05-13-2013, 12:34 AM
Here also is info from the analysis paper on the "carry" language and how JVOAs come into play, which IOC has possibly already put in place since April.
"Fourthly, the State’s equity participation, as set out under the relevant petroleum agreements, is paid for under a carried interest arrangement. Under this arrangement, the pro rata amount on account of exploration, capital and operation expenditure is represented as a debt from the State to the oil companies. The debt is classified as a loan to the State from the oil companies, from the issuance of the production licence. The amount owed to the oil companies accrues interest at a commercial rate and the debt or the "deemed loan" is defrayed by the revenue earned from sale of "oil foregone" in favour of the oil companies during the period the liability remains outstanding. The financial arrangement under which the State pays for its participation in the project reflects features of a service contract and joint venture arrangement. However, the treatment of the title to petroleum produced under the PNG ’s petroleum arrangement is not analogous to the arrangements under the service contract arrangements[110] but is more aligned with the treatment of title to oil produced and owned under a joint venture agreement, where title to the petroleum passes at the wellhead upon production. The petroleum titles, under the PNG ’s petroleum arrangement rest with the oil companies, which are granted the same under the petroleum legislation. This is unlike the service contract arrangement or the production sharing contract where the petroleum title rest[5] with the state enterprise, and the oil company is engaged as a contractor and its services are paid for either in cash or from portion of the oil produced. Further, the State equity participation is carried by the oil companies and defrayed through the allocation of the State’s share of petroleum produced. This incident is consistent with that of a joint venture petroleum arrangement."
Again, the State has traditionally not done the "carry" as they have borrowed/leveraged the sunk cost buy-in in other ways. They likely will do the same again, but if for some reason they don't want to or can't work things out, they can resort to the "carry".
"Fourthly, the State’s equity participation, as set out under the relevant petroleum agreements, is paid for under a carried interest arrangement. Under this arrangement, the pro rata amount on account of exploration, capital and operation expenditure is represented as a debt from the State to the oil companies. The debt is classified as a loan to the State from the oil companies, from the issuance of the production licence. The amount owed to the oil companies accrues interest at a commercial rate and the debt or the "deemed loan" is defrayed by the revenue earned from sale of "oil foregone" in favour of the oil companies during the period the liability remains outstanding. The financial arrangement under which the State pays for its participation in the project reflects features of a service contract and joint venture arrangement. However, the treatment of the title to petroleum produced under the PNG ’s petroleum arrangement is not analogous to the arrangements under the service contract arrangements[110] but is more aligned with the treatment of title to oil produced and owned under a joint venture agreement, where title to the petroleum passes at the wellhead upon production. The petroleum titles, under the PNG ’s petroleum arrangement rest with the oil companies, which are granted the same under the petroleum legislation. This is unlike the service contract arrangement or the production sharing contract where the petroleum title rest[5] with the state enterprise, and the oil company is engaged as a contractor and its services are paid for either in cash or from portion of the oil produced. Further, the State equity participation is carried by the oil companies and defrayed through the allocation of the State’s share of petroleum produced. This incident is consistent with that of a joint venture petroleum arrangement."
Again, the State has traditionally not done the "carry" as they have borrowed/leveraged the sunk cost buy-in in other ways. They likely will do the same again, but if for some reason they don't want to or can't work things out, they can resort to the "carry".