Common use of IOC remuneration Clause in Contracts

IOC remuneration. The provisions of a service contract that determine the amount and rate at which an IOC is paid for its services will typically be heavily negotiated. In a long-term service contract, accurate financial modelling is critical and the underlying assumptions of the model should be extensively tested. The IOC will typically be paid the following fees: • a cost-recovery fee for the capital and non-capital costs incurred by the IOC in undertaking the operations that are the subject of the service contract; and • a remuneration fee that is essentially the IOC’s profit margin for undertaking the services. The cost-recovery fee and the remuneration fee may be paid in cash or production. The service contract should also provide the timing for the payment of such fees and the extent (if any) to which such amounts may be capped for a given invoicing period.