This is a self-grading exam. Answers are entered by selecting the checkbox corresponding to your answer choices(s) or by typing-in your answers in the case of fill-in test items (if applicable). The examination is scored by clicking the 'Grade Test' button at the bottom of the form. Correct answers and explanations are found through hyperlinks at the bottom of the page. This test requires that your browser be JavaScript enabled. Please verify that JavaScript is activated if you encounter any problems. NOTE: Fill-in/Essay test items (if any) cannot be graded and thus are ignored. However, you may view these test items for their correct answers in the 'Correct Answers' section below (if provided by your instructor).
(A) A clause in a contract which allows an Operator to not meet its obligations due to unforeseen conditions. These conditions were non-existent at the signing of the contrac.
(B) A clause in a contract, specifying that because the Operator would be under extreme hardship to execute, allows an Operator not to meet its obligation.
(C) A clause in a contract, specifying that the Operator is not responsible for certain conditions that make it impossible to fulfill a contractual obligation (i.e. weather conditions do not permit the drilling a well on time).
(D) A clause in a contract, specifying that civil war, riots, earthquakes or other drastic events (called acts of God), that could not have been anticipated and outside the control of the Operator make fulfillment of contract obligations impossible and thus, relieves the Operator of liabilty.
(B) Uplift is a mechanism to ensure that the Contractor recovers his costs, while investment credits helps cost recovey of only investments.
(C) Uplift applies to all capital costs while investments credits apply only to investment costs, such as platforms, pipeline and processing equipment.
1. (10) The Force Majeure clause in a contract is:
Answer: (D) A clause in a contract, specifying that civil war, riots, earthquakes or other drastic events (called acts of God), that could not have been anticipated and outside the control of the Operator make fulfillment of contract obligations impossible and thus, relieves the Operator of liabilty.
3. (100) There is a difference between a production sharing contract (PSC) and a risk service contract RSC contracts in that
Answer: (A) under a risk service contract (RSC) a contractor has no interest in production unless paid in kind or has a preferential right to purchase.
5. (40) Evaluation of the sale of lease is compared with the holding the lease. There are investments needed in the future which may exceed cash flow. Cash flows are discounted by an assumed interest rate i, in evaluating the property. Increasing the interest rate
Answer: (B) can increase or reduce the present value of the property.
Explanation: If net cash flow is negative early in the life of the field, then the larger interest rate would discount these, and the present value can go down.
6. (20) The difference between investment credits and uplift in a PSC is:
Answer: (C) Uplift applies to all capital costs while investments credits apply only to investment costs, such as platforms, pipeline and processing equipment.
Answer: (C) Provide financial incentive for the operator to invest in the leased area knowing that there is a means of recovering some or all of his costs.