When discovered in the 1990s, the Kashagan oil field was the second largest oil field on earth. Unlike most contracts in the energy industry, the Kashagan agreement was an "elastic PSA" meaning the contractual terms-the apportionment of risks and yields-depended on ex post awareness of such matters as capital costs and profitability.
The parties integrated eventualities into the contract to ensure it, and to make it fairer and much more flexible, and remain viable over the job's 40-year life. Due to a combination of issues and challenges, the job was not done in mid-2007. Then, the patrons, led by the Italian energy company ENI, declared the total cost was likely to be $136 billion along with the project would not be completed until 2010. Although oil prices had increased dramatically between 1997 and 2007, thus making the endeavor worth considerably more, the Kazakh authorities indicated its urge to renegotiate crucial provisions of the contract.
The Kashagan Production Sharing Agreement (PSA) case study solution
PUBLICATION DATE: May 07, 2013 PRODUCT #: 213082-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
