSC) has evolved since its introduction in 1976 to replace the concession-based system. The PSC fiscal terms today are tailored to match the opportunity, 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. The Contractors bear the risks associated with petroleum activities of the contract area, while enjoying entitlement from the hydrocarbon production.
The majority of the PSCs today are premised on a Revenue over Cost (R/C) structure. Some are based on tranches of cumulative volume produced. PSCs are the most commonly used form of petroleum arrangement (PA) in Malaysia.
Overview of the Evolution of Malaysia’s Fiscal Terms