production sharing contracts

A production sharing contract is an agreement between a government and an oil or gas company, where the company explores, develops, and produces natural resources. The company invests in the project and, once resources are extracted, they share a predetermined portion of the output or profits with the government. The remaining resources or profits typically belong to the government or national entity. This arrangement allows governments to benefit from their natural resources without bearing all exploration costs upfront, while companies get the opportunity to develop resources with a clear framework for sharing outputs.