OGEL Journal (Oil, Gas & Energy Law Intelligence)

Associate Editor(s):
Philip R. Weems
King & Spalding LLP


Scott C. Craig
King & Spalding LLP

OGEL 1 (2005) - Production Sharing Contracts

This first OGEL issue in 2005 focuses on production-sharing contracts. Production-sharing contracts now dominate the world of upstream exploration and development for oil and gas, with some exceptions in Europe (where concession-licenses prevail), in the US and in some Latin American countries which have during their privatisation period in the 1990s re-introduced mineral concessions on the Chilean model (Chile, Argentina, Brazil, Peru in particular). Production-sharing contracts are also used, though sparingly and with limitations, in Russia.

The production-sharing contract originated in the 1960s in Indonesia, conceptually and culturally derived from the share-cropping model then familiar to Indonesians (and indeed much of the agricultural world where agricultural leases have traditionally often been based on simple production-sharing). It offered a new model to reject the "mineral concession" then seen as colonialist (though in itself it is nothing but a particular form of a legal title to exploration and subsequent development in case of a commercial discovery); it was made attractive to the then (and now) nationalistic sentiments in producing countries as it did (or seemed to give) the symbolic functions of ownership and control of the resource, both underground and after extraction, to the state enterprise (in Russia the state) as the agent of the nation. It also provided the state with oil in kind to supply domestic needs. To the international oil companies, it was first seen as revolutionary and widely resented.

This special issue was prepared by Philip R. Weems and Scott C. Craig of King & Spalding in Houston.

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