While watching BBC today (July 15, 2007), I learned that Production Sharing Agreements (PSAs) are now legalized in Iraq, despite their being illegal in most neighbouring states. And if only 10 or 12 local oil producers join, that up to the tune of 200 billions of dollars are going to be lost. Imagine the cost savings to western oil companies that purchase the product.
But what are PSAs? Wikipedia didn’t have an article. But I found a description nonetheless. I’ll let you figure out why they are unpopular (the typos are in the original).
- A contract between a multinational oil company and a host government, in which the corporation provides capital investment, in exchange for control over an oilfield, and access to a large share of the revenues from it
- Lasting usually 25-40 years – and sometimes even indefinite.
- A change of language, describing the state as “owner” and the foreign company as “contractor”, but in practice mostly equivalent to the old-style concession agreements.
- Precise terms depend on negotiation between state and company.
- Often contains “stablisation clause”, which restricts future governments’ ability to change tax rates or pass any new law which affects the company’s profits
I still recall U. of A. classmate’s claim that oil had absolutely nothing to do with the invasion and occupation of Iraq. This incursion was for “humanitarian reasons”, as they put it.
I guess PSAs are humanitarian.
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