Comparison of the Model Production Sharing Agreement (PSA) 2003 with the Model Production Sharing Agreement (PSA) 2023.

The Model Production Sharing Agreements (PSA) of 2003 and 2023 are critical legal frameworks governing petroleum exploration and production in Pakistan. These agreements establish the terms and conditions under which contractors undertake petroleum operations, ensuring a balance between incentivising investment and protecting national interests. Over the years, significant updates have been made to these agreements to reflect evolving industry practices, technological advancements, and regulatory requirements.

The 2003 PSA provided a robust foundation for petroleum operations, emphasizing environmental protection, cost recovery, and equitable sharing of profits. As the industry and regulatory environment evolved, the need for an updated framework became apparent, leading to the introduction of the 2023 PSA. This new agreement incorporates changes to enhance efficiency, ensure better environmental compliance, and adapt to the current economic and technological landscape.

This comprehensive Q&A document compares the 2003 and 2023 PSAs, highlighting the key similarities and differences in various aspects such as exploration periods, cost recovery mechanisms, environmental obligations, and dispute resolution procedures. The comparison aims to provide a clear understanding of how the regulatory framework for petroleum operations in Pakistan has evolved over the past two decades, offering insights into the strategic shifts that shape the industry today.

1. Q: What is the term of the initial exploration period in the 2003 PSA? A: The initial term of the exploration period in the 2003 PSA is five contract years .
2. Q: How is the initial term of the exploration period defined in the 2023 PSA? A: The initial term of the exploration period in the 2023 PSA is also five contract years, divided into two phases of three and two years, respectively .
3. Q: What are the conditions for the first and second renewals of the exploration period under the 2003 PSA? A: Under the 2003 PSA, the first and second renewals are each for two contract years, contingent on the contractor meeting specific obligations and making mandatory relinquishments .
4. Q: What changes have been made to the renewal periods in the 2023 PSA? A: The 2023 PSA reduces the renewal periods to one contract year each for the first and second renewals .
5. Q: How does the 2003 PSA address the extension of the term for drilling in progress? A: The 2003 PSA allows for an extension of up to 180 days for drilling an exploration well in progress, which will be considered part of the current term .
6. Q: What is the provision for term extension for drilling in progress in the 2023 PSA? A: The 2023 PSA permits an extension for drilling an exploration well in progress for a period approved by the DGPC .
7. Q: How are significant gas discovery areas treated under the 2003 PSA? A: Significant gas discovery areas can extend the duration of the agreement by a period equal to the applicable retention period .
8. Q: Has there been any modification in the treatment of significant gas discovery areas in the 2023 PSA? A: The 2023 PSA retains similar provisions for extending the term for significant gas discovery areas by the retention period .
9. Q: What is the definition of “Work Unit” in the 2003 PSA? A: “Work Unit” in the 2003 PSA is defined in Annex III and involves a valuation for seismic surveys and exploration wells .
10. Q: How is “Work Unit” defined in the 2023 PSA? A: The definition of “Work Unit” in the 2023 PSA remains similar, with details provided in Annex III, but includes updated values and work categories .
11. Q: Describe the relinquishment obligations at the end of the initial term under the 2003 PSA. A: At the end of the initial term, the contractor must relinquish at least 20% of the original contract area .
12. Q: How have the relinquishment obligations changed in the 2023 PSA? A: The 2023 PSA increases the relinquishment obligation to 30% of the original contract area at the end of the first phase of the initial term .
13. Q: What are the dispute resolution mechanisms in the 2003 PSA? A: Disputes under the 2003 PSA are first attempted to be resolved amicably, then may be referred to a sole expert, and if unresolved, to arbitration under ICC rules .
14. Q: What are the key changes in dispute resolution in the 2023 PSA? A: The 2023 PSA maintains a similar structure but specifies arbitration under the PCA Arbitration Rules 2012, with different rules for disputes involving local contracting companies .
15. Q: How does the 2003 PSA handle the costs of arbitration? A: The costs of the sole expert and arbitration are to be borne equally by the concerned parties .
16. Q: Are there any changes to the handling of arbitration costs in the 2023 PSA? A: The 2023 PSA does not specifically alter the equal cost-sharing arrangement for arbitration costs .
17. Q: What are the environmental protection obligations under the 2003 PSA? A: The contractor must conduct operations in an environmentally acceptable manner, prepare contingency plans, and promptly address any environmental incidents .
18. Q: Have environmental protection obligations been updated in the 2023 PSA? A: The 2023 PSA maintains similar environmental protection obligations, emphasizing compliance with good international petroleum industry practices .
19. Q: How does the 2003 PSA address the use of local goods and services? A: The contractor is encouraged to use local goods and services where they are competitive in terms of quality, price, and availability​​.
20. Q: Is there a change in the use of local goods and services provision in the 2023 PSA? A: The 2023 PSA continues to encourage the use of local goods and services under similar competitive conditions .
21. Q: What are the penalties for non-performance of minimum work obligations in the 2003 PSA? A: Non-performance of minimum work obligations incurs a penalty of $10,000 per unaccomplished Work Unit .
22. Q: Have the penalties for non-performance of minimum work obligations changed in the 2023 PSA? A: The 2023 PSA retains the same penalty amount of $10,000 per unaccomplished Work Unit .
23. Q: What is the procedure for approving development plans under the 2003 PSA? A: The development plan must be submitted for approval to the relevant authorities, including detailed work programmes and budgets .
24. Q: Has the procedure for approving development plans been altered in the 2023 PSA? A: The 2023 PSA retains a similar procedure for the approval of development plans, with emphasis on compliance with updated rules .
25. Q: How are force majeure events handled in the 2003 PSA? A: Force majeure events temporarily suspend obligations, and the affected party must notify and work with the other parties to mitigate impacts .
26. Q: What provisions for force majeure are included in the 2023 PSA? A: The 2023 PSA includes similar force majeure provisions, allowing suspension of obligations and requiring notification and mitigation efforts .
27. Q: What are the obligations for site restoration and abandonment in the 2003 PSA? A: The contractor must prepare and submit site restoration plans, and perform necessary activities to restore the site after operations .
28. Q: Have the site restoration and abandonment obligations changed in the 2023 PSA? A: The 2023 PSA continues to require site restoration plans and activities, aligning with good international petroleum industry practices .
29. Q: How does the 2003 PSA address the ownership of assets used in petroleum operations? A: The contractor retains ownership of assets during the contract term but must transfer them to GHPL upon termination or expiry of the agreement without compensation .
30. Q: Is there a modification in asset ownership provisions in the 2023 PSA? A: The 2023 PSA maintains the provision that assets used in petroleum operations must be transferred to GHPL upon termination or expiry of the agreement .