Since Timor-Leste launched its 2nd Licencing Round, ANPM has been attracting top IOCs from all over the world to its roadshows and data rooms, from the majors, to new and rapidly growing IOCs. One of the biggest conversation topics during these meetings, was the country’s highly competitive and attractive fiscal and tax regime.
Timor-Leste has an abundance of incentives and contingency options for companies looking to invest in its upstream, midstream and downstream sectors, with some of the most competitive incentives in the region.
Why is Timor-Leste’s fiscal regime so competitive in 2021? The country has launched its 2nd Licensing Round, making 18 blocks available to IOCs, 7 onshore and 11 blocks offshore, while creating a very stable environment for large-scale regional investments, a very attractive PLC model. Furthermore, the country is establishing partnerships with its neighbours and resolving outstanding issues, cooperating with Australia and major regional IOCs to make the most out of the Greater Sunrise reserves and future discoveries.
7 Reasons Why Timor-Leste’s fiscal regime is attractive to international investors
No Signature Bonus
No Cost Recovery Limit
IOCs have a Domestic Market Obligation only for national energy security, allowing the to export their production
The Domestic Market Obligation petroleum and gas are priced according to the market, with no discount or premium, securing the project’s profitability and fairness throughout the production cycle
No Commercial Discovery and Production Bonus
Thanks to the existence of a single regulatory authority and tax authority, there are no hidden taxes or municipality fees, leading to a clear defined economic partnership
Timor-Leste tackles corruption very seriously, having very strict rules for managing petroleum and gas revenues, and maintaining transparency
Timor-Leste PLC Model and Structure
Timor-Leste’s Petroleum fiscal system is built around the Petroleum Activities Law of 2005, (Article 10 no. 13/2005), with several revisions afterwards, offering even better terms for future investors.
Timor-Leste has a very competitive PSC model, completely forgoing signature bonuses, discovery bonuses and production bonuses, as a country-wide policy, reducing upfront costs, and barriers of entry significantly. According to ANPM, the country is not interested in short-term profit, but in the work programs, technical expertise and financial capacity to perform the awarded exploration projects, and maximise the potential of the country’s assets.
Equally important, is the lack of a cost-recovery limit, allowing companies and international investors to recover 100% of their exploration, capital, and operating costs. This approach is holistic, taking into account the decommissioning of the wells, with an 11% uplift for offshore acreage, and an uplift of 9% for onshore. All available revenue or petroleum after Royalty is allocated to recover costs in each tax period.
In addition to that, Timor-Leste has one of the most lucrative profit sharing structures in the region: after the company has recovered its costs, oil and gas profits are to be split in 40% government take, and 60% for the contractor.
In terms of state participation in the PSC, Timor-GAP, the country’s national oil company, has the option to participate for up to 20%, but its participation is not obligatory, allowing IOCs to have more options when investing in Timor-Leste.
Upstream Taxation
Timor-Leste has an income tax of 30% for oil and gas upstream, with a supplemental petroleum tax of 22.5% that applies only when the investor’sIRR (Interest Restriction Returns) are more than 65%, with a total taxation limit of 42%.
The South-East Asia nation currently ranks as one of the countries with the lowest government takings in the global index, well below the world average of 75%.
Discover more about these opportunities directly from ANPM at their official website, or reach out to IN-VR at marketing@in-vr.co. Meet the country’s key players and find the latest business opportunities in upstream and midstream, its 2nd Licensing Round, exploration updates and new midstream projects.
For more information on Timor-Leste’s 2nd Offshore and Onshore Licensing Round visit ANPM’s site here: http://licensinground.anpm.tl/