Evolving trends in production sharing agreements & cost recovery systems

• Main Authors: Pereira, Eduardo G., Fowler, Reg, Stephens, Thomas, Elias-Roberts, Alicia, Lemos, André, Wan Zahari, Wan Mohd Zulhafiz, Kamil, Reyhan, Kakimov, Nurzhan
• Format: Article
• Language: English
• Published: University of Oklahoma College of Law 2023
• Subjects: K Law (General)
• Online Access: http://irep.iium.edu.my/108454/7/108454_Evolving%20trends%20in%20production%20sharing%20agreements.pdf; http://irep.iium.edu.my/108454/; https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1408&context=onej

Host nations tend to own and/or control the hydrocarbon resources situated in their own jurisdiction.'Although they can develop such resources by themselves, the high risks and costs involved encourage them to outsource such activities to investors, ie, oil and gas companies. 2 The legal instruments behind such" outsourcing" procedures are commonly performed via a concession, license, lease, production sharing contract, service contract, or a hybrid form. 3 Although all of these instruments could lead to the same end" result," each instrument has its own characteristics. 4 The concession, license, and lease tend to confer full ownership of production on the investors while the host government gains royalties and/or taxation. The production sharing agreement tends to share the production. The service contract provides all the production to the host government, and the investor gets paid fees and reimbursed costs. So, one of the key distinctions between these agreements tends to be the ownership and costs involved. The agreements that provide higher amounts of production to the investor leaves them to cover their own costs whereas the agreements that provide higher amounts of production to the host nation allow certain costs to be recovered or compensated by the investor