After cost Oil is awarded, the allocation of the remaining production between the parties, known as profit oil, will also be regulated by PSA. These attributions themselves can often become very complicated under formulas incorporated into the EPI. Once again, there may be tensions, particularly with respect to the level of revenue and benefits available to each party and the date on which these revenues are collected. The host country (NOC) instructs the International Oil Group (IOC) to carry out exploration and production work at its own expense. If there are no hydrocarbons, the NOC will lose little or nothing and owes nothing to the IOC. The so-called “profit” oil, i.e. the allocation of production that remains after “cost oil”, is also controlled by PSA. The NOC wants profit oil as quickly as possible, regardless of what happens with cost oil. Generally, a wind tax or oil and gas royalty agreement has something to do with it. Given that tax rates can be 60-80%, it is not surprising that the parties want tax protection.

Production-sharing agreements were first used in Bolivia in the early 1950s, although their first implementation was similar to that of today in Indonesia in the 1960s. [1] Today, they are often used in the Middle East and Central Asia. Production-sharing agreements can be beneficial for governments in countries that lack expertise and/or capital to develop their resources and wish to attract foreign companies. They can be very profitable agreements for the oil companies involved, but they often present a significant risk. In the series of tenders for the new Exploration Licensing Directives (NELP) in India in 2000, Reliance Industries Limited (Reliance) and NIKO Resources Ltd (NIKO) received the KG-D6 block as part of a PSA that limits cost coverage. The consortium made its first gas discovery in 2002, the world`s largest gas discovery this year and India`s largest since the 1970s. Production in KG-D6 began on April 1, 2009 and reached a peak capacity of 69.43 mmcmd in March 2010. Today, production is 80% below the peak. In February 2011, BP purchased 30% of 23 PPEs operated by Reliance across India, including limited partnership D6 PSA, for $7.2 billion (bringing Reliance`s share to 60%) a reduction in expense of 20 In 2011, the Indian Government (GoI) refused to cover the costs of the limited partnership D6 PSA on the grounds that Reliance had breached its obligation to comply with the development plan. In November 2011, Reliance launched arbitration proceedings against the GoI. However, in addition to a share of the profits, there are a number of other economic routes through which the State takes over part of the production: of all the legal contracts in the oil and gas industry, one of the most important is the production sharing agreement.