Investors wishing to participate in exploration and production activities must apply and receive license from PETRONAS. The licenses take the form of a Petroleum Arrangement (PA) contract between PETRONAS and the investors (to be referred as PA Contractors), where one of the parties is designated as the operator. The vast majority of PA contracts applicable today is in the form the Production Sharing Contract (PSC). The 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.
Petroleum Arrangement Contract
The Petroleum Arrangement Contract is a contractual agreement entered into between PETRONAS and PA Contractors that outlines the rights and responsibilities of each party. There are various forms of Petroleum Arrangement Contract offered to PA Contractors which is the Production Sharing Contract (PSC) and Risk Service Contract applying different types of fiscal terms such as Revenue-over-Cost PSC, Deepwater PSC, Late Life Assets PSC, Small Field Assets PSC and Enhanced Profitability PSC.
The Petroleum Arrangement (PA) Contract is the main document for governing the activities in Malaysia’s Upstream oil and gas sector. It sets out the terms, conditions, rights and responsibilities of the parties involved. A typical PA Contract specifies, among others:
-
Duration & Scope of Contract
-
Contract Area
-
Work Programme & Budget
-
Management & Operations
-
Division of Gross Production & Cost Recovery
-
Accounts & Audits
-
Procurement of equipment, facilities, goods, material, supplies and services
-
Governing Law & Dispute Resolution
-
Taxes
-
Abandonment
PETRONAS Procedures & Guidelines Upstream Activities (PPGUA)
The PPGUA is issued by PETRONAS as a one-stop governing document for the overall spectrum of upstream activities from exploration until abandonment. PA Contractors are required to adhere to the requirements stipulated in PPGUA when executing their operations. PPGUA also incorporates industry best practices to further enhance operational and environmental safety, efficiency and sustainability.
