Production Sharing Agreement
Production sharing agreements (PSAs) are a common type of contract signed between a government and a resource extraction company (or group of companies) concerning how much of the resource (usually oil) extracted from the country each will receive.
Production sharing agreements were first used in Bolivia in the early 1950s, although their first implementation similar to today's was in Indonesia in the 1960s. Today they are often used in the Middle East and Central Asia. In production sharing agreements the country's government awards the execution of exploration and production activities to an oil company. The oil company bears the mineral and financial risk of the initiative and explores, develops and ultimately produces the field as required. When successful, the company is permitted to use the money from produced oil to recover capital and operational expenditures, known as "cost oil". The remaining money is known as "profit oil", and is split between the government and the company, typically at a rate of about 80% for the government, 20% for the company. In some production sharing agreements, changes in international oil prices or production rate can affect the company's share of production.
Production sharing agreements can be beneficial to governments of countries that lack the expertise and/or capital to develop their resources and wish to attract foreign companies to do so. They can be very profitable agreements for the oil companies involved, but often involve considerable risk.
Read more about Production Sharing Agreement: Risk Sharing Contracts, Framework For Marginal Fields Risk Service Contracts
Famous quotes containing the words production, sharing and/or agreement:
“I really know nothing more criminal, more mean, and more ridiculous than lying. It is the production either of malice, cowardice, or vanity; and generally misses of its aim in every one of these views; for lies are always detected, sooner or later.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“However intense my experience, I am conscious of the presence and criticism of a part of me, which, as it were, is not a part of me, but a spectator, sharing no experience, but taking note of it, and that is no more I than it is you. When the play, it may be the tragedy, of life is over, the spectator goes his way. It was a kind of fiction, a work of the imagination only, so far as he was concerned.”
—Henry David Thoreau (1817–1862)
“The doctrine of those who have denied that certainty could be attained at all, has some agreement with my way of proceeding at the first setting out; but they end in being infinitely separated and opposed. For the holders of that doctrine assert simply that nothing can be known; I also assert that not much can be known in nature by the way which is now in use. But then they go on to destroy the authority of the senses and understanding; whereas I proceed to devise helps for the same.”
—Francis Bacon (1560–1626)