1 International Oil & Gas Seminar 21 October 2014 Houston, Texas
2 International Oil & Gas Seminar Agenda Tuesday 21 October 2014 Four Seasons Houston Timings and presenters of the sessions are subject to change without notice. 10:00 a.m. 12:00 noon Unconventional Oil and Gas Development* Randel Young Partner, K&L Gates, Houston David Sweeney Of Counsel, K&L Gates, Houston Lian Yok Tan Partner, K&L Gates, Singapore James Green Partner, K&L Gates, London Simon Salter Partner, K&L Gates, Perth 12:00 1:30 p.m. Networking Luncheon 1:30 3:00 p.m. FPSOs, FLNG, and Offshore Oil and Gas Structures* Steven Sparling Partner, K&L Gates, Houston / Washington, D.C. Raja Bose Administrative Partner, K&L Gates, Singapore Mike Stewart Partner, K&L Gates, London Michael Chalos Partner, K&L Gates, New York / Charleston 3:00 5:00 p.m. U.S. Exports of Oil, Condensates, and Gas* David Wochner Partner, K&L Gates, Washington, D.C. Darrell Conner Government Affairs Counselor, K&L Gates, Washington, D.C. Steven Sparling Partner, K&L Gates, Washington, D.C. Lian Yok Tan Partner, K&L Gates, Singapore 5:00 9:30 p.m. Cocktail Reception and Dinner *CLE credit offered in CA, IL, NY, PA, and TX
3 International Oil & Gas Seminar Tuesday 21 October 2014 Speaker Biographies Raja Bose Administrative Partner, K&L Gates, Singapore FPSOs, FLNG, and Offshore Oil and Gas Structures Raja Bose is the Administrative Partner of the Singapore office of K&L Gates and leads the firm s Commercial Disputes and International Arbitration practice in Asia. He has more than 20 years of experience in international dispute resolution and has worked in both London and Singapore. He is qualified both as an Advocate & Solicitor of the Supreme Court of Singapore as well as admitted as a Solicitor of England & Wales. Michael Chalos Partner, K&L Gates, New York, Charleston FPSOs, FLNG, and Offshore Oil and Gas Structures Michael Chalos is a Partner in the firm s New York and Charleston office and has been practicing maritime law for more than 35 years. He has handled a number of matters involving traditional maritime issues such as collisions; groundings; failure of equipment; damage to cranes and offshore rigs; cargo and other damages; Jones Act issues; Death on the High Seas Act; arrests; and insurance issues relating to cargo, P&I, hull, indemnity, and general liability. Darrell Conner Government Affairs Counselor, K&L Gates, Washington, D.C U.S. Exports of Oil, Condensates, and Gas Darrell Conner is a government affairs counselor based in the firm s Washington D.C. office and has more than 20 years of experience working with Congress and the executive branch. He also has extensive legislative experience in general public policy analysis and planning, strategic counseling, and coalition management and coordination. Mr. Conner also assists clients in incorporating public policy into their strategic planning, integrating public relations into their legal and advocacy activities, and legislative drafting.
4 International Oil & Gas Seminar Tuesday 21 October 2014 James Green Partner, K&L Gates, London +44.(0) Unconventional Oil and Gas Development James Green is a Partner in the London office, and spearheads the Africa group within the firm. His practice covers a broad range of corporate areas, including fundraising and other transactions on the Official List and AIM (acting for both companies and nominated advisers/ brokers), mergers, acquisitions, joint ventures, group reorganisations and venture capital investments. Mr. Green has experience in a range of sectors, but has a particular focus on oil and gas, mining and cleantech/renewable energy. Simon Salter Partner, K&L Gates, Perth Unconventional Oil and Gas Development Simon Salter is a Partner in the firm s Perth office with extensive experience in a wide range of transactional work for both private and public clients. He provides strategic advice on, and negotiates a wide range of transactions for clients principally in the resources sector and for internet service providers. He works closely with lawyers from other areas of the firm to provide comprehensive solutions for our clients. Mr. Salter advises clients in connection with a wide range of resource-related issues in a variety of jurisdictions in Africa, the Americas, Europe and Asia. Steven Sparling Partner, K&L Gates, Houston, Washington, D.C FPSOs, FLNG, and Offshore Oil and Gas Structures U.S. Exports of Oil, Condensates, and Gas Steven Sparling is a partner in the firm s Washington, D.C. and Houston offices. Mr. Sparling has a comprehensive understanding of the global LNG and oil industries legal, operational, and commercial. He has represented clients in connection with the strategic assessment, project development, and optimization of over 30 projects in the Americas, Asia, and Europe.
5 International Oil & Gas Seminar Tuesday 21 October 2014 Mike Stewart Partner, K&L Gates, London +44.(0) FPSOs, FLNG, and Offshore Oil and Gas Structures Mike Stewart is a Partner in the Energy, Infrastructure and Resources group in the firm s London office. He focuses on complex, high-value disputes arising out of major energy and infrastructure projects in emerging markets. Mike s practice is divided between acting as project counsel and appearing in international arbitrations. David Sweeney Of Counsel, K&L Gates, Houston Unconventional Oil and Gas Development David Sweeney is based out of the firm s Houston office and advises corporate and institutional clients on a broad range of oil and gas, coal, and other natural resource and infrastructure transactions, as well as advising on anti-corruption compliance matters for companies in the oil and gas business and related service sectors. Over the past ten years, Mr. Sweeney has advised on energy-related mergers and acquisitions (aggregate transaction value, over US$60 billion) and energy finance transactions (aggregate transaction value, over US$2 billion), as well as U.S. and international operational matters and projects. Lian Yok Tan Partner, K&L Gates, Singapore Unconventional Oil and Gas Development U.S. Exports of Oil, Condensates, and Gas Lian Yok Tan is a Partner in the firm s Singapore office and has over 18 years of experience specializing in a broad spectrum of energy, mining, and oil and gas matters including, among other projects: power plant, smelter, and refinery construction; financing and operation; oil and gas exploration and commercialization; infrastructure development; electric power sale and distribution; hydrocarbon and mining assets sale and disposal; and U.S. and international operational matters and projects.
6 International Oil & Gas Seminar Tuesday 21 October 2014 David Wochner Partner, K&L Gates, Washington, D.C U.S. Exports of Oil, Condensates, and Gas David Wochner is a Partner in the firm s Washington, D.C. office and represents clients on natural gas, LNG, and oil-related matters, including natural gas commodity and pipeline transportation issues, LNG imports and exports, and natural gas as a transportation fuel. He has served as lead Washington counsel on behalf of a major international drilling company in multiple Congressional and federal agency investigations and hearings related to the Gulf of Mexico Macondo oil spill, including House Committees on Energy and Commerce and the Judiciary, the Bureau of Safety and Environmental Enforcement, and its predecessor agencies. Randel Young Partner, K&L Gates, Houston Unconventional Oil and Gas Development Randel Young is a Partner in the firm s Houston office with over 30 years experience in the energy, natural resource and electric power and related service, manufacturing and supply sectors. His oil and gas project development, M&A and transactional experience spans virtually every major segment of the oil and gas business. Mr. Young has represented national oil companies, international oil companies and other multinational businesses in structuring and implementing cross-border transactions in the United States, the Americas, and around the world.
7 2014 International Oil & Gas Seminar Tuesday 21 October 2014 Four Seasons Houston Copyright 2013 by K&L Gates LLP. All rights reserved.
8 Copyright 2013 by K&L Gates LLP. All rights reserved. Unconventional Exploration & Development
9 Introduction Randel Young Houston, Texas Copyright 2013 by K&L Gates LLP. All rights reserved.
10 Assessed World Shale Gas and Shale Oil Resources (42 Countries, including U.S.) Source: EIA/ARI World Shale Gas and Shale Oil Resource Assessment, May 17, 2013 klgates.com 4
11 klgates.com 5
12 Part 1 Lifecycle Stages, De-risking, and Risk Allocation David Sweeney Houston, Texas Copyright 2013 by K&L Gates LLP. All rights reserved.
13 Unconventionals vs. Conventionals Key Differences? Some key differences between unconventional and conventional projects Project lifecycle Project phases tend to be less distinct when compared to conventional projects Certain risks decrease more gradually over time instead of abruptly at the end of a discrete phase Risk profile Risks are similar to a conventional project However, risks increase and decrease differently over time Types of risks examples of differences in impact Exploration Conventional dry hole Unconventional play concept /not-economic, well variability, acreage prospectivity Operational Conventional rig problems/downtime, lost hole, impenetrable substances Unconventional inefficiencies, difficulty obtaining services (e.g., frac crews), long cycle times, high service/material costs External Conventional commodity prices, regulatory framework, NIMBYism Unconventional commodity prices, regulatory framework, NIMBYism klgates.com 7
14 Project Lifecycle Conventional Discovery? FID/Sanction? First Production P&A/Decommission Phase Description Major Risk(s) Allocation Exploration Appraisal Development Production Search for hydrocarbon accumulation Determine whether accumulation is commercial Drill wells/build infrastructure/determine monetization scheme Produce and sell hydrocarbons Maintain production Dry hole Noncommercial discovery Cost overruns; Construction delays Commodity prices; Change in laws/regulatory environment/politics All participating parties High sole risk premium Participating parties Lower sole risk premium U.S. Participating parties (well-by-well) Non-U.S. All parties U.S. Participating parties (well-by-well) Non-U.S. All parties klgates.com 8
15 Project Lifecycle Unconventional * * Reproduced with permission of Preston Cody of Wood Mackenzie Consulting klgates.com 9
16 Similar Risks Different Degree & Duration * * Reproduced with permission of Preston Cody of Wood Mackenzie Consulting klgates.com 10
17 Exploration and Concept/Variability Risk Exploration vs. concept and well variability risk Conventional exploration risk is substantially eliminated through the drilling of exploration and appraisal wells Play concept risk and well variability risk continue for a much longer period of time over the life of the project Operator may have difficulty obtaining consistent, repeatable, and commercial results (well variability) and/or find that parts of a play are better than others (acreage prospectivity) Concept and Pilot phases vs. exploration phase Exploration and appraisal phases largely eliminate dry hole risk in conventional project Dry hole risk is less relevant for an unconventional project; however, play concept and well variability risks amount to the same thing no commercial project Concept and pilot phases do not usually eliminate these risks Lessons UNCONVENTIONAL E&P IS NOT EQUIVALENT TO MANUFACTURING NOT ALL UNCONVENTIONAL ACREAGE IS CREATED EQUAL klgates.com 11
18 Exploration and Concept/Variability Risk Risk allocation traditional methods Traditional Exploration and (sometimes) appraisal wells participate or relinquish/breach Follow-on/development wells after project de-risked well-by-well in U.S.; all-in or all-out outside U.S. Problems De-risking may take much longer and involve many more wells and production testing Allowing parties to get out potentially places concept/variability risk on one party, which may result in under-investment However, forcing parties to stay in may incentivize over-expenditure Risk allocation potential unconventional methodology Agree to specific, contractually mandated pilot program Sub-areas and different pilot stages Step-down premium matrix No sole risk/non-consent klgates.com 12
19 Operational Risk Ramp-up & exploit vs. development & production Similar risks, but different project sensitivities and timing Vs. conventional projects, unconventional projects generally: require more, and more expensive, wells/facilities have sharper decline curves have higher GOR/NGL content require ongoing capex, almost to the end of project life (in proven areas) have higher acquisition costs/taxes/royalties/fees These operational risks are largely eliminated by the end of the development phase in a conventional project but continue to the end of an unconventional project Risk allocation traditional methods Cost overrun provisions (not typically in U.S. onshore ventures) Procurement limitations Accumulation of surplus stock is to be avoided (COPAS 2005) Risk allocation proposed unconventional methodology Agree on operating philosophy (e.g., early pad based horizontal drilling vs. drill-and-hold vertical test wells) ahead of time Strategic procurement Alternative decision-making structures Consider (carefully ) CAPL operator challenge klgates.com 13
20 Generally External Risks Rarely dealt with contractually in a comprehensive fashion Managing these risks results in part from understanding them Political risk/nimbyism Changes in law Risk that operations required for optimal development (especially given thin unconventional margins) will not be permitted or made significantly more expensive Examples New York, the Netherlands, UK ban on hydraulic fracturing Municipality-required setbacks/landscaping Disclosure of frac fluid contents Risk allocation & handling Risks are generally shared by all participants May be handled to some degree by understanding concerns and legal requirements and setting up structures to monitor and deal with them ahead of time Shared operating philosophy NOC/governmental assistance Force majeure HSEQ programs In-country education and involvement klgates.com 14
21 Unconventional Development Outside the U.S. (How) Is the U.S. Experience Relevant (?) Different licensing/fiscal regimes may complicate risk allocation structure Mandatory relinquishments Host government take Nonmarket price regimes NIMBYism/Political risk Politicization of hydraulic fracturing in the U.S. may exacerbate issues outside the U.S. Lack of perceived benefit to holder of surface rights may erode support G&G Not all unconventional plays are created equal Projects may be more sensitive to lower production rates, steeper decline curves, and higher costs Infrastructure and equipment concerns Lack of physical infrastructure Lack of regulatory infrastructure Lack of large-scale service company presence Don t assume that what has worked in the U.S. will work outside the U.S. klgates.com 15
22 Part 2 China Unconventional Oil & Gas Lian Yok Tan Singapore Copyright 2013 by K&L Gates LLP. All rights reserved.
23 China Shale Gas/Oil Source: U.S. EIA/ARI World Shale Gas and Shale Oil Resource Assessment Report June 2013 klgates.com 17
24 China Unconventional Oil & Gas Production Overview China gas consumption 162 bcm in 2013 Estimated to increase in the next 10 years to ~400 bcm per annum Rising demand due to host of factors including push for cleaner energy Shale production falls short In August 2014, shale gas production revised from bcm to 30 bcm Supply and demand targets too ambitious klgates.com 18
25 China Unconventional Oil & Gas Production Challenges (1) Technological, geological, technical, and topological hurdles Sichuan, most promising basin, but in a deeply faulted region and mountainous Water issues China is increasingly subject to water scarcity Significant challenge to secure water supply for water-intensive shale gas exploration Lack of sufficient transport China s existing pipeline network insufficient to effectively and efficiently transport gas to domestic demand centers Requirement for enormous capital investment Lack of financial resources by most interested developers coal producers and provincial energy firms "Shale gas reserves in the United States are like a flat plate, but in China that plate fell to the ground and broke and then someone stomped on it again." klgates.com 19
26 China Unconventional Oil & Gas Production Challenges (2) Discouragement of investment by low domestic prices Prices are controlled by National Development and Reform Commission (NDRC) and local governments, resulting in a lower price in China than international markets Much higher than break-even price of US$ /mmBtu in the U.S. due to combination of: Low regulated domestic price Low production rate from test wells Higher drilling costs 2 or 3 times U.S. costs More incentives needed Higher subsidies Tax incentives including tax deductions for shale gas development costs and tax breaks on imported equipment Extend effective period for firms to commercialize shale gas production Environmental concerns Bringing additional environmental damage to a country with existing environmental problems klgates.com 20
27 China Unconventional Oil & Gas Production Challenges (3) Regulation Jointly undertaken by NDRC, Ministry of Land Resources (MLR), Ministry of Finance (MOF), Ministry of Environmental Protection (MEP), Ministry of Science and Technology (MOST), and the State Administration of Taxation (SAT) Difficulty is getting regulators on the same page Have to address legal issues with overlapping shale gas blocks with traditional oil and gas blocks To date, China has issued only two or three rules about shale gas Uncertainty around a short -term subsidy program National and local government subsidies (± CNY 0.4 per cubic meters) are only available for shale gas produced between 2012 and 2015 klgates.com 21
28 Partnership with Foreign Companies (as of November 2013) klgates.com 22
29 Chinese Firms Overseas Acquisitions in Shale Gas (Oct 2010 to Dec 2012) (1) Date Buyer Seller Deal Value Shale Gas-Related Assets Oct 2010 Dec 2011 Feb 2011 Jan 2012 CNOOC Chesapeake US$2.16 billion One-third interest in 600,000 acres in the Eagle Ford Shale CNOOC & Sinopec Frac Tech US$2.2 billion Both firms expressed interest to acquire 30% state of the firm specializing in hydraulic fracturing technology CNOOC Chesapeake US$1.27 billion One-third stake in 800,000 acres in northeast Colorado and southeast Wyoming Sinopec Devon Energy US$2.5 billion One-third interest in 265,000 acres in the Tuscaloosa Marine Shale; 350,000 acres in Michigan; 235,000 Utica Shale acres in Ohio; 215,000 acres in Oklahoma; and 320,000 acres in Wyoming Source: Company announcements klgates.com
30 Chinese Firms Overseas Acquisitions in Shale Gas (Oct 2010 to Dec 2012) (2) Date Buyer Seller Deal Value Shale Gas Related Assets Feb 2012 July 2012 Dec 2012 CNPC Shell US$1 billion (reported) CNOOC Nexen US$15.1 billion (for the entire company) 20% stake in Shell s 100%-owned land and shale assets in Groundbirch of northeast British Columbia 300,000 acres of shale gas lands in northeast British Columbia, estimated to hold 9 38 Tcf of shale gas resource CNPC Encana US$2.2 billion 49.9% stake in the Duvernay shale gas formation (224,000 acres) holding an estimated 31 Tcf of gas resources Source: Company announcements klgates.com
31 Conclusion Great demand for shale gas but many challenges and risks Fresh water, clean air, and a healthy environment are significant political issues Remains to be seen whether Chinese government will give more incentives and address regulatory issues to entice Chinese and foreign companies including Chinese oil majors to invest in unconventional oil and gas klgates.com 25
32 Part 3 UK Shale Gas Making It Happen James Green London, UK Copyright 2013 by K&L Gates LLP. All rights reserved.
33 Overview of Shale Gas in the UK Long history of onshore oil & gas 1851 first onshore UK-oil produced in Scotland 1960s major discoveries in the North Sea 1980s hydraulic fracturing of conventional onshore oil and gas wells 2011 Cuadrilla Resources (Preese Hall, Lancashire) Major political and media issue Growth in national and local lobbying groups Example of the U.S. Local regeneration and employment Declining North Sea conventional reserves Fears over energy security Technically recoverable resources up to 130 Tcf klgates.com 27
34 UK Shale Gas/Oil klgates.com 28
35 Infrastructure The Risks We Don t Have klgates.com 29
36 Gas prices The Risks We Don t Have klgates.com 30
37 UK energy mix The Risks We Don t Have klgates.com 31
38 Licensing/ Access Rights Licensing Petroleum Exploration and Development License (PEDL), issued by the Department of Energy and Climate Change (DECC) DECC s consent required to drill a well, plug and abandon a well, or flare any gas Hydraulic fracturing plan required traffic light monitoring system Environmental Risk Assessment Access Rights Trespass consent/ Court process Draft Infrastructure Bill statutory right of access Contribution of 20,000 by the operator to the community for each horizontal well UK Onshore Operators Group Community Engagement Charter 100,000 for each well site; 1% of revenues following production Follows a 12-week public consultation klgates.com 32
39 Environmental/ Planning UK is densely populated NIMBYs/BANANAs Planning permission from the Minerals Planning Authority (MPA) Wide discretion Environmental Impact Assessment (EIA) DECC Environmental Risk Assessment (ERA) Environmental Risk Assessment (ERA) Application to drill Health and Safety Executive (HSE) Well design and construction, well integrity during operations, and the operation of surface equipment on the well pad Well design verified by the HSE and by an independent third party Environment Agency Disposal and treatment of flow-back fluids Air emissions Management of naturally occurring radioactive materials klgates.com 33
40 Tax Finance Act 2014 new rules for shale gas Ring-fenced corporation tax 30% Shale gas and conventional oil profits are within a single ring fence Ring fence expenditure supplement (RFES) Supplementary charge 32% Pad allowance specific deduction against profits for supplementary charge purposes Investment incentive may eliminate supplementary charge Proposed sovereign wealth fund klgates.com 34
41 Future for the Industry Material changes to planning process unlikely Appeals and judicial reviews will establish precedents Better understanding of environmental impacts of exploratory operations may mean scope of EIAs can be scaled back Increasing public confidence As projects enter production, communities will see the economic benefits klgates.com 35
42 Part 4 Australia Unconventional Oil & Gas Simon Salter Perth, Australia Copyright 2013 by K&L Gates LLP. All rights reserved.
43 Australia Shale Gas/Oil Source: U.S. EIA/ARI World Shale Gas and Shale Oil Resource Assessment Report June 2013 klgates.com 37
44 Overview of Shale Gas in Australia Industry Background One of the world s largest shale gas reserves, with technical recoverable resources estimated at 437 trillion cubic feet (Tcf) according to various reports Asia s increasing demand for clean energy driving Australia s gas exploration & production Cooper Basin straddling South Australia and Queensland: One of the few regions outside the U.S. commercially producing shale gas Has existing infrastructure for conventional oil and gas, which will facilitate construction of facilities and transportation of shale gas to market klgates.com 38
45 Regulation Legal Framework (1) Subject to the same regulatory framework as conventional gas Legislation operates on Federal, State, Territory, and local council level Exploration and extraction are primarily regulated at the State and Territory level, or at the Federal level in the case of offshore developments Federal laws affect gas activities in all States, including those relating to taxation, native rights, environmental protection, and occupational health and safety Local council laws apply in respect of development and planning approvals klgates.com 39
46 Legal Framework (2) Ownership of hydrocarbon resources Federal, State, and Territory governments own all hydrocarbon reserves Rights to explore and produce hydrocarbons are granted through various petroleum titles and approvals from relevant government authority Landholders therefore do not have ownership to gas resources, although they may be entitled to compensation for loss of use of land due to gas exploration and extraction activities klgates.com 40
47 Administration Legal Framework (3) As shown in the schematic below, shale gas activities are governed by the various Petroleum Act equivalents and relevant Regulations in each State klgates.com 41
48 Key Considerations for Shale Gas Projects in Australia (1) Exploration stage A permit is required from the relevant State and Territory authority Exploration permit will cover a defined area and have an initial term of five to six years with a right to renew the permit or progress to an exploitation lease Permit will grant holder the right to enter land and conduct test drilling and surveying activities Terms of permit vary according to each State, but all are subject to meeting certain criteria It also specifies minimum annual expenditure and development levels to ensure that holders continue to invest in the permit area klgates.com 42
49 Key Considerations for Shale Gas Projects in Australia (2) Production stage Extraction and sale of shale gas requires a production license from the relevant regulating authority Term of production license varies in each jurisdiction but is typically for at least 21 years License entitles license holder to extract gas and retain economic benefit of gas produced, subject to payment of royalty to the State Like exploration permits, production licenses generally specify minimum annual expenditure and development levels klgates.com 43
50 Key Considerations for Shale Gas Projects in Australia (3) Water resources rights State and Territory legislation governs access to and use of water Water rights are administered through legal instruments, property titles, or contracts with a water service infrastructure operator Management of environmental risk associated with contaminated wastewater is usually a condition of production license klgates.com 44
51 Key Considerations for Shale Gas Projects in Australia (4) Fracking Significant political issue Concerned with use of certain chemicals in fracking process and associated risks to environment and groundwater Most jurisdictions have implemented regulations on fracking process and use of certain chemicals Western Australia has recently released draft regulations for consultation to closely monitor fracking process associated with shale gas production In Queensland and the Northern Territory, laws are in place that restrict use of certain chemicals in fracking In Victoria, currently a moratorium prohibiting all fracking until June 2015 klgates.com 45
52 Key Considerations for Shale Gas Projects in Australia (5) Fracking (Cont d) In June this year, a bill was passed through federal parliament to protect groundwater resources in every state except Western Australia Western Australia was not included because the legislation was limited to areas where coal seam gas is found, and Western Australia s reserves hold shale gas klgates.com 46
53 Other General Regulatory Considerations (1) Environmental and planning considerations Shale gas exploration and production operations are subject to significant laws and regulations governing environmental protection Violation may result in issuance of injunctions limiting or prohibiting operations, as well as administrative, civil, and even criminal proceedings Regulators may require operator to prepare and implement a plan to improve environmental performance of a project, and may amend the conditions on an existing environmental approval klgates.com 47
54 Other General Regulatory Considerations (2) Native Title considerations Native Title is the term used to describe certain rights held by indigenous Australians in respect of traditional land and water Native Title can only exist where the claimant group has and maintains a traditional connection with the land or waters If Native Title rights exist, they must be taken into account and certain procedures must be complied with, including in some cases, payment of compensation A register of Native Title interests is kept, and searches may be obtained from relevant courts and National Native Title Tribunal to establish whether a parcel of land is subject to a Native Title claim or interest klgates.com 48
55 Other General Regulatory Considerations (3) Royalty considerations There are 3 mains types of royalties levied in Australia: Unit-based a fixed monetary rate is applied on a physical rather than financial basis, for example, a set amount of dollars per cubic meter of gas extracted Value-based (ad valorem) a uniform % of value of the resource is charged as royalty, for example, 10% of the post-wellhead value of gas extracted Profit-based a % is applied to profit realized, e.g., 10% of profits achieved klgates.com 49
56 Other General Regulatory Considerations (4) Fiscal regime and tax incentives Petroleum Resource Rent Tax (PRRT) is a profit based tax that is levied on petroleum projects From 1 July 2012, the PRRT is applied to all Australian onshore and offshore gas and LNG projects Previously relevant was the carbon pricing mechanism; however the Australian government abolished the carbon tax with effect from 1 July 2014 klgates.com 50