Create a Production Sharing Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Definitions (feel free to skip)

Legal Requirements: Requirements set by the government or other entity that must be followed or obeyed in order for something to be considered legal.

Rights: The ability to do or have something that is protected by law or agreement.

Responsibilities: Duties or obligations that someone is expected to complete or fulfill.

Privileges: Special rights or advantages given to certain people or groups.

Scope: The extent or range of something, such as the range of activities or ideas included in a situation.

Duration: The length of time that something lasts.

Conflicts: A disagreement or a situation in which people or groups are opposed to each other.

Ambiguous: Not stated clearly or leaving uncertainty about its meaning.

Comply: To act in accordance with a request, command, or agreement.

Notaries: An official authorized to witness the signing of documents and to certify that they are authentic.

Contents

• Establishing the framework and purpose of the agreement
• Researching relevant laws and regulations
• Identifying the goals and objectives of each party
• Defining the roles and obligations of each party
• Determining the rights, responsibilities, and privileges of each party
• Negotiating the scope and duration of the agreement
• Negotiating the terms of the agreement
• Discussing and agreeing upon the terms of the agreement
• Clarifying any ambiguous language
• Drafting the agreement, including legal language and terms
• Composing the document according to applicable laws and regulations
• Ensuring the agreement is clear and understandable
• Finalizing the agreement, including signing and registering the agreement
• Checking the agreement for accuracy and completeness
• Obtaining the signature of each party to the agreement
• Registering the agreement in the appropriate jurisdiction
• Executing the agreement, including ongoing monitoring and compliance
• Making sure each party fulfills the terms of the agreement
• Resolving disputes in accordance with the terms of the agreement
• Assessing the agreement and making any necessary changes
• Evaluating the performance of the agreement
• Recommending adjustments to the agreement
• Terminating the agreement with appropriate notice
• Giving notice of intent to terminate the agreement
• Following the steps outlined in the agreement for termination
• Documenting the agreement
• Retaining a copy of the agreement for future reference
• Disseminating the agreement
• Making the agreement available to all relevant parties

Get started

Establishing the framework and purpose of the agreement

• Review the parties involved in the agreement and determine their roles and responsibilities
• Outline the purpose and goals of the agreement
• Identify any pre-existing relevant laws and regulations that may impact the agreement
• Determine the desired level of risk and document any contingencies
• Specify the resources and financial commitments of the parties
• Establish the duration of the agreement

When these items have been established, you can move on to the next step of researching relevant laws and regulations.

Researching relevant laws and regulations

• Determine the national laws and regulations relevant to the agreement, including any industry-specific regulations
• Research international laws and regulations that may affect the agreement
• Identify any relevant treaty obligations
• Gather any other necessary information to inform the agreement
• Document the research and findings

Once you have gathered and documented the relevant laws and regulations, you can move on to the next step of identifying the goals and objectives of each party.

Identifying the goals and objectives of each party

• Meet with both parties and identify their goals and objectives for the Production Sharing Agreement (PSA)
• Ask each side to make a list of their goals and objectives and explain how they plan to achieve them
• Make sure the goals and objectives of both parties are clear, realistic, and achievable
• Create a document that outlines both parties’ goals and objectives
• Once both parties agree to the goals and objectives and sign off on the document, this step can be marked as complete and you can move on to the next step.

Defining the roles and obligations of each party

• Identify any special roles or obligations of each party related to the production sharing agreement.
• Define the roles and obligations of each party and outline them in the agreement.
• Outline the roles and responsibilities of each party in detail.
• Outline any contingencies that need to be addressed and how each party will handle them.
• Identify any limitations or restrictions on the roles and obligations of each party.
• Make sure all roles and obligations are clearly defined and understood.

Once all roles and obligations of each party have been identified, defined, and outlined, you can check this step off your list and move on to the next step.

Determining the rights, responsibilities, and privileges of each party

• Outline what each party will be responsible for, including any specific obligations
• Define which party will hold the majority of the rights, privileges, and responsibilities
• Detail what each party will be entitled to, including any compensation
• Consider any restrictions or limitations that should be in place
• Discuss the scope of each party’s authority and decision-making power
• Finalize the specifics of the agreement that each party is comfortable with

Once all of the rights, responsibilities, and privileges of each party have been outlined and agreed upon, you can move on to the next step of negotiating the scope and duration of the agreement.

Negotiating the scope and duration of the agreement

• Determine the duration of the agreement - this could be a fixed period of time or when specific milestones are met.
• Discuss the scope of the agreement and any limitations within it.
• Consider the needs of both parties and create an agreement that is mutually beneficial for all.
• Record the details of the agreement in a written document.

How you’ll know when you can check this off your list and move on to the next step:

• When both parties have agreed on the scope and duration of the agreement, the step is complete.

Negotiating the terms of the agreement

• Gather a list of all the possible terms of the agreement
• Brainstorm and discuss the terms with the other party
• Consider the interests of both parties involved
• Negotiate and come to an agreement on the terms
• Document the agreed-upon terms in writing
• When both parties have agreed on the terms, the step can be completed and you can move on to discussing and agreeing upon the terms of the agreement.

Discussing and agreeing upon the terms of the agreement

• Have all parties to the agreement discuss the terms in full detail, ensure that all parties are in agreement
• Make sure all parties are clear on their roles, duties and responsibilities
• Review the agreement and make any necessary changes to the terms of the agreement
• Ensure that all parties have signed off on the agreement
• When all parties have agreed upon the terms of the agreement and have signed off, the step is complete and you can move on to the next step.

Clarifying any ambiguous language

• Carefully review the agreement in its entirety, including any and all clauses, to identify any language that is not clear or is ambiguous
• Ask relevant questions about the unclear language to ensure that all parties involved are in agreement about the intended meaning
• Discuss any issues that arise and revise the language in the agreement to ensure that all parties are in agreement with the terms
• When all parties are in agreement about the language of the agreement and all parties understand the meaning of the language, this step is complete.

Drafting the agreement, including legal language and terms

• Research the applicable laws and regulations for the agreement
• Gather all relevant information on the parties involved in the agreement
• Determine the terms that will be included in the agreement
• Draft the agreement using the appropriate legal language
• Have the agreement reviewed and approved by a lawyer
• Make any necessary revisions to the agreement
• When the agreement has been fully drafted and reviewed, you can move on to the next step of composing the document according to applicable laws and regulations.

Composing the document according to applicable laws and regulations

• Ensure the document contains all the necessary legal language and terms
• Research and include any applicable laws and regulations in the document
• Consult with legal professionals to make sure all applicable laws and regulations are included in the document
• Double-check to make sure that all the legal language and terms are clearly stated
• Once you have completed these steps, the document is ready to be reviewed and finalized

Ensuring the agreement is clear and understandable

• Review the written language of the agreement to ensure it is clear and understandable to all parties
• Have all parties involved review the agreement and provide feedback
• Consider revising and clarifying any language that is not clear or understandable
• Make sure the agreement includes all necessary definitions and definitions are clear
• Make sure the language does not have any ambiguities that could be misinterpreted by the parties
• When the agreement is clear and understandable to all parties, the step is complete and can proceed to finalizing the agreement.

Finalizing the agreement, including signing and registering the agreement

• Get all parties to sign the agreement
• Ensure that all signatures are witnessed
• Make copies of the signed agreement for each party
• File the agreement at the appropriate government office
• Check that the agreement has been registered properly
• Obtain a copy of the registered agreement

You’ll know that you can check this off your list when all parties have signed the agreement and it has been registered at the appropriate government office.

Checking the agreement for accuracy and completeness

• Carefully review the draft document to ensure all requested changes have been made
• Ensure the agreement includes all the necessary clauses including signatures
• Check if all the details in the agreement are accurate and complete
• Make sure the parties to the agreement agree to all the terms in the document
• Verify if all documents are attached to the agreement
• Once you are satisfied that the agreement is accurate and complete, you can move on to the next step of obtaining the signature of each party to the agreement.

Obtaining the signature of each party to the agreement

• Have each party physically sign the agreement
• Ensure each signature is witnessed and dated
• Make sure to keep a copy of the signed agreement
• Once all parties have signed, you can check this step off your list and move on to the next step.

Registering the agreement in the appropriate jurisdiction

• Determine the jurisdiction which the Production Sharing Agreement (PSA) needs to be registered in.
• Check the requirements for registering the PSA in the chosen jurisdiction.
• Submit the necessary documents to register the PSA in the jurisdiction.
• Follow up with the registration office to ensure that the PSA has been accepted and registered properly.

You will know that you can check this off your list and move on to the next step when you have received confirmation that the PSA has been accepted and registered in the chosen jurisdiction.

Executing the agreement, including ongoing monitoring and compliance

• Monitor the agreement to ensure that the parties are adhering to the terms
• Ensure compliance with the terms of the agreement
• Resolve disputes between the parties in a timely manner
• Track performance of the agreement to ensure that both parties are meeting their obligations
• Establish a procedure for reporting any violations of the agreement
• Ensure that the agreement is regularly reviewed and updated
• When all the parties are in compliance with the terms of the agreement and all disputes are resolved, you can move on to the next step.

Making sure each party fulfills the terms of the agreement

• Monitor compliance of both parties to ensure they are fulfilling the terms of the agreement
• Ensure both parties are aware of their obligations and responsibilities
• Establish regular check-ins and review points to monitor progress
• Identify areas of improvement or non-compliance and take appropriate action
• Ensure compliance is maintained throughout the life of the agreement
• When both parties are meeting their obligations and responsibilities, you can check this off your list and move on to resolving disputes in accordance with the terms of the agreement.

Resolving disputes in accordance with the terms of the agreement

• Set up an arbitration process: determine how disputes will be resolved, such as through arbitration or mediation
• Establish a timeline for filing a dispute and a timeline for how long it will take to resolve the dispute
• Consider how to enforce the agreement if one of the parties does not comply with the terms
• Agree on the jurisdiction and applicable law in case the dispute has to be taken to court
• Include a clause that states the parties must attempt to settle the dispute in good faith before resorting to arbitration or litigation

You can check this step off your list once you and the other party have agreed on the terms of the dispute resolution clause and have made any necessary changes to the agreement.

Assessing the agreement and making any necessary changes

• Review the agreement and consider any changes that may need to be made
• Obtain approval from all parties involved in the agreement
• Draft any changes in accordance with the terms of the agreement
• Obtain approval from all parties for the changes
• Finalize the agreement with the changes

You will know you can check this off your list and move on to the next step when all parties have approved the changes to the agreement.

Evaluating the performance of the agreement

• Analyze the data related to the agreement and assess progress
• Consider the performance of each party to the agreement in terms of financial and operational performance
• Assess the efficiency and effectiveness of the agreement
• Determine if all contractual obligations and conditions have been met
• Identify any issues or disputes that have arisen
• When you have reviewed all of the data, assessed the performance of the agreement, and identified any issues, you can check this step off your list and move on to recommending adjustments to the agreement.

Recommending adjustments to the agreement

• Analyze the performance of the agreement and identify areas that need improvement.
• Work closely with all parties involved to develop and implement mutually acceptable changes.
• Monitor the effects of the adjustments and make any further necessary changes.
• Ensure that all adjustments are in compliance with applicable laws and regulations.
• Document all changes and ensure that all parties involved are aware of the changes.

When you can check this off your list and move on to the next step:

• When all parties involved have agreed to the adjustments and they have been documented.

Terminating the agreement with appropriate notice

• Evaluate the termination options available in the agreement and determine which one is most appropriate to the situation.
• Give notice to the other party in the agreement that you are terminating the agreement according to the terms of the agreement.
• If the other party does not respond to the notice, consider filing a lawsuit to enforce the termination.
• Monitor the other party’s response to the notice and make sure they comply with the terms of the agreement.
• Once the other party has complied with all the terms of the agreement and the termination is finalized, you can check this off your list and move on to the next step.

Giving notice of intent to terminate the agreement

• Provide written notice of intent to terminate the agreement to the other party, either in the form of a letter or email.
• Include the date of termination and the reasons for the termination.
• Make sure the notice is received by the other party in accordance with the agreement’s notice provision.
• Once the notice is received, the other party has a certain amount of time to respond.
• You’ll know you can move on to the next step when you receive a response from the other party, or when the notice period has lapsed and no response has been received.

Following the steps outlined in the agreement for termination

• Review the agreement for details on the process and time requirements for termination
• Determine the parties involved in the agreement and any additional parties that need to be informed
• Notify all parties in writing of the intention to terminate the agreement
• Discuss and negotiate any financial implications of the termination
• Prepare a termination agreement and ensure all parties sign it
• When all the parties to the agreement have signed the termination agreement, it can be considered final and you can move on to the next step.

Documenting the agreement

• Have the agreement reviewed by a lawyer or a legal advisor to ensure that all parties understand their rights and obligations.
• Obtain necessary signatures from all parties involved in the agreement.
• Keep an original signed copy of the agreement and give copies to all parties involved.
• Have the agreement notarized to make it legally binding.

Once all the steps are completed, you can be sure that the agreement has been properly documented and is legally binding.

Retaining a copy of the agreement for future reference

• Make a physical and digital copy of the completed Production Sharing Agreement (PSA).
• Store the physical copy in a secure location and ensure that the digital copy is backed up.
• Make sure to label the physical and digital copies with the date of the agreement and the names of the parties involved.
• When you have completed this step, you can check it off your list and move on to disseminating the agreement.

Disseminating the agreement

• Prepare multiple copies of the production sharing agreement for each relevant party
• Distribute a copy to each party for them to sign
• Ensure that all parties have received a copy of the agreement
• Ask the parties to sign and return the agreement to you
• Keep a record of all parties who have received the agreement
• Once all parties have signed and returned the agreement, you can move on to the next step.

Making the agreement available to all relevant parties

• Provide a copy of the agreement to all relevant parties
• Set up meetings or video conferences with all relevant parties to discuss the agreement
• Make sure all parties have the necessary information to understand the agreement
• Make sure all parties have the opportunity to ask questions and get clarification on the agreement
• Reach a consensus on the agreement and ensure all parties are in agreement
• When all parties have signed the agreement, you can check this off your list and move on to the next step.

FAQ:

Q: How can I create a Production Sharing Agreement when I don’t know the specifics of my industry?

Asked by Brian on April 2nd, 2022.
A: A Production Sharing Agreement (PSA) is a type of contract between a government and a business when it comes to the exploration, extraction and production of natural resources, such as oil and gas. Depending on your industry, the specifics of the PSA may vary. However, in general, it sets out the rights and obligations of both parties in terms of the production and distribution of profits from the resources.

It is important to ensure that you understand your particular industry and what will be required from you and from the government in order to create a successful PSA. Researching best practices in your sector can help you to understand how to create an effective agreement. Additionally, seeking advice from an experienced lawyer can provide you with more information on how to create a PSA that meets your needs.

Q: What are the differences between UK, USA and EU laws when it comes to Production Sharing Agreements?

Asked by Emma on June 7th, 2022.
A: When it comes to Production Sharing Agreements (PSAs), there are some important differences between UK, USA and EU laws that you should be aware of. In the UK, PSAs are governed by domestic legislation such as the Petroleum Act 1998 and the Energy Act 2004. In the USA, PSAs are governed by state law and may vary according to the location of production activities. In the EU, PSAs are subject to national law as well as European Union (EU) legislation such as the Energy Charter Treaty and related regulations.

In terms of specific provisions relating to PSAs, there may be some differences between countries and regions. For example, in Europe PSAs usually provide for joint ownership of resources between governments and companies, while in North America this is less common. Additionally, there may be differences regarding taxation provisions or dispute resolution procedures depending on which jurisdiction you are in. It is important to ensure that you understand any relevant laws or regulations in your jurisdiction before creating a PSA.

Q: What other documents might be required alongside a Production Sharing Agreement?

Asked by Jeff on November 11th, 2022.
A: When it comes to creating a Production Sharing Agreement (PSA), there may be other documents that you need to consider alongside the main PSA document itself. These documents could include any relevant licenses or approvals granted by government authorities; contracts with third parties; project agreements; environmental impact assessments; tax agreements; employment contracts; financial agreements; insurance policies; or any other documents that may be necessary for the successful operation of your project or business. It is important to ensure that all of these documents are in place before signing a PSA so that you have all of the necessary protections and obligations in place for your business activities.

Example dispute

Suing a Company over Violation of a Production Sharing Agreement

• A plaintiff may raise a lawsuit referencing a production sharing agreement if they believe that the defendant has not met their obligations as specified in the agreement.
• For example, if the agreement states that the defendant is responsible for providing a certain amount of oil, but the plaintiff has not received the agreed-upon amount, they may be able to raise a lawsuit.
• The plaintiff must prove that the defendant failed to meet the obligations stipulated in the agreement and that their failure caused the plaintiff to suffer losses or damages.
• Settlement could be reached through an agreement between the two parties, or the court may order the defendant to pay damages to the plaintiff.
• Damages may include the cost of the plaintiff’s lost profits, the cost of the oil not received, penalties for breach of contract, and attorney’s fees.

Templates available (free to use)

Production Sharing Agreement

‍