Question

Nebeli Oil, Kao Upstream Ltd and Keli Ltd in a joint venture agreement in a sharing ratio of 5:3:2 respectively undertake petroleum operation in Oleum block. The PA signed with Government of Ghana indicated that government has an additional interest of 5% and carried interest of 10%. A total of 10,000,000 barrels of crude oil was produced and lifted for three months ended on 31st March 2020. The market price per barrel of crude oil lifted is $50 with a production cost of $50,000,000 for each contractor. Capital allowance for the partners are $25,000,000 each. Corporate tax rate - 35%.

a. Compute the distribution of the crude oil.

b. Prepare government receipts from the petroleum activity and express

Answer 1

. Royalty	5% of A	500,000		$25,000.00
C. Net Production	A-B	9,500,000		$475,000.00
D. Carried Interest	10% of C	950,000		$47,500.00
E. Additionalinterest	5% of C	475,000		$23,750.00
F. Government’s share	B+D+E	1,925,000		$96,250.00
E. Contractors’ share ( % of C) 100%-15% =85%	85% of net production	8,075,000		$403,750.00
DISTRIBUTION	SHARING RATIO
Nebeli	0.5  of E	4,037,500		$201,875.00
Kao	0.3  of E	2,422,500		$121,125.00
Keli	0.2  of E	1,615,000		$80,750.00