A production sharing contract (PSC) is a contractual relationship between a host government and a private sector participant (‘investor’) whereby the government contracts with the investor to carry out oil and gas exploration and production activities (E&P activities) in a defined area for a defined period of time. A PSC is distinguished from the other types of upstream petroleum agreement by the fact that the host government always remains the owner of the oil and gas resources in the ground, although title to a share of the produced oil and gas is transferred to the investor at a contractually agreed 'delivery point' to compensate the investor for the E&P activities it has undertaken.
For more information on the different types of upstream petroleum agreements, see Practice Note: Understanding upstream petroleum agreements—concessions, production sharing contracts and service contracts.
Each jurisdiction that adopts a PSC as the basis for its upstream petroleum agreement will design its PSC in its own particular way. Common provisions include: