Production Sharing Agreement Kazakhstan: Understanding the Basics

Kazakhstan is a country that is rich in natural resources, including oil and gas reserves. As such, the country has been able to attract foreign investors who are interested in exploring and exploiting these resources. To facilitate the exploration and exploitation of these resources, Kazakhstan has adopted the Production Sharing Agreement (PSA) model.

What is a Production Sharing Agreement?

A Production Sharing Agreement is a contract between a government and a private investor that governs the exploration and exploitation of natural resources. Under a PSA, the government grants the investor the right to explore and exploit a particular area in exchange for a share in the profits.

The PSA model is often used in countries where the government owns the natural resources and wants to attract foreign investment to develop them. The PSA model allows the government to maintain ownership of the resources while sharing the risks and rewards of exploration and exploitation with private investors.

PSA in Kazakhstan

Kazakhstan first introduced the PSA model in 1992. Since then, the country has signed PSAs with various international oil and gas companies, including Chevron, Shell, and Total. The PSA model has been successful in attracting foreign investment and developing the oil and gas industry in Kazakhstan.

Under the PSA model in Kazakhstan, the government maintains ownership of the natural resources, while the investor is responsible for financing and operating the exploration and production activities. The investor is entitled to a share of the profits based on the terms of the PSA.

Advantages and Disadvantages of PSA in Kazakhstan

The PSA model in Kazakhstan has several advantages. First, it allows the government to attract foreign investment without giving up ownership of the natural resources. Second, it enables the government to share the risks and rewards of exploration and exploitation with private investors. Third, it provides a legal framework for the exploration and exploitation of natural resources, which protects the interests of both the government and the investors.

However, the PSA model also has some disadvantages. One of the main criticisms of the PSA model is that it may not be transparent enough. Critics argue that the terms of PSAs are often kept secret, making it difficult for the public to know how much the government is receiving from the investors.

In conclusion, the PSA model has been successful in attracting foreign investment and developing the oil and gas industry in Kazakhstan. While the model has some disadvantages, it remains an important tool for the government to attract foreign investment and develop the country`s natural resources. As Kazakhstan continues to develop and diversify its economy, the PSA model is likely to play an important role in the country`s future growth.