US OCS Upstream Fiscal and Regulatory Report - Favorable Fiscal Terms but Strong State and Judicial Opposition to Expanding the OCS on Offer

The Unites States offers regular licensing rounds paired with favorable fiscal and stable regulatory terms, which score well for licensees when compared with neighboring countries’ petroleum fiscal frameworks. However, the administration’s decision of halting the opening up to hydrocarbons exploration of practically all parts of the OCS as a result of strong political and judicial opposition leaves the schedule of the lease sales based on the 2017-2022 program. The result will be slowing investments pace as initially planned when the administration introduced the draft program 2019-2024. Whether or not additional OCS areas are opened, the Gulf of Mexico is likely to continue to contribute the bulk of licensing activity. The administration has recently reduced its fiscal take favoring investors, but few significant further changes appear on the horizon.

“US OCS Upstream Fiscal and Regulatory Report - Favorable Fiscal Terms but Strong State and Judicial Opposition to Expanding the OCS on Offer”, presents the essential information relating to the terms which govern investment into United States’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for United States’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in United States

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in United States

Reasons to buy

Understand the complex regulations and contractual requirements applicable to United States’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 2

1.2. List of Figures 2

2. Regime Overview 3

3. State ...

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 2

1.2. List of Figures 2

2. Regime Overview 3

3. State Take Assessment 5

4. Key Fiscal Terms 6

4.1. Royalties, Bonuses and Fees 6

4.1.1. Bonus 6

4.1.2. Rental 7

4.1.3. Royalty 8

4.2. Direct Taxation 13

4.2.1. Federal Corporate Income Tax 13

4.2.2. Federal Corporate Income Tax Deductions and Depreciation 13

4.2.3. Withholding Tax 15

4.3. Branch Profits Tax 15

4.4. Indirect Taxation 16

4.4.1. Value Added Tax 16

4.4.2. Custom Duties 16

4.4.3. Depletion Allowance 16

4.4.4. Carbon Credit for Enhanced Oil Recovery 16

5. Regulation and Licensing 17

5.1. Legal Framework 17

5.1.1. Governing Law 18

5.1.2. Contract Type 18

5.1.3. Title to Hydrocarbons 18

5.2. Institutional Framework 19

5.2.1. Licensing Authority 19

5.2.2. Regulatory Agency 20

5.3. Licensing Process 20

5.3.1. Licensing Rounds 20

5.3.2. Pre-qualification 21

5.3.3. Bidding 21

5.4. License Terms 21

5.4.1. Duration and Relinquishments 21

5.4.2. Activity Plan 22

5.5. Local Content 22

6. Outlook 23

7. Appendix 25

7.1. Bibliography 25

7.2. Contact Us 28

7.3. Disclaimer 28

List of Tables

1.1. List of Tables

Table 1: Regime Overview 3

Table 2: US OCS, Average Bonus Per Acre in Recent Lease Sale (US$) 6

Table 3: ...

1.1. List of Tables

Table 1: Regime Overview 3

Table 2: US OCS, Average Bonus Per Acre in Recent Lease Sale (US$) 6

Table 3: US OCS, Gulf of Mexico Rental Rates (US$ per acre) 7

Table 4: US OCS, Gulf of Mexico Rental Program R1, R2, R3, R4, R5 and R6 (US$ per acre) 8

Table 5: US OCS, Gulf of Mexico Royalty Rates (%) 9

Table 6: US OCS, Gulf of Mexico Deepwater Royalty Relief Volumes (mmboe) 9

Table 7: US OCS, Gulf of Mexico Deepwater Royalty Relief Threshold Prices 10

Table 8: US OCS, Gulf of Mexico Shallow Water Deep Gas Royalty Relief Volumes (bcf) 11

Table 9: US OCS, Gulf of Mexico Shallow Water Deep Gas Royalty Relief Threshold Gas Prices (US$/mcf) 11

Table 10: US OCS, Alaska Suspension Volume (mmbbl) 12

Table 11: US, Historical Marginal Federal Corporate Income Tax Rates to 2017 (%) 13

Table 12: US – Alaska, 7-Year & 5-Year GDS Depreciation Rates (Half-Year Convention) (%) 14

Table 13: US, Depreciation of assets 14

Table 14: US, Bonus Depreciation Rates 15

Table 15: US OCS, Gulf of Mexico, Initial Period (years) 21

Table 16: References 25

List of Figures

1.2. List of Figures

Figure 1: Regime Flow Chart 4

Figure 2: US OCS, Indicative NPV10/boe, IRR and State Take Comparison, Regional 5

Figure 3: ...

1.2. List of Figures

Figure 1: Regime Flow Chart 4

Figure 2: US OCS, Indicative NPV10/boe, IRR and State Take Comparison, Regional 5

Figure 3: US OCS, Legal Framework 17

Figure 4: US OCS, Institutional Framework 19

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