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.   

Overview of the Evolution of Malaysia’s Fiscal Terms