A5.6 Brunei PSC
Oil and gas production activities in Brunei are currently governed by the terms of Production Sharing Contracts (PSC).
The key components of Brunei fiscal regime for oil and natural gas development include Royalty, Cost Recovery, Profit Sharing and Income Tax. These are described below.
In the 2000 model agreement, for onshore fields, the royalty rate is 12.5% and for deepwater developments, the royalty rate is 8%.
Under concessions awarded before the 2001 bidding round, the royalty rates depend on the location of the developments. The rate is 12.5% for onshore fields, 10% for discoveries between three and ten nautical miles offshore and 8% for discoveries more than ten nautical miles offshore.
After Royalty, the contractors are allowed to recover costs from the Gross Revenue, subjected to a negotiated cost recovery ceiling. The cost recovery ceilings announced in the government's bid presentation on 23 October 2000 are 60% for oil discoveries and 70% for gas discoveries onshore and 80% for oil discoveries and gas discoveries in deepwater. Costs can be recovered under the Brunei PSCs include exploration and appraisal costs, development costs, operating costs, abandonment sinking fund and excess revenue payments. All costs are expensed and recovered immediately. Unrecovered costs are carried forward indefinitely until fully recovered but not beyond the duration of the contract.
The revenue remaining after Royalty and Cost Recovery is Profit Petroleum which is shared between the contractors and the State at negotiable rates on an incremental sliding scale depending on the production rate. The profit shares indicated in the government's bid presentation of 23 October 2000 are given in Table 45 and Table 46.
Table 45 – Profit Sharing in Brunei Onshore PSCs
|Production||Contractors' Profit Share|
|0 – 10 Mbbl/d||50%|
|10 – 25 Mbbl/d||40%|
|> 25 Mbbl/d||–||30%|
|> 50 MMbbl cumulative production||50%|
|0 – 2||50%|
Table 46 – Profit Sharing in Brunei Offshore PSCs
|Oil||Gas (Tcf)||Contractors' Profit Share|
|0 – 50 Mbbl/d||75%|
|50 – 100 Mbbl/d||65%|
|> 100 Mbbl/d||–||60%|
|> 200 MMbbl cumulative production||50%|
|0 – 4||60%|
The petroleum income tax rate in Brunei is 55%.
The deductions for income tax include exploration costs, operating costs, royalty and depreciation. Exploration costs and operating costs are immediately deductible. Capital costs are depreciated on a straight line basis over different periods of time depending on the category of expenditure.