Methodology for calculating the balance of interests of the state and the investor when concluding production sharing agreements

The profitability of the investor and the state when implementing a production sharing agreement is determined by the current (quarterly) distribution of hydrocarbon raw materials extracted during the period of industrial development (operation) of the deposits by ensuring the implementation of such distribution parameters, as stated in the terms of the competition or in the agreement.

The investor's profitability is calculated based on the reimbursement of costs to the investor with compensatory products, the distribution of profitable products between the state and the investor, the receipt of income tax from the investor and other taxes, fees (mandatory payments).

The maximum percentage of compensatory production cannot exceed 70 percent of the total volume (value) of hydrocarbon raw materials produced in the relevant period.

The specified amount of compensatory production is a parameter that regulates not only the speed of reimbursement of the investor's costs, but also the size of the profitable part of the extracted hydrocarbon raw materials in the corresponding distribution period.

The total profit share of hydrocarbon raw materials subject to distribution in the relevant settlement period is calculated as the difference between the total volume (value) of raw materials produced in such period and the total volume (value) of compensatory products, determined in accordance with the procedure established by the production sharing agreement.

The size of the investor's net profit is determined by the difference between the size of the profitable part of the hydrocarbon raw material as remuneration and the size of the tax liabilities of the relevant accounting period, such as:

1) fee for geological exploration works.

2) payments for the use of subsoil.

3) investor's profit tax.

4) contributions to state mandatory funds.

5) contributions to mandatory state social insurance for employees and foreign citizens hired for work.

6) levy on mandatory state pension insurance of employees and foreign citizens hired for work.

7) the amount of other costs associated with the production of hydrocarbon raw materials, which are included in gross costs, but are not reimbursed to the investor by compensatory products, including costs not reimbursed by the investor's profitable products of previous periods.

The investor's total income is determined based on the amount of compensation products and the size of the investor's net profit products.

The total income of the state is calculated considering the following indicators:

1) the cost of part of the profitable hydrocarbon raw materials.

2) the amount of agreed (paid) tax liabilities on income tax.

3) in addition, the amount of agreed (paid) tax liabilities is included in the total income of the state.

4) from the fee for geological exploration work performed at the expense of the state budget.

5) from the user fees.

6) contributions to the mandatory state social insurance of employees and foreign citizens employed.

7) levy on mandatory state pension insurance of employees а foreign citizens employed.

The economic mechanism for the distribution of hydrocarbon raw materials must ensure the interests of the state and the conditions for the investor's profitable activity.