9Phase points of integrated operation

9 Phase points of integrated operation

(1) The phase points of an integrated operation are: (a) the point where the upstream stage ends and the downstream stage begins; and (b) any point in the flow of project product through the operation at which there is expected to be a difference in the ratio of project product to total product flowing through the operation before and after the point.

Note 1: This section divides the integrated operation into phases in such a way that petroleum product is not brought into or taken out of the operation except at the beginning or end of a phase. In obtaining the cost‑plus and netback prices:

(a) the various joint costs incurred by participants in the operation are attributed to each phase (see section 38); and
(b) the capital costs are annualised (see Division 3 of Part 4); and
(c) the costs for the assessment year are apportioned between the project product and other product, using an energy coefficient appropriate for the phase (see section 43).

Note 2: This procedure assumes that the same phase points apply over the life of the project. If a new phase point emerges that was not identified before the production year, there may need to be a recalculation of the annualised capital costs.

Note: Example 1: An integrated GTL operation begins with the recovery of natural gas and liquid petroleum, using the same extraction facilities. Separate pipelines are used to carry off the natural gas and the liquid petroleum, so that only the gas pipeline is part of the operation. The total product flowing through the operation is reduced, as the liquid petroleum is removed. The ratio of project product in relation to total product therefore changes at the beginning of the gas pipeline, and the beginning of the pipeline is therefore a phase point.

Note: Example 2: At the sales gas production facility of an integrated GTL operation, natural gas from another source is added to the project natural gas. The point at which the natural gas is added is a phase point.

Note: Example 3: Some of the sales gas produced in an integrated GTL operation is transported in a pipeline that is part of the operation, and therefore enters the downstream phase; it is then sold before liquefaction. The ratio of project product to total product changes when the sales gas is sold before liquefaction, as the total product in the operation is reduced. The point of sale is therefore a phase point.

(2) However, paragraph (1)(b) does not apply to an integrated GTL operation for which an election has been made under section 50. (4) The integrated operation is divided into phases by the phase points.