Production sharing contracts (PSCs) are agreements between host governments and oil and gas exploration and development companies. These contracts outline the rights and responsibilities of the parties involved and allocate the fiscal and legal terms for oil and gas exploration, development, and production in a particular area or block. In this article, we will provide some examples of production sharing contracts.
1. ExxonMobil`s Liza oil field in Guyana
ExxonMobil`s Liza oil field in Guyana is a significant example of a production sharing contract. The contract was signed between the government of Guyana and ExxonMobil`s subsidiary Esso Exploration and Production Guyana Limited (EEPGL) in 2016. According to the contract, ExxonMobil would have a 45% interest in the project, Hess Corporation would have a 30% interest, and CNOOC Nexen Petroleum Guyana Limited would have a 25% interest.
The agreement also stated that the government of Guyana would receive a 2% royalty on gross revenue and 50% of the profits from oil production. The remaining profits would be shared between the oil companies, who would pay taxes and other fees as per the laws of Guyana.
2. BP`s Tangguh liquefied natural gas project in Indonesia
BP`s Tangguh liquefied natural gas project in Indonesia is another example of a production sharing contract. The contract was signed between BP Tangguh Indonesia (BPTI) and the government of Indonesia in 1999. The contract was for the exploration and production of natural gas from the Tangguh field located in the Papua province of Indonesia.
The contract stated that BPTI would have a 37.16% interest in the project, and other partners, including Miang Besar LNG Indonesia, KG Berau Petroleum Ltd, and China National Offshore Oil Corporation, would have the remaining interests. The government of Indonesia would receive a 10% royalty on gross sales and a share of the profits from the project.
3. ENI`s Zohr gas field in Egypt
ENI`s Zohr gas field in Egypt is a significant example of a production sharing contract. The contract was signed between the Egyptian Natural Gas Holding Company (EGAS) and Italy`s ENI in 2015 for exploration and production of natural gas from the Zohr gas field located in the Mediterranean Sea.
According to the contract, ENI would have a 60% interest in the project, while EGAS and BP would have 10% each. The remaining 20% would be divided among other partners. The government of Egypt would receive a 22.5% share of the profits from the project, and ENI would pay taxes and other fees as per the laws of Egypt.
In conclusion, production sharing contracts are essential documents that outline the terms of oil and gas exploration and development projects between host governments and oil and gas companies. These contracts allocate the fiscal and legal terms for the project, which ensures that the interests of all parties involved are protected. The examples above showcase the different arrangements that can be included in a production sharing contract, and how they vary based on the location and scope of the project.