Under a psa the state as the owner of mineral resources engages a foreign oil company foc as a contractor to provide technical and financial services for exploration and development operations. Noteworthy that devon filed the permit for an allocation well after failing to garner enough support from royalty owners for a production sharing agreement. A well drilled across lease or unit boundaries pursuant to a production sharing agreement is referred to at the rrc as a psa well, because the permit is granted based on the operators assertion that it has production sharing agreements with royalty owners for allocation of production between or among tracts. Secondly, the state may adopt a production sharing agreement psa approach in which it enters into contracts with foreign companies which, similar to a licence, permit the compan ies to explore for and, if successful, to develop and produce oil and gas. 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. An analysis based on an oil price stochastic process corresponding author. Templates and forms the university of texas at austin. Production sharing agreements oil and gas lawyer blog. An agreement between the lessee and lessor as to how production will be shared among leases crossed by a production sharing well. All necessary documents must be submitted to the glo at least fifteen 15 business days prior to the applicable royalty reporting and payment deadlines, unless otherwise noted in the lease. Production sharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development.
Production sharing agreement and allocation wells current state of play. Fiscal challenges of tanzanias production sharing agreements psas zitto kabwe, mp and chairman pac dar es salaam, september 2014 introduction the recent leak of the natural gas terms agreed with statoil exxonmobil is an opportunity to examine whether our country will adequately benefit from our. Cropshare farm lease based on publication ncfmec02, revised 2011 for additional information see ncfmec02 crop share rental arrangements for your farm. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. Exceptions or specific provisions related to sharing of crop income are the following. The psa sets out the parameters for the exploration and development of the field and the fees, basis for production sharing, and the taxes payable to the republic of kazakhstan. Application for production sharing agreement to allow horizontal wells to cross lease lines page 1 as of oct 5, 2018. The fundamental distinction between psc and rt regimes lies in the. Production sharing contracts production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries in these regions adopting a royaltytax or concession rt regime or some hybrid. Model contractssurvey of global petroleum industryfinal. Although it is not clear how the particular type of contract is selected for a particular project, it follows from other provisions of.
They may be used as a model for government contracts in a particular jurisdiction but they are not always widely accepted and used in other countries, even though some countries have cooperated with each other. John paterson this paper considers destas critique of how contracts in the extractive industries involving host nations in subsaharan africa and international companies have been drafted and adjudicated. Revenuesharing arrangements in production sharing agreements illustrate. In view of the above explanation of the most common adopted agreement psc by the developing states,this study aims to compare expected returns that the selected countries nigeria, indonesia, malaysia and equatorial guinea get by adopted production sharing contract as an agreement that guides their petroleum operations.
Other departments within the railroad commission also may use the email address you provide to communicate with you. Production sharing agreements psas or 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 oil extracted from the country each will receive. Most but not all production sharing agreements provide for allocation based on the percentage of the productive lateral crossing each lease. Psc is an agreement between the parties to a well and a host country regarding the percentage of oil and gas production each party will receive after the participating parties have recovered a specified amount of costs and expenses. Pooling and unitization including the prevention of waste, the protection of human life and environmentally sensitive areas and the encouragement of efficient development of oil and gas resources through longterm, rather than short. Top five questions about production sharing agreements. Nonparticipating royalty interest owners in vertically and horizontally pooled units jordan k. Why governments have succeeded in exploring more money from iocs. Production sharing agreement psa wells are an alternative to allocation wells are.
Governing law state of texas agreements, contracts. The railroad commission of texas the rrc routinely grants drilling. County of the commissioner of the general land office, on behalf of the state of texas collectively referred to as lessor or the state, as approved by the board for lease of university lands. When the penetration point is located on such offsite tract, the applicant for such a drilling permit must give 21 days notice by certified mail, return receipt. Production allocated to each unit will be treated for lease and royalty payments as if it was produced from the unit. The production sharing agreements require foreign oil companies to pay the host country a signing bonus as soon as the contract gets put in action, by kaufmann, 2011.
Finally, the paper will outline those terms of the form of the model production sharing agreement that are expressly made negotiable by. This lease entered into this day of, 20, between, owner, of address, spouse, of address hereafter known as the owner, and, operator, of address. So, they came up with the idea of production sharing agreements. Production sharing, geometric brownian motion, meanreverting process, oil contract, international petroleum cooperation production sharing contract. Herein of production sharing agreements and allocation. Mar 02, 2018 a production sharing agreement serves the same purpose.
Smith, former dean of the university texas law school and a renowned texas oil and gas law scholar. Defined as a private, contractual agreement between the operator of a proposed well and nonoperating mineral interest owner in two or more leases or units that will be penetrated by a horizontal drainhole that provides for the sharing of production proceeds. Production sharing agreement and allocation wells current state. Agreement or the agreement means this production sharing agreement executed between sonangol and contractor group, including its annexes. The major difference between a pooling agreement and a production sharing agreement is in how production is allocated. Production sharing agreement university of texas system. Royalty, therefore, becomes a part of total net revenue of the state from the 1 according to the federal law no. Effective date means the first day of the month next following the month in which this agreement. Guidelines for production sharing agreements texas general.
Tender protocol and model of the production sharing agreement. Model production sharing contract under the petroleum act. Authorization letter to include % of participation psa12 form showing acreage to be assignedto proposedwell plat showing the external boundary of all tracts contributing acreage to the proposed well well allocation worksheet. Nov 10, 2012 a well drilled across lease or unit boundaries pursuant to a production sharing agreement is referred to at the rrc as a psa well, because the permit is granted based on the operators assertion that it has production sharing agreements with royalty owners for allocation of production between or among tracts. A psa in this context is a production sharing agreement. Smith oil, gas and mineral law march 28, 2014 houston, texas production allocation issues.
Production sharing agreement psa and a psa well permit is issued by the rrc. Texas public information act or other applicable federal or state legislation. A psa is 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. The commissioner of the general land office, on behalf of the state of texas. A production sharing agreement is an agreement usually between an oil and gas company and royalty interest owners. Governing law provisions also knows as choice of law or controlling law clauses in contracts are frequently used by the agreement parties to specify which jurisdictions laws will be applied to interpreting the contractual provisions and obligations. Provided below are links to production sharing agreements with texas governing law clauses. A comparative analysis of production sharing contracts of. Permitting horizontal wells as allocation wells with the texas railroad commission rrc when sixtyfive percent of the royalty interest owners within a pooled unit or units have approved a drilling plan and execute production sharing agreement psa, the texas railroad commission rrc. The general land office glo will enter into production sharing agreements psa and similar type agreements if they are found to be in the best interest of the state.
Land and regulatory issues related to horizontal wells presented by h. Effective date means the first day of the month next following the month in which this agreement is signed by sonangol and contractor group. Texas courts hold it is the rrc authority to determine if the. Forced pooling in texas is allowed only under limited circumstances and.
Closing statement of the texas general land office, oil and gas docket no. The second part of the paper will compare the production sharing agreement to the joint venture, an alternative also offered by modern turkmen law. Railroad commission of texas production sharing form psa12. Oct 21, 2016 production sharing agreement wells and allocation wells present workable alternatives to pooling the tracts needed to drill a horizontal well, but are not without risk, and will often create. This production sharing contract, is made and entered into on this 23rd.
Production sharing agreements and allocation wells update. Include a damage indemnity or bond in your agreement. Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. Interest owner, do hereby enter into this production sharing agreement. Production sharing contract dated this agreement is a production sharing contract made under the petroleum act between the, acting on behalf of the democratic republic of timorleste the ministry and and each a contractor and collectively, the contractors. Itfirst sets out the options that the state has in setting out a. A psa well is a well permitted by the texas railroad commission based upon a contractual agreement between the lessors and lessees, which specifies the manner in which production and royalties will be allocated, and is executed by at least 65% of all mineral and. Production sharing agreement wells and allocation wells present workable alternatives to pooling the tracts needed to drill a horizontal well, but are not without risk, and will often create. This profit sharing agreement template is written in a manner so that it can apply to a situation whereby a company has hired someone to market a product for them and offered a share of the profits on the sale of the product. Production sharing contract psc production sharing agreement psa under a pscpsa, a national oil company noc or a host government enters into a contract directly with an oil and gas company. Herein of production sharing agreements and allocation wells. Establish damage standards as part of the agreement. This agreement allows the oil and gas company to drill horizontal wells that will cross unit boundaries and produce from lands from multiple units.
It was located below section vi and has been removed to allow more space for section vi on this page, as well as for. Austin, texas texas mineral title course institute for energy law the center for american and international law may 2 3, 20 houston, texas. Interest owners agree that production from horizontal well will be shared between the units by entering into production sharing agreement, or psa. Land office glo will enter into production sharing agreements psa and similar type agreements if they are found to be in the best interest of the state. The university of texas school of law continuing legal education 5124756700. The procedure for obtaining glo approval is to submit two original copies of the proposed form of psa. Doc the key features of the production sharing contracts. No case law regarding production sharing agreement wells other than what governs. May 14, 2020 production sharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Production sharing agreements supporting documentation. Production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries in these regions adopting a royaltytax or concession rt regime or some hybrid. Since 2010, rrc has approved hundreds of allocation well permits. Psa wells, allocation wells and stacked laterals texas rrc.
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