Revenue Sharing Contracts

1. CONTRACTUAL FRAMEWORK :
PETROLEUM CONTRACTS IN INDIA(PSC/RSC)

2. PRODUCTION SHARING CONTRACTS
 Production Sharing Contracts or Agreements (PSC/PSAs) are among the most common types of
contractual arrangements for petroleum exploration and development. PSAs were first introduced in
Indonesia in 1966. From Indonesia PSAs spread globally to almost all oil-producing regions.
 PSAs are distinguished from other types of contracts in two ways. First, the Company carries the entire
exploration risk. If no oil is found the company receives no compensation. Second, the government
owns both the resource and the installations. Over time PSAs have changed substantially and today
they take many different forms e.g. Revenue Sharing Contracts etc.

3. OVERVIEW OF CONTRACTUAL REGIMES AND TYPES OF
CONTRACTS
Year E&P Regimes Type of Contracts
1948
State Monopoly, acreages awarded to NOCs on
nomination basis
Nomination (PEL/PML deeds)
1980-1995
Beginning of de-regulation, 9 Pre-NELP Exploration
Rounds, 2 Pre-NELP Development Rounds
Pre-NELP Production Sharing
Contracts (PSC)
1997-2010
Liberalization of E&P sector, 9 NELP and 4 CBM
Rounds
CBM contracts and NELP PSC
2015 Discovered Small Filed Policy under RSC regime
Revenue Sharing Contracts
2016-17 Introduction of HELP and DSF Bid Round I
2018 DSF Bid Round II and OALP Bid Round I
2019-2022 OALP Bid Round II to VII and DSF Bid Round III

4. PRODUCTION SHARING CONTRACTS
 The Production Sharing Contracts (PSCs) under NELP are based on the principle of “profit sharing”. When a contractor
discovers oil or gas, he is expected to share with the Government the profit from his venture, as per the percentage
given in his bid.
 Salient Features:
 The Contract period was 25 years divided into Phases (exploration, appraisal and development, production)
 Minimum Work Programme – It was a biddable criteria. Non-completion of minimum work programme resulted in
termination.
 Relinquishment of Area
 The Contractor operates at its sole risk and expense and the Contractor is permitted to recover costs incurred on
carrying out Petroleum Operations from petroleum produced from the block
 Operatorship and Management Committee
 Profit Petroleum is divided between the Contractor and the Government as per the sharing proportion described in the
Contract.
 Payment of Royalty and cess as applicable (as provided under ORDA, 1948)
 Ownership of petroleum vests with Government. All data and infrastructure of the contract area vests in the
Government or the Licensee at the end of the term or earlier termination of the Contract.

5. REVENUE SHARING CONTRACTS
 Revenue Sharing Contract (RSC) refers to an agreement between Contractor and Government whereby Contractor
bears all exploration risks, production and development costs in return for its stipulated share of revenue resulting from
this effort.
 Distinguishing features:
 Bidders is required to quote in their bids revenue to be shared with the GOI at lower revenue point and higher revenue
point.
 Government share of revenue (net of royalty and taxes on sales) is payable by the bidder commencing from the date of
production.
 Marketing and Pricing Freedom
 No Cost Recovery
 Limited Role of Management Committee
 Exploration allowed throughout contract period
 Single license for conventional and unconventional hydrocarbon operations