Comparing Service Contracts and PSAs in Nigerian Oil Industry

This report provides a detailed comparison between service contracts and petroleum sharing agreements (PSAs) within the Nigerian petroleum industry. It begins with an overview of the two contract types, highlighting their roles in oil and gas extraction and sales. The study then reviews existing lite...Read More

Comparing service
contract and petroleum
sharing agreement in
Nigeria

TABLE OF CONTENTS
Title: "Comparing service contract and petroleum sharing agreement in Nigeria".........................1
INTRODUCTION...........................................................................................................................1
1.1 Overview..........................................................................................................................1
1.2 Rationale of Study............................................................................................................1
Research Aim.........................................................................................................................1
Research Objectives...............................................................................................................2
Research Question..................................................................................................................2
2. LITERATURE REVIEW............................................................................................................2
2.1 Current production sharing contract and service contract in the petroleum industry of
Nigeria....................................................................................................................................2
2.2 The role of petroleum sharing agreements in Nigeria.....................................................3
2.3 Compare service contracts and petroleum sharing agreements in Nigeria......................3
3. RESEARCH METHODOLOGY.................................................................................................3
3.1 Type of Investigation........................................................................................................3
3.2 Data Collection Method...................................................................................................4
3.3 Sampling Method.............................................................................................................4
3.4 Accessibility Issues..........................................................................................................4
3.5 Ethics & Health & Safety issues......................................................................................4
3.5 Data Analysis Plan...........................................................................................................5
3.7 Research Limitations........................................................................................................5
ANTICIPATED FINDINGS...........................................................................................................6
TIME TABLE..................................................................................................................................6
REFERENCES................................................................................................................................7

Title: "Comparing service contract and petroleum sharing agreement in
Nigeria"
INTRODUCTION
1.1 Overview
Contracts are the written agreements based on laws by the two parties. There are various
types of contracts such as Concession, joint venture, service and production sharing
contract(PSC). There are different rights provided for the petroleum industry in order to extract
and sell the oil/gas (Onoh, 2017). However, choosing appropriate contract is very necessary for
the company in order to earn profit. Under service contracts which is based under government
mandate's and they pay to contractors which further pay for exploration, development and work.
Through this government can maintain title of reserves, ownership and assets and for the
contractors there is no risk while in PSC state-companies along with contractor-company comes
for the specific period of time (Ovadia, 2014). Finance for exploration and development is
provided by contractor. Under service contract there is no risk to contractor and complete risk
and reward goes to government while in production sharing contractor has risk in exploration
and rewards are shared by both. Current report focus on the service contract and petroleum
sharing agreement in Nigeria
1.2 Rationale of Study
For extracting the petroleum and other natural products there is requirement of the legal
contracts which helps to identify the contractor and government involvement. The research is
carried out so that comparison can be made on service contract and production sharing
agreement (PSA).
Hypothesis:
 PSA is most used in Nigeria
 PSA are advantageous than service contract.
Research Aim
The aim if the study "To assess the production sharing contract and service agreements in
Nigerian Petroleum industry".
The is based on the two aspects that is service contracts and petroleum sharing
agreements in context to the country Nigeria.
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Research Objectives
In order to identify the outcomes of the current aim, objectives are identified and
mentioned below: .
 To ascertain the current production sharing contract in the petroleum industry of Nigeria.
 To evaluate the concept of service contracts in the petroleum industry of Nigeria.
 To analyse the role of petroleum sharing agreements in Nigeria.
 To differentiate among the service contracts and petroleum sharing agreements in
Nigeria.
 To recommend the best suitable production sharing contract by the petroleum industry of
Nigeria.
Research Question
In order to achieve the above objectives following questions were prepared.
 What is the current production sharing contract in the petroleum industry of Nigeria.
 Evaluate the concept of service contracts in the petroleum industry of Nigeria.
 What is the difference among the service contracts and petroleum sharing agreements in
Nigeria.
2. LITERATURE REVIEW
2.1 Current production sharing contract and service contract in the petroleum industry of Nigeria.
According to Odera and et. al. (2016), PSC is used by Nigerian government so that scope
for the foreign companies can be opened. It included the private outsider companies. Under this
government is on the safe side and it is considered as best ways for attracting the outside
investors. Moreover, without the involvement of the them resources can be explored and can be
given on the contracts basis. Further, service contracts are not used there is very limited profit
and there is also no relevance in exploration. There is only advantage of using this service
contract that payment is made predetermined rate. Other than this, cost recovery can be gained in
PSC.
2.2 The role of petroleum sharing agreements in Nigeria.
As stated by the Hennchen (2015), using the petroleum sharing agreements in Nigeria,
outside companies as well as government both can earn profit. This has provided chances to
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many companies to enter in the market, explore the resources and extract them. The first PSC
was signed in 1973 by Ashland Oil. So due to cash problems, operation and other issues they
uses PSC with the petroleum companies.
2.3 Compare service contracts and petroleum sharing agreements in Nigeria.
As mentioned by the Campbell (2013), similarity both the contracts have relinquishment
provisions and it is in stipulated form. These contracts are finally signed by the government.
These are made for the securing national interest. Mentioned contracts have minimum work
obligation. However, as stated by Idemudia (2014), that PSC is mostly founded that ownership
of resulting petroleum resource. There is more control of PSC over SC. There are chances of
earning through this PSC while loss chances are high in other. Payment, stake of outcomes and
negotiation can be done under PSC and not under SC.
3. RESEARCH METHODOLOGY
It is the most significant part of the research proposal as it highlights the main tools and
techniques that will be used to carry out the study (Creswell, 2013). Mention report is based on
the qualitative approach and data findings are made through the secondary sources. It is the cost-
effective and best methods and more finding can be gathered from the previous authors.
Methodology will be applied based on topic of research and using different tools and techniques
available it will be applied.
3.1 Type of Investigation
Mentioned report will be based on descriptive nature. The reason behind descriptive
research in this research is that through this deeper insights about the agreements and contracts
can be understood in Nigeria (Taylor, 2014). These types of study is based on the other
statements, finding and operation (Daniel and Sam, 2011). Moreover, the nature describes the
action that influence the other parts of the action. Using of descriptive research will assist in
making comparison between the service contract and production sharing agreement in Nigeria.
Through this investigation explanation can be provided that why Nigeria has petroleum sharing
agreements. Moreover, it aid to provide more description about the operation of oil/gas in
Nigeria in more comprehend way.
3.2 Data Collection Method
Complete research will be supported on qualitative aspect. Supporting this methods, the
data which is accessed is also carried out in the qualitative nature. In general there are two ways
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for the data collection, primary and secondary. Under this report, due to certain limitation
primary research is not used and secondary sources are used. Under that critical evaluation of
different authors and their findings are mentioned. Moreover, the data is accessed from various
sources that are available in physical and non-physical form. Secondary information will be
source from varied types of journals, artifact, online-websites, books, newspapers and from other
available secondary mode of information.
3.3 Sampling Method
In the research sampling method is considered as the important term as it is used to used
to gather the proper quantity of information from the chosen samples. In context to the current
report as the secondary sources are chosen so findings will be completely based on the areas
selected. As mentioned in the study that it is based on Nigeria so journals, articles, online-
websites, books and newspapers all will be accessed about Nigeria. Based on the topic of the
research that is to compare service contract and production sharing agreement in Nigeria is
shown using the methods.
3.4 Accessibility Issues
Accessibility of the data is part of heading towards the conclusion which for which valid
and reliable sources are used. If it is not used than report can be total vague. For this purpose
secondary data collected will be based on the Nigeria and famous authors those have contributed
in finding related to the topic are mentioned in the report.
3.5 Ethics & Health & Safety issues
Ethical, health and safety issues will be considered while completing the research. The
nature and purpose of the research are chosen does not harm any community or society. No
living will be harmed in this research and for the author recognition, proper citation are done in
this report.
3.5 Data Analysis Plan
In the current report data will be collected using secondary method of data collection. For
this qualitative data analysis will be used in the research. The method of thematic-analysis will
be used. Under this, themes will be made to carry out research.
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3.7 Research Limitations
During perusing this research there may be few bound/limitation which can be
encountered by the researcher (Hayes, 2008). These must be highlighted by the researchers so
that it can be helpful for other readers. As it is based on the secondary sources so there are
chances of wrong information mentioned in the report. There may be possibility of lack of
availability of literature on the current topic. Accessing the data from the secondary information
will require excessive time and cost as certain journals require access or sign-in procedure.
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ANTICIPATED FINDINGS
In the descriptive-research study, the researcher is anticipating that the best contract that
must be selected by the Nigeria. It is also anticipated that in Nigeria, petroleum sharing
agreement is used by the contractor and government and not the service contracts. Finally, aim
and objectives stated above of the study will be completed in efficient and prompt manner.
TIME TABLE
Gantt chart involves various activities and time period that are required for completion of
the research. Through this time period of the research can be identified.
Key
Activities/Weeks
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Introduction part
Literature Review
Findings for the
Secondary Data
Evaluating
collected Data
Research Design
and Methodology
Analysis of
secondary data
Conclusions and
Recommendations
Final Completion
Addressing the
feedback and
Draft
Final Submission
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REFERENCES
Campbell, C. J., 2013. Nigeria. In Campbell's Atlas of Oil and Gas Depletion (pp. 51-53).
Springer New York.
Creswell, J. W., 2013. Qualitative, Quantitative, and Mixed Methods Approaches. 4th ed. SAGE
Publications, Inc.
Daniel, S. P. and Sam, G. A., 2011. Research Methodology. Gyan Publishing House.
Hayes, E. B., 2008. Measuring Customer Satisfaction and Loyalty: Survey Design, Use, and
Statistical Analysis Methods. ASQ Quality Press.
Hennchen, E., 2015. Royal Dutch Shell in Nigeria: Where Do Responsibilities End?. Journal of
Business Ethics. 129(1). pp.1-25.
Idemudia, U., 2014. Oil Multinational Companies as Money Makers and Peace Makers: Lessons
from Nigeria. In Corporate Social Responsibility and Sustainability: Emerging Trends in
Developing Economies (pp. 191-213). Emerald Group Publishing Limited.
Odera, O. and et. al., 2016. Differential reporting of social and environmental disclosures
between local and foreign oil companies in Nigeria. Social Responsibility Journal. 12(3).
pp.415-438.
Onoh, J. K., 2017. The Nigerian oil economy: From prosperity to glut. Routledge.
Ovadia, J. S., 2014. Local content and natural resource governance: The cases of Angola and
Nigeria. The Extractive Industries and Society. 1(2). pp.137-146.
Taylor, I., 2014. Chinese interest in Nigeria's oil and the American context. Canadian Journal of
African Studies/La Revue canadienne des études africaines. 48(3). pp.391-404.
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