Production sharing contract in India its effectiveness in the exploitation of hydrocarbon resources

Abstract

While a country’s energy resources base is a gift of nature, transforming these resources into salable commodity like crude oil requires investment and effort. Whether governments choose to invest directly or allow private investors to do so, their primary reason differs in foundation. For the host government the primary concern is to maximize social benefits derived from the exploitation of the resource base, while the International oil companies operate with an appetite for supernormal profits as oil and gas sector is associated with high risk-high returns. In practice however defining what constitutes the maximum benefit to which party is essentially a profound question which helps explaining the variety of objectives pursued by either party – governments or oil companies over time. The governments with different choices of regimes to pursue, in order to exploit their natural resources efficiently, have a challenging task in deciding which and how the companies should be awarded the exclusive rights to explore, develop, and produce their resources, and on what conditions such rights should be awarded. Hence, for every country, not only there is a certain excitement and quest to create wealth, there have always been another, humbler, but hardly secondary motivation, the desire for self sufficiency. Adding to this, the importance of oil as an international commodity, such urgency has warranted for some of the most challenging times in the world’s history tapestries. And in more recent times there has been yet another, by extension of the last, as desire has turned to necessity: the need to secure the resources to maintain economic growth; the energy to fuel the world.