1. Using numerical example, explain the implications of cost ceiling for host government and contractor in a PSC.

2. Compare and contrast production sharing contracts (PSCs) and royalty tax (RT) systems based on the following themes:

a. Ownership of mineral rights

b. Transfer of title to production

c. Exploration risks

d. Title to operator equipment and facility

3. Explain the meaning of economic limit and show with numerical illustration, its relationship to abandonment of oil and gas fields

4. Reservoir Oil ESP Co, has been contracied by the Government of Ghana under a risk serice contract. This project is located in the deep waters af the Atlantic and due to the highly risky nature of the prospect, Reservoir Oil Co, must establish whether or not to take up this offer based on both the Government Take and the companys Take statistics

from the operation.

Below is a most probable forecast of data from the venture.

Total	Yr1	Yr2	Yr3	Yr4	Yr5	Yr6
Oil Production (MMBbl)		10	10	10	10	10
Oil Price ($/Bbl)		30	30	40	40	50
Operating cost ($MM)		30	30	30	30	30
Capital expenditure ($MM)	500
Service fee ($MM)		200	200	200	200	200
Income Tax ($MM)	20	20	50	50	50	50

Assuming that best practice in industry is a minimum Contractor Take of 15%, calculate the government take and the contractor take and comment on this offer.

5.

Fortune Oil Services (FOS) entered into a risk service greement with the Chilean government. FOS agreed to pay all af the costs associaled with exploration , development, and production.

The contract defines costs incurred in the exploration development phase of each project area as being capital costs (CAPEX), and all costs incurred in the production phase as operating costs (OPEX. Each year, in which production occurs, the govertment agrees to pay Fortune Oll Services a fee comprising the following.

a. AIl OPEX incurred in the curtent year

b. tenth of all unrecovered captal costs

c. $0.40/bbl on producton from 0 to 4,000bbl/day, $0.6/bbl on production from 4,001 to 10,000bb/day, and $0.9/bbl on production above 10,000bblday. The agreement indicates that the maximum total fee that wil be paid in any year is $1.45/bbl times the total number of barrels produced. Any threcovered OPEX or CAPEX (unrecovered due to the fee cap) can be carried forward into future years,

Assume that in 2012, production commenced of the Liama Field. At that time, Fortune had spent $10,000,000 on CAPEX and during 2012, spent &3,000, 000 In OPEX.

Total oil production for 2012 was as follows:

Star Well = 3,642,000 barrels

Lucky Well = 1,358,000 barrels

Calculate the fees to be paid to FOS Ltd given the fee cap