PSC term and condition and its implementation in South East Asia region

Comparing the implementation of fiscal term and condition for South East Asia countries is very interesting effort in order to study how oil and gas industry benefit to the host country and how they attract foreign investment through its different competitiveness aspects. In general, the oil and gas industry has been the main source of government income for this region particularly Indonesia and Malaysia for decades. On the other hand, the objectives of oil companies are to maximize value and increase shareholders return by finding and producing oil and gas reserves at the lowest possible cost and highest profit margin. From the government perspective, their intend is to capture as much economic rent as possible by designing a fiscal term that encourage greater exploration and development activities as well as diversification of investors but at the same time ensuring availability of supplies for domestic and export markets and generate new revenue stream for future generations. Royalty Rate, Cost Recovery, Domestic Market Obligation, Signature Bonus, Production Bonus, Export Duty and Corporate Tax are the different forms on how the government extract the economic rent and fulfill their policy objectives. This paper will be comparing the fiscal regime and how SEA countries manage oil and gas resources in order to utilize it in proper way through the fiscal mechanism. The unique approach and implementation of the fiscal regime provide different benefit to the host country and also its attractiveness for foreign investment climate. This paper will look at the contract term at a snap shot point. Any changes on the input assumptions could change the economic outcomes. Therefore * Hess Oil and Gas Sdn. Bhd ** Hess Indonesia this paper will hopefully give an idea of the contract terms of one country relatively to other countries for the given set of assumptions.