Economic Aspects of Production Sharing Contracts


The course is designed for those working in the upstream industry who are not familiar with PSCs and who require either a working or practical knowledge of the financial mechanics and economic aspects of the contracts.


- Understand the principles of economic analysis (cashflow, cost of capital, NPV, rate of return etc)
- Application of sensitivity analysis to incorporate risk
- Understand the structure of the PSC contract and comparison with the tax/Royalty fiscal system
- Calculations of cost recovery and specific issues to consider
- Learn about bonuses and bonus calculations
- Examine sliding scale fiscal mechanisms including R Factor and rates of return methods
- Calculation of taxation including allowances, depreciation and tax losses
- Understand profit sharing
- Taking advantage of tax and PSC ring fencing terms to add value to the asset
- Booking of reserves in a PSC (including tax barrels)
- Contractor/Government/National Oil Companies relationship: cost carries, fiscal take
- How to optimize fiscal terms from both contractor and government perspective
- Construction of a production sharing contract spreadsheet model, the derivation of relevant economic metrics, application of sensitivities and the drawing of conclusions to aid decision-making

Learning Objectives

• Understand how to calculate cost recovery and profit share
• Appreciate other features such as bonuses, state participation and sliding scales
• Examine the working of ring fencing
• Be able to build PSC cash flow models
• Be aware of the key fiscal levers with respect to project value
• Learn about the history of PSC regimes



Number of Participants

Max 20


Excel: working knowledge

Software Used


Course Format

Classroom delivery with presentations, practical exercises and modelling workshop

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CGG GeoTraining offers the most comprehensive industry training based on years of practical experience acquired by our personnel.

Our proprietary courses are fully customizable and can be offered at a time and location convenient to you. Please request a course for more information.