Taxation of Revenue and Cost Streams

OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

Question

a) Explain the tax treatment of assignment of or disposal of petroleum rights as provided under the Income Tax Act 2016 (Act 896).

b) Deep Sea Ventures and Coastal Explorations are joint venture partners who have 45% and 40% interest respectively in the Atlantic Oil Fields in Ghana. They commenced exploration in 2010 and discovered hydrocarbons in commercial quantities in 2015. A plan of development was subsequently approved for the development of the Atlantic Oil Fields.

The fiscal terms of the agreement between the joint venture partners and the Government of Ghana include Bonus of US$ 100 million, Royalty of 10%, Initial (Carried) Interest of 10% Additional Participating Interest of 5%, Corporate Tax rate of 35% and Capital Allowance on straight line basis at a rate of 20%. Commercial production commenced in the Atlantic Oil Fields in 2019. Information available on the oil and gas production operations in the Atlantic Oil Fields are as follows:

Up to 31/12/2017	US$
Exploration Costs	250,000,000.00
Development Costs	2,000,000,000.00
Bonus	100,000,000.00

As at 31/12/2018	US$
Exploration Costs	15,000,000.00
Development Costs	1,500,000,000.00
Interest on loan for installations & infrastructure	100,000,000.00

NB. The loan was contracted by the operator on behalf of the parties that hold interest in the Atlantic Oil Fields

As at 31/12/2019	US$
Exploration Costs	5,000,000.00
Development Costs	430,000,000.00

Required: Compute the capital allowance entitlements of Deep Sea Ventures and Coastal Explorations and state the underlying assumptions for your computations.

Answer

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Tags: Capital Allowance, Development Costs, Exploration Costs, Income Tax Act, Petroleum Agreement
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: FEB 2020

OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

Question

a) Explain the following concepts

i. Unitization; and

ii. Redetermination.

b) ABC Limited has 40% and 30% interest in Costal Reef Petroleum Agreement and Deep Sea Petroleum Agreement respectively. The contract areas of the two Petroleum Agreements have been unitised for joint operation. It has been determined that the hydrocarbon present in the unitised area is in the proportion of 40% and 60% for the Costal Reef Contract Area and Deep Sea Contract Area respectively.

Gross production of crude oil in the unitised area in 2018 year is 500,000,000 barrels. The average price of crude oil that year is $50 per barrel.

Required:

Compute the gross income of ABC Limited for the 2018 year of assessment.

Answer

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Tags: Crude Oil Price, Gross Income, Hydrocarbon Allocation, Petroleum Agreement, Unitization
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: FEB 2020

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

Question

Sapele Petroleum Ghana Ltd and Mahogany Production Incorporated are joint venture partners who have 45% and 35% interest respectively in the Upstream Fields in Ghana. They commenced exploration in 2011 and discovered hydrocarbons in commercial quantities in 2013.

The fiscal terms of the agreement between the joint venture partners and the Government of Ghana include Bonus of US$ 150 million, Royalty of 5%, Initial (Carried) Interest of 15%, Additional Participating Interest of 5%, Corporate Tax rate of 35% and Capital Allowance on straight line basis at a rate of 20%. Mahogany Production is the operator of the Upstream Fields. Production commenced in the Upstream Fields in 2019. Information available on the oil and gas exploration and production operations in the Upstream Fields are as follows:

Up to 31/12/2017	US$
Exploration Costs	250,000,000.00
Development Costs	2,000,000,000.00
Bonus	150,000,000.00

As at 31/12/2018	US$
Exploration Costs	100,000,000.00
Development Costs	1,500,000,000.00
Interest on loan for installation of equipment & facilities	100,000,000.00

NB. The loan was contracted by the operator on behalf of the parties that hold interest in the Upstream Fields

As at 31/12/2019	US$
Exploration Costs	40,000,000.00
Development Costs	400,000,000.00
Average production cost per barrel	15.00
Average Price of crude oil per barrel	40.00
2019 Production	50,000,000 barrels

You are required to compute the following, and also state the assumptions underlying your computations:
i. Capital allowance entitlements of Sapele Petroleum Ghana Ltd and Mahogany Production Incorporated.
ii. Distribution of crude oil.
iii. 2019 income tax liability of Sapele Petroleum Ghana Ltd and Mahogany Production Incorporated in accordance with the provisions of the Income Tax Act, 2015 (Act 896).
iv. Total revenue that will accrue to Government of Ghana.

Answer

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Tags: Capital Allowance, Crude Oil Distribution, Government Revenue, Income Tax, Petroleum Operations
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: AUGUST 2020

OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

Question

a) Explain the tax treatment of assignment of or disposal of petroleum rights as provided under the Income Tax Act 2016 (Act 896).

Up to 31/12/2017	US$
Exploration Costs	250,000,000.00
Development Costs	2,000,000,000.00
Bonus	100,000,000.00

As at 31/12/2018	US$
Exploration Costs	15,000,000.00
Development Costs	1,500,000,000.00
Interest on loan for installations & infrastructure	100,000,000.00

NB. The loan was contracted by the operator on behalf of the parties that hold interest in the Atlantic Oil Fields

As at 31/12/2019	US$
Exploration Costs	5,000,000.00
Development Costs	430,000,000.00

Required: Compute the capital allowance entitlements of Deep Sea Ventures and Coastal Explorations and state the underlying assumptions for your computations.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Development Costs, Exploration Costs, Income Tax Act, Petroleum Agreement
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: FEB 2020

OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

Question

a) Explain the following concepts

i. Unitization; and

ii. Redetermination.

Gross production of crude oil in the unitised area in 2018 year is 500,000,000 barrels. The average price of crude oil that year is $50 per barrel.

Required:

Compute the gross income of ABC Limited for the 2018 year of assessment.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Crude Oil Price, Gross Income, Hydrocarbon Allocation, Petroleum Agreement, Unitization
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: FEB 2020

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

Question

Up to 31/12/2017	US$
Exploration Costs	250,000,000.00
Development Costs	2,000,000,000.00
Bonus	150,000,000.00

As at 31/12/2018	US$
Exploration Costs	100,000,000.00
Development Costs	1,500,000,000.00
Interest on loan for installation of equipment & facilities	100,000,000.00

NB. The loan was contracted by the operator on behalf of the parties that hold interest in the Upstream Fields

As at 31/12/2019	US$
Exploration Costs	40,000,000.00
Development Costs	400,000,000.00
Average production cost per barrel	15.00
Average Price of crude oil per barrel	40.00
2019 Production	50,000,000 barrels

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Crude Oil Distribution, Government Revenue, Income Tax, Petroleum Operations
Level: Level 1

Topic: Taxation of Revenue and Cost Streams
Series: AUGUST 2020

Topic: Taxation of Revenue and Cost Streams

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OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

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OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

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OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

You're reporting an error for "OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination"

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

You're reporting an error for "OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation"

OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights

Explain the tax treatment of assignment or disposal of petroleum rights under the Income Tax Act, 2015 (Act 896).

You're reporting an error for "OGMT – Feb 2020 – L1 – Q4 – Assignment of Petroleum Rights"

OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination

Explain the concepts of unitization and redetermination in the context of petroleum operations.

You're reporting an error for "OGMT – Feb 2020 – L1 – Q3 – Unitization and Redetermination"

OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation

Compute capital allowances, crude oil distribution, income tax, and government revenue for Sapele Petroleum and Mahogany Production in 2019.

You're reporting an error for "OGMT – Aug 2020 – L1 – Q5 – Petroleum Taxation"

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