Understanding upstream petroleum agreements—concessions, production sharing contracts and service contracts


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Practice notes

Understanding upstream petroleum agreements—concessions, production sharing contracts and service contracts


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Energy expert

Practice notes
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The purpose and scope of petroleum agreements

In order for a private sector participant (the ‘investor’) to carry out oil and gas exploration and production (‘E&P’) activities on land or sub-sea, the investor will need to obtain the consent of the ultimate owner of the oil and gas, which is usually the host government (where ownership by the state could be received as a matter of constitution, eg Iran, or by statute, eg the UK). This consent typically take one of three forms (although there are many hybrid versions which incorporate elements of more than one of these forms):

  1. •

    a concession (in today's terms, a licence or a lease),

  2. •

    a production sharing contract (a ‘psc’), or

  3. •

    a service contract

For the purposes of this Practice Note, these arrangements are collectively referred to as ‘petroleum agreements’.

A petroleum agreement establishes the framework for the performance of E&P activities by an investor in a defined area. The petroleum agreement will address a wide range of issues, the most important of which

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Ownership definition
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