Are All PSAs Good Marriages?

摘要

The foundation for the relationship between a hostrnGovernment and a contractor oil company in the operation ofrna petroleum concession is the Production Sharing AgreementrnPSA). This document, versions of which have evolved overrnmany years, should recognize that the two parties have onerncommon goal: properly exploit the hydrocarbon resourcesrnwithin the defined concession area - but each has potentiallyrndiverse interests. Generally, the representing entity of the hostrnGovernment is compelled to minimize financial commitmentrnand risk and negotiates with a view to put these obligationsrnonto the ‘Contractor’; and the Contractor, particularly if it is arnpublicly owned corporation, in accepting the financing andrnrisk obligations, is compelled to seek maximization of thernfinancial return consistent with internally established riskreturnrnrelationships.rnThe stage is set for serious negotiation.rnIf the Government terms are too restrictive, the company willrntake its exploration money to another opportunity in arndifferent country. If the company is seen as too greedy, thernGovernment will invite another company as the potentialrnpartner. Without an agreement neither wins; with a goodrnagreement, both win. Understanding by all negotiators of therninterests, goals and limitations of the other party is essential.rnRemember that the normal 25 year duration of a concessionrnagreement is similar to that of a good marriage. If instead ofrn“understanding,” the parties inter into discussions with onlyrn“perceptions” regarding the forces driving decisions made, orrnpositions taken by the other party, the negotiation process canrnthen be unbelievably difficult, and the experience thereafterrnless than satisfactory, and such perceptions are created at thernfirst reading of a revised PSA form.rnThis paper presents the authors’ expectations about thern“perceptions” that may be created by recent changes in theProduction Sharing Agreement format adopted by thernEgyptian General Petroleum Corporation (EGPC), the nationalrnoil company of Egypt which, we believe, is a guide for manyrnArab countries.