1. Assume that MMD company, a US company, is involved in petroleum operations in Chile. MMD has a 30% WI, while local oil company has a 70% WI. Annual gross production is to be split in the following order:
2. Royalty is 10% of annual gross production and is to be paid in kind.
3. VAT is equal to 6% of annual gross production and is to be paid in kind.
4. Cost oil is limited to 50% of gross production, with cost to be recovered in the following order:
5. 1.- Operating expense s paid 30% by MMD and 70% by local oil company.
6. 2.- Exploration costs paid 100% by MMD.
7. 3.- Development costs: after completion of exploration, local oil company opted to participate at 70%. Therefore, development and operating costs were paid 30% by MMD and 70% by local oil company.
8. Any excess remaining after cost recovery become profit oil:
9. 1.- Of the profit oil, 20% goes to the government.
10. 2.- The remainder is split between MMD and local oil company based on their working interests.

For 2012, assume the following:

1.- Recoverable operating costs total $2,000,000

2.- Exploration cost unrecovered to date total $220,000,000

3.- Development costs unrecovered to date total $1,000,000

4.- Any costs not recovered in the current year may be carried forward to be recovered in future years.

5.- The annual gross production for the year is 10,000,000 barrels of oil.

6.- The agreed upon price is $100/bbl.

Calculate the number of barrels allocated to local oil company. Identify each element of the allocation.