SCHOOL OF PETROLEUM MANAGEMENT, GANDHINAGAR

Clauses of Production Sharing Contract
Legal Aspects of Business Assignment
Submitted By: Hetal Patel (20091016) Submitted to: Prof. Mayuri Pandya 23rd January, 2011

[CLAUSES OF PRODUCTION SHARING CONTRACT]

January 23, 2011

Content
Introduction ..................................................................................................................................................... 4 Standard Clauses ............................................................................................................................................ 6 Description of Parties............................................................................................................................... 6 Scope of Contract ....................................................................................................................................... 7 Contract Area .............................................................................................................................................. 7 License and Exploration Period ........................................................................................................... 7 Relinquishment .......................................................................................................................................... 8 Operatorship, Joint Operating Agreement and Operating Committee.................................. 9 Conduct of Operations ......................................................................................................................... 9 Obligations of Host Country or its nominee.............................................................................. 10 Discovery, Development and Production ....................................................................................... 10 Protection of the Environment........................................................................................................... 10 Important Concepts .................................................................................................................................... 11 Recoverable Costs ................................................................................................................................... 11 Profit Petroleum....................................................................................................................................... 12 Share of Profit Petroleum ..................................................................................................................... 12 Standard Clauses .......................................................................................................................................... 13 Production Sharing of Petroleum ...................................................................................................... 13 Cost Petroleum ......................................................................................................................................... 14 Recovery of Cost Petroleum ................................................................................................................ 15 Profit Petroleum....................................................................................................................................... 16 Taxation, Duty and Levies .................................................................................................................... 16 Domestic Supply Requirement ........................................................................................................... 16 Valuation of Petroleum.......................................................................................................................... 16 Employment, Training and Transfer of Technology .................................................................. 17 Local Goods and Services ..................................................................................................................... 17 Insurance and Indemnification .......................................................................................................... 18 Records, Reports, Accounts and Audit ............................................................................................ 18 Information, Data, Confidentiality, Inspection and Security................................................... 19
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.................[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23.......................................................................................................................................................................... Highly Critical for Host Country’s Interest ....................................................................................................................................................................................... Data and Assets ............................................................... 20 Governing Law and Language................. 23 3|P age ......................................................................................... Critical to both Host Country and International Oil Companies’ interest.................................................................................................................................... 22 Conclusion.................................................................... 21 B..................................................................................................................................................... 19 Assignment of Participating Interest .............. 2011 Title to Petroleum................................................... Important to both Host Country and International Oil Companies’ interest............................................................................................. 20 Termination ........................................................... 21 Order of Importance ............................................................. 21 A.............................. 21 C................................................................................... 20 Arbitration................................... 20 Force Majeure .... 20 Local Office and Notice ........................................................... 20 Effective Date .................

which is the surplus obtained from the sale of gas in a year after recovering operating and exploration costs. It is their complexity. which is advantageous to oil companies. not their simplicity.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. and government taxes and royalty together described as ‘cost petroleum’. Production sharing agreement is the most contractually complex form of oil contract. who would be entitled to take many decisions regarding exploration. in case it is not successful in finding oil or gas. development and production. It also stipulates the extent of area the contractor has to relinquish after each exploration phase. The important clauses of any contract are: • Description of Parties • Recitals of Subject • Consideration • Covenants and Undertaking 4|P age . Agreements representing the various conditions agreed to by the parties mentioned in the form of certain ‘clauses’ form the foundation of rights and liabilities of the parties. The PSC stipulates certain maximum timeframes available to the contractor for different exploration phases. The PSC requires the constitution of a management committee consisting of representatives from the government and the contractor. 2011 Introduction Production Sharing Contracts (PSCs) 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 petroleum) extracted from the country each will receive. It describes the notion of ‘profit petroleum’. Thus. the PSC describes the procedures to be followed if the contractor finds a reserve of oil or gas regarding how it should be exploited further. One of the critical sections of the PSC is the detail of how profit will be shared between the contractor and Government.

[CLAUSES OF PRODUCTION SHARING CONTRACT] • Signature and Attestation • Endorsement and Supplemental Deeds • Stamp Duty • Applicable Law • Force Majeure • Notice • Arbitration Clause January 23. 2011 The checklists for the standard clauses are: • Preamble • Parties • Definitions • Offer and Acceptance • Obligations • Conditions • Environmental Responsibility • Security • Delivery • Insurance • Risk of Loss • Price and Currency Indexes • Force Majeure • Default • Termination and Expiration • Intellectual Property Rights • Confidentiality • Penalties and Liquidated Damages • Delay • Notice Clause • Choice of Law and Venue 5|P age .

[CLAUSES OF PRODUCTION SHARING CONTRACT] The Contractual Framework can be shown as follow. 2011 Standard Clauses The clauses of production sharing contract are as follow. January 23. with prior approval of the Central Government Every license or lease granted to contain additional terms and conditions as provided for in an agreement between the Central Government and the licensee or the lessee (the PSC) 6|P age . Description of Parties The parties involved in the contract are as follow: For offshore areas – Grant of license and lease by the Central Government For onshore areas – Grant of license and lease by the State Government.

[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. in accordance with the terms of the PSC.at sole risk . 2011 Where license or lease to be granted by a State Government – merely an obligation to ‘consult’ the State Government Issues in the case of onshore PSCs are: (1) Delays in post contract clearances. License and Exploration Period The different phases of the exploration can be divided into three different phases and the share of contractor and government can be described by following model production sharing contract arrangement. (2) Involvement as confirming parties to contracts Scope of Contract A clause describing in broad terms: the relationship between Host Country (whether it is represented by a Ministry or a National State Owned Oil Company) and the Contractor. 7|P age . and (2) Procurement of mining leases from the State Government seen as a major bottle neck Though ‘concurrence’ already received. States should be better involved by: (1) Involvement at bidding stage. development and production on behalf of State and to supply the technical expertise and the funds required for such operations and receive reimbursement. Contract Area This clause gives a definition of the area covered by the PSC (to be progressively reduced in accordance with the relinquishment provisions). appointment of the Contractor to carry out .exploration.

Development Operations. Commercial Discovery and Contract Area. The entire area (excluding Discovery and Development area) shall be relinquished at the end of 7 consecutive years of 8|P age . Minimum Work Program. 2011 For example. or else it can be extended for required period not exceeding six months. The Initial Exploration Period shall consist of the first four consecutive Contract Years with provision to proceed to the Subsequent Exploration Period of maximum three consecutive years subject to provisions contained in Article 3.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. Development Area. the contractor has to complete minimum work program. Production Operations. Thus Licence and Exploration Period clause mentions about the Initial Exploration Period. Relinquishment At the end of the Initial Exploration Period. Discovery Area. the Contractor shall have option to relinquish entire area after completion of Minimum Work Programme or proceed to the Subsequent Exploration Period and retain the block by committing to carry out drilling of one well each year in Contract Area. During the initial exploration period. the Exploration Period shall begin on the Effective Date and shall be for a period not exceeding seven (7) consecutive Contract Years consisting of Initial Exploration Period and Subsequent Exploration Period. Subsequent Exploration Period.

The clause also states rules regarding the form and size of areas to be relinquished. 2011 Exploration Period. Joint Operating Agreement and Operating Committee This clause establishes an Operations Committee or Management Committee. review of the Contractor’s operations etc. on which both Host Country and the Contractor will be represented on an equal basis. this standard clause presents the requirements for the Contractor to progressively reduce the size of the contract area at stated intervals during the exploration period. Thus. Operatorship. misconduct. The clause specifically sets out procedures for submission by Contractor of and approval by Operations Committee or Host Country’s nominees of annual work programs and budgets and procedures for Contractor to make expenditures in excess of approved budgets. The Operations Committee will be responsible (inter alia) for approval of work programs and budgets approval of development plans. relating to or connected with the Contract. At the end of the total Exploration Period. 9|P age . the Contractor shall retain only Development Areas and Discovery Areas. as the case may be. commission or omission in carrying out Petroleum Operations during the period between the Effective Date and the date of relinquishment of the Contract Area or termination or expiry of the Contract. approval of programs for training and technology transfer. By the end of the exploration period only development and production areas will remain.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. The liability of the Contractor shall be limited to any liability undertaken or incurred in respect of. and/or any claim arising out of or in relation to the act of negligence. Conduct of Operations This clause states the requirements for the Contractor to carry out operations according to the local laws and regulations and good oil industry practice and to maintain accurate records and books. approval of development and production areas. review of any assessment of commerciality of a discovery.

etc. if the Contractor fails the Law to stop pollution. Discovery. complying with foreign exchange regulations. at the Contractor’s expense. Protection of the Environment The Contractor will be required to conform to health and safety standards adopted by the local Host Country’s Government under the authority of the Petroleum Law. Host Country and or the Government can appoint inspectors to ensure that these standards are being enforced.. 10 | P a g e . securing entry permits for foreign employees. clearing equipment through customs. The Contractor will be required to conform to environmental protection standards adopted under the Petroleum Law and relevant good oil field standards and practice to ensure that no damage is done to the environment. dealing with government agencies.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. If a discovery is proven to be commercial. This clause also provides for compensation in the event of damage. and in identifying qualified local personnel for work in the Contractor’s operations. reasonable period of time. Development and Production This clause requires prompt economic evaluation of any deposit which the Contractor discovers and sets out a procedure by which the Contractor and Host Country can agree. within a defined. as to whether the discovery can be developed commercially. 2011 Obligations of Host Country or its nominee (Ministry or National Oil Company owned by the State) This clause obligates Host Country to assist the Contractor in such matters as establishing of necessary facilities in the country. and for the right of Host Country to take action. Guidelines are set forth to assess the commerciality of a discovery. the Contractor will relinquish rights to it. obtaining supplies and equipment. the Contractor will be required to submit a development plan for consideration to the Operations Committee. If a discovery is determined not to be commercial. Work Programmes and Budgets for Development and Production Operations shall be submitted to the Management Committee as soon as possible after the approval of a Development Plan.

a Quarterly amount equal to the product of the rate of Uplift and the Quarterly balance of outstanding Recoverable Costs. Less Miscellaneous Receipts and less any deductions. Recoverable Capital Costs. allowable in that Year. but without prejudice to any other provision of this Agreement which would result in any such cost or expense not being a Recoverable Cost. and (unless the Contractor is only one person and the Contractor and the Operator are that person) properly charged to the Contractor under an agreement made between them and consented to by the Ministry.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. and Recoverable Operating Costs. 2011 Important Concepts Recoverable Costs Only costs and expenses incurred by the Operator in carrying on Petroleum Operations. the sum of those of the following that are not ineligible costs: (a) The sum of: i. iii. ii. Recoverable Appraisal Costs. Recoverable Costs are. 11 | P a g e . (c) Recoverable Costs in the previous Calendar Year. are Recoverable Costs. Recoverable Exploration Costs. and (d) Beginning in the Calendar Year seven (7) years prior to the Calendar Year in which Ministry approval has been given for the first Development Plan. In any Calendar Year. to the extent in excess of the value of the Contractor’s share of Petroleum in that previous Calendar Year. (b) Decommissioning Costs Reserve. iv.

difficulties. it will add-up to the amount of Recoverable Costs – therefore reduces the bulk of Profit Petroleum. the share of Profit Petroleum shall also vary from one environment to another. first. development. 12 | P a g e . suggested that the Share of Profit Petroleum should follow the formula presented below to reflect the different environment and petroleum component. second. it will allow inefficiency in costs because Contractor make more money from this end than from Profit Petroleum and such the Contractor will tend to blow-up the cost. Offshore Shallow Water (0-200 meters). third.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. it will not be taxable – therefore reduces Host Country’s income from taxes. as the development cost of Oil and Gas is different. Share of Profit Petroleum This provision disregards the differences of exploration. If Uplift is included in the Recoverable Costs provision. 2011 Profit Petroleum The calculation for Profit Petroleum follows this formula: Profit Petroleum = Gross Production of Petroleum – Recoverable Costs Petroleum Profit Petroleum is the bulk of Income that is Taxable under Timor-Leste’s Petroleum Tax Law (income tax). Furthermore. costs of petroleum operations in different environment such as Onshore. the share of Profit Petroleum shall also be different. It is therefore. As the hardship of petroleum operations is different from one environment to another. Offshore Deep Water (200-1000 meters) and Offshore Ultra Deep Water (>1000 meters).

[CLAUSES OF PRODUCTION SHARING CONTRACT] Thus. 13 | P a g e . payable to the State. the total revenue will be shared as follow. If Host Country or its nominees participates in supplying development and production expenditures. c) Royalty. development and operating costs. b) Profit Petroleum. any amount remaining after (a) and (b) will be divided between Host Country and the Contractor according to an agreed formula. it will also share accordingly in this cost recovery. January 23. 2011 Standard Clauses Production Sharing of Petroleum Petroleum production will be divided into the following amounts: a) Cost Petroleum (with/without a maximum ceiling of x% of gross production) payable to the Contractor for recovery of exploration. currently in international standard ranging from 5% to 15% of gross production. The amount payable to the Contractor under this formula will be considered as profit and as such will be subject to the Host Country’s income tax.

[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. 'X' denotes Investment Multiple of Contractor at the end of preceding Year. The Profit Petroleum due to the Contractor in any Year from the Contract Area shall be divided amongst the Parties constituting the Contractor. Development and Operations and Decommissioning Cost Reserve consistent with the Approved Work Programmes and Budgets are hereto considered as Cost Petroleum for the purpose of this Agreement 14 | P a g e .500) but is less than three and one half (3. rounded off to three decimal places. and the Contractor shall be entitled to take and receive (100-Z)% of the total Profit Petroleum from the Contract Area with effect from the start of the succeeding Year. The government’s share and contractor’s share depends on the investment multiple at the end of the year. 'b' denotes Government share 'b' should always be higher than 'a'. shall be calculated on the basis of the Investment Multiple actually achieved by the Contractor at the end of the preceding Year for the Contract Area. Cost Petroleum (a) All expenses incurred by the Contractor in carrying out Petroleum Exploration. the Government shall be entitled to take and receive Z%. The Government share Z% shall be calculated by interpolation as under: Z = a + [(b – a) * (X – 1. When the Investment Multiple of the Contractor at the end of any Year is more than one and one half (1. Appraisals.500). These figures shall be as per the bid of the Contractor and accepted by the Government. in proportion to their respective Participating Interest.5)/2] Where 'a' denotes Government share. A Party's share of Profit Petroleum in any Year. 2011 This clause mentions about the sharing of the Profit Petroleum by the partied of production sharing contract.

and iv. and (ii) Recovery shall next be made of the Production Costs. subject as further provided in Annex C. If during any Year the Cost Petroleum is not sufficient to enable the Contractor to recover in full the Contract Costs due for recovery then. and (iv) Recovery shall then be made of the Development Costs. the Contractor shall be entitled to recover Contract Costs out of a percentage of the total value of Petroleum Produced and Saved from the Contract Area in the respective Year. (i) Recovery shall first be made of royalty payments. Recoverable Costs are. (iii) Recoverable Costs in the previous Calendar Year.[CLAUSES OF PRODUCTION SHARING CONTRACT] (b) The Contractor is entitle to recover the Cost Petroleum January 23. to the extent in excess of the value of the Contractor’s share of Petroleum in that previous Calendar Year. allowable in that Year. ii. and Recovery of Cost Petroleum In accordance with this clause. and (iii) Recovery shall next be made of the Exploration Costs. (ii) Decommissioning Costs Reserve. the sum of those of the following that are eligible costs: (i) The sum of i. Recoverable Operating Costs. 2011 (c) The Contractor’s accounts shall be prepared and maintained in accordance with Annex C (d) Recoverable Costs In any Calendar Year. 15 | P a g e . Recoverable Exploration Costs. Recoverable Appraisal Costs. iii. Recoverable Capital Costs.

the value of Crude Oil. Valuation of Petroleum For the purpose of this Contract. taxes and duties applicable in the Host Country. The actual prices invoiced by the Company(ies) for the sales will form the basis for the purposes of cost recovery. Taxation. Condensate and Natural Gas shall be based on the price determined as provided in the contract. for each Delivery Period. on import parity basis (with marine freight being determined on the basis of nearest port to the Contract Area) for Crude Oil produced and sold or otherwise disposed of from Contract Area. Domestic Supply Requirement This clause states that in the event that petroleum available to the State from its entitlements and those of Host Country are insufficient for domestic needs. in accordance with the appropriate basis for that type of sale or disposal specified below. 2011 Profit Petroleum In each Calendar Year the remaining Petroleum available after deduction for Cost Petroleum shall be considered as Profit Petroleum. Profit Petroleum sharing and payment of 16 | P a g e . A price for Crude Oil shall be determined for each Month or such other period as the Parties may agree in terms of United States Dollars per Barrel. and shall be shared between the Government and Contractor as per the contract. The clause also makes clear that material and equipment used in the operations are excluded from import duties and that there are no taxes and duties on the export of petroleum.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. etc as well as all other taxes. fees and duties that are generally applicable in Host Country. Duty and Levies This clause specifies the Contractor’s liability to pay income tax. Contractor and any other third party producing oil in the country will be required to supply a volume of oil. There are no discriminatory fees.

Thus. and will establish appropriate training programs. At the request of the Government. Contractor shall employ Indian Subcontractors having the required skills or expertise. but not be limited to. insofar as their services are available on comparable standards with those obtained elsewhere and at competitive prices and on competitive terms. Local Goods and Services The Contractor will give preference in purchasing goods and services produced or provided in the Country. confidentiality restrictions. royalty conditions. The Operator shall offer a mutually agreed number of Indian nationals the opportunity for on-the-job training and practical experience in Petroleum Operations during the Exploration Period. provided such goods and services are comparable to imports. costs and method of payment. to the maximum extent possible. licensing issues.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. including tender procedures. for the acquisition of goods and services which shall ensure that suppliers and Subcontractors in India are given adequate opportunity to compete for the supply of 17 | P a g e . The issues to be addressed in negotiating such technical assistance agreements shall include. Training and Transfer of Technology The Contractor will give preference to hiring Host Country’s nationals. 2011 royalty. in good faith. liabilities. technical assistance agreements with the Government or a company nominated by Government for this purpose setting forth the terms by which each Foreign Company constituting the Contractor may render technical assistance and make available commercially proven technical information of a proprietary nature for use in India by the Government or the company nominated by Government. in accordance with an agreed timetable for localization. Employment. this clause majorly deals with the determination of the price of natural gas and crude oil. The Contractor shall establish appropriate procedures. the Foreign Companies shall separately endeavour to negotiate.

including. 18 | P a g e . the procedures for such bidding. Insurance and Indemnification The Contractor shall. during the term of this Contract. and shall within two months of the date of policy or renewal furnish to the Government. the financial amounts or value of contracts which will be awarded on the basis of selective bidding or open competitive bidding. and shall be subject to the approval of the Management Committee. 2011 goods and services. losses and damages of any nature whatsoever. in accordance with an agreed accounting procedure and for filing of periodic financial reports by the Contractor. The Contractor shall indemnify.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. certificates evidencing that such coverage is in effect. without limitation. and the exceptions to bidding in cases of emergency. inter alia. Insurance shall cover all the possible losses and damages as would be mentioned in the clause. defend and hold the Government. Accounts and Audit This clause contains requirements for maintaining financial records. The tender procedures shall include. Such insurance policies shall include the Government as additional insured and shall waive subrogation against the Government. maintain and obtain insurance coverage for and in relation to Petroleum Operations for such amounts and against such risks as are customarily or prudently insured in the international petroleum industry in accordance with modern oilfield and petroleum industry practices. claims for loss or damage to property or injury or death to persons caused by or resulting from any Petroleum Operations conducted by or on behalf of the Contractor. Records. Reports. and the State Government harmless against all claims.

insurance and safety of all assets acquired for Petroleum Operations and for keeping them in good repair. Thus. the Contractor shall be responsible for proper maintenance. whether fixed or movable. 19 | P a g e . 2011 Information. Title to all Data shall be vested in the Government and the Contractor shall have the right to use thereof as therein provided. Title to Petroleum. All information received by Host Country from the Contractor will be subject to appropriate confidentiality provisions. The clause also specifies that samples and original data collected by the Contractor are the property of Host Country. Condensate or Gas the title whereof has passed to the Contractor or any other person in accordance with the provisions of this Contract. Assets purchased by the Contractor for use in Petroleum Operations shall be owned by the Parties comprising the Contractor in proportion to their Participating Interest provided that the Government shall have the right to require vesting of full title and ownership in it. acquired and owned by the Contractor for use in Petroleum Operations inside or outside the Contract Area. order and working condition at all times. and provides for inspection of Contractor’s facilities and records by representatives of Host Country. The Contractor will also be required to supply periodic reports describing work done to date. of any or all assets. Confidentiality. such right to be exercisable at the Government's option upon expiry or earlier termination of the Contract. free of charge and encumbrances. Inspection and Security This clause requires the Contractor to supply timely and complete information to Host Country on all aspects of the Contractor’s work. Data.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. Data and Assets This clause specifies that the Government is the sole owner of Petroleum underlying the Contract Area and shall remain the sole owner of Petroleum produced pursuant to the provisions of this Contract except as regards that part of Crude Oil.

20 | P a g e .[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. Arbitration This clause permits arbitration of disputes between the Contractor and Host Country (but not disputes over taxation and other State fiscal impositions. which would be resolved under the appropriate law). Local Office and Notice The Contractor will be required to establish a local office to carry out its development and production responsibilities. following signing and Ministerial approval).. e. 2011 Assignment of Participating Interest The Contractor may not assign rights under the PSC to any other parties without the consent of Host Country.g. serious failure by the Contractor to perform its responsibilities. Force Majeure This clause is the standard force majeure clause suspending the parties’ obligations to the extent that they are unable to fulfil them because of events outside their sphere of influence. Termination This clause provides for termination of the PSC in the event of certain specified occurrences. Arbitration will be conducted under an agreed procedure providing for an internationally appointed arbitrator. The clause will also set out a procedure for termination. Effective Date This is a formal clause specifying when the PSC will come into force (e. failure to make a commercial discovery within the exploration period.g.

Highly Critical for Host Country’s Interest This means. normally they can be classified into three categories: A. the resource Owner. the provisions below shall exist in the PSC and shall be emphasized as such to really ascertaining the Host Country’s interest and position: 1) Recoverable Cost/Cost Reimbursement and share of Profit Petroleum 2) Local Purchase and Procurement 3) Local Employment. the provisions below shall exist to serve equally the interest and position of the Host Country or its nominee. However.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. These provisions shall be well defined in every PSC. 21 | P a g e . the Contractors. 2011 Governing Law and Language The governing law of the contract will be the law of Host Country. Order of Importance Depending on the situation and condition of the Host Country or the Host Government the order of importance of the above sections/provisions may vary from one country to another. The contract will be executed in X Country and parties may decide to make a working text for the day to day operations in English. and the International Oil Companies. Critical to both Host Country and International Oil Companies’ interest This means. Training and Transfer of Technology 4) Local Office and Notice 5) Title to and control of Facilities and Equipments 6) Domestic Supply Requirement 7) Inspection Safety and Environment Protection B.

as such it is an important part of every PSC. etc.[CLAUSES OF PRODUCTION SHARING CONTRACT] 1) Definitions 2) Scope of Contract 3) Term of Contract 4) Contract Area 5) Minimum Exploration Program 6) Relinquishment 7) Operations Committee (optional) 8) Conduct of Operations January 23. the provisions below are necessary to make the contract more certain and not to be ambiguous in the case of problems or disputes arisen during the contract period. 1) Force Majeure 2) Termination 3) Arbitration 4) Good Faith 5) Effective Date 6) Governing Law and Language 22 | P a g e . 2011 9) Obligations of Host Country or its nominee (Ministry or National Oil Company owned by the State) 10) Commercial Discovery 11) Financing 12) Measurement and Pricing of Petroleum 13) Taxation. Important to both Host Country and International Oil Companies’ interest This means. Duty and Levies 14) Associated Gas 15) Information 16) Accounting and Auditing 17) Assignment C.

2011 Conclusion The report mentions all the important clauses of the production sharing contract.[CLAUSES OF PRODUCTION SHARING CONTRACT] January 23. Also the importance of the above discussed clauses to the government as well as the contractor are analysed and stated above. that is cost petroleum. 23 | P a g e . The most important clauses for negotiation remains the sharing of petroleum production. profit petroleum. taxation. royalty and other duty.

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