Frequent question: What is production sharing contract in oil and gas industry?

1. n. [Oil and Gas Business] An agreement between the parties to a well and a host country regarding the percentage of production each party will receive after the participating parties have recovered a specified amount of costs and expenses.

What is a production sharing agreement in oil and gas?

Production Sharing Agreement. An agreement between the lessee and lessor as to how production will be shared among leases crossed by a production sharing well. Most (but not all) production sharing agreements provide for allocation based on the percentage of the “productive lateral” crossing each lease.

What is the meaning of Production Sharing Contract?

Production sharing contracts were first developed in Indonesia in 1966 to give the host government more control over their resources. … Under this type of contract the contractor bears the exploration risk while the host government receives a share of the produced oil rather than cash from royalties and taxes.

How does a production sharing agreement work?

An agreement between a government and a company in which the government awards to the company the right to extract and develop a natural resource (for example, mineral ore or oil). Under a PSA, the company bears the financial risk of exploring and extracting the resource.

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What is the characteristic of production sharing contract?

The main principle of PSC is that ownership and control of national resources are entrusted to the government and the Oil Companies assume the status of risk-taking contractors, entitled to reimbursement of their costs only in the event of commercial production plus a share of production to remunerate their efforts.

What does PSA mean in oil and gas?

3. Introduction. 1. Production sharing agreement (PSA) is a contract between one or more investors and the government in which rights to prospection, exploration and extraction of mineral resources from a specific area over a specified period of time are determined.

What is risk service contract in oil and gas industry?

Under a risk service contract, a host nation contracts with a (foreign) oil company to explore and develop its oilfield asset. The oil company assumes all managerial and technical responsibilities and bears all the financial and operational risks, in consideration for a prescribed fee.

What is service contracting?

Service contract means a contract that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply. A service contract may be either a nonpersonal or personal contract.

What is risk sharing contract?

For our purposes, “risk-sharing contract” refers to a non-traditional method of assigning value in a transaction. With risk-sharing contracts, clinical and/or economic outcomes are measured and agreed upon prior to signing the contract, and payment is dependent on meeting the agreed-upon measures.

What is EPSA agreement?

The government may grant surface and sub-surface rights to oil and gas resources to third parties by way of an exploration and production sharing agreement (EPSA) which must be ratified by royal decree and issued by the sultan.

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What is cost recovery ceiling?

Cost recovery is an opportunity given to the E&P company to recover(by selling the crude or gas) the cost borne by the company to make the commercial discovery.

What does a joint operating agreement do?

Joint Operating Agreement (JOA) — a contract that sets forth the duties and obligations of both the operator and nonoperating working interest owners of a mineral lease.

What is the meaning of concession agreement?

A concession agreement is a contract that gives a company the right to operate a specific business within a government’s jurisdiction or on another firm’s property, subject to particular terms.

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