Ghana, having found oil in commercial quantity has joined its counterparts in the world in the production of Oil. Fiscal systems have been put in place to bring in various revenue streams to the Government of Ghana.
Required:
Discuss fully the under listed revenue types from Upstream Petroleum Operations:
i) Carried Interest (3 marks)
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Carried interest entitles the State to a share of the oil produced without making financial contribution towards exploration and development costs. The State should contribute towards production cost being its proportionate representation. The carried interest ranges between 7.5% and 15% in most oil producing countries.
ii) Additional Carried Interest (3 marks)
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Additional carried interest is a paying interest that allows the State to pay the proportionate share of only the development and production cost. The state does not pay towards exploration and appraisal cost.
The State can acquire up to 5% in any commercial discovery subject to petroleum agreement.
iii) Additional Oil Entitlement (3 marks)
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Additional oil entitlement which is also called super normal profit tax. It is levied in case the windfall profit, where the venture’s rate of return exceeds the target rate of return used to evaluate the profitability of the venture during negotiation.
It is computed on the basis of the after-tax inflation adjusted rate of return that the contractor achieves with respect to each field.