Governments normally choose from many contracts to delegate oil and gas exploration and development. The form of the contract changes between and within countries, but the most common contracts are concession contracts and production sharing agreements (EPI). After repayment, the IOC may acquire a certain share of production at a reduced price (purchase contract). The concession agreement is the second type of fundamental oil exploration and use contracts that govern the rights and obligations of HC, NOC and IOC. To search for oil, an authorization is required. It defines the contract between the licensees and the government. Production requires a production license. There are four main types of contracts: now that we have briefly explained what the CSP is, it is important that legal staff and contract managers in the oil and gas industry understand the differences between CCC conditions and concession contracts. Several differences between the two types of contracts are listed below. The IOC is required to pay income tax on its net profit from the concession contract as well as on all other taxes collected by the HC. The concession agreement is the first known contractual agreement worldwide and, since World War II, it has become a known type in most countries, especially in industrialized countries.
The IOC owns all production and can dispose of it freely, subject to the obligation to pay royalties and, if necessary, to comply with the requirements of the local market. First, the IOC holds the rights to oil development under the concession contract. However, under the terms of the CSP, the IOC has the exclusive right to conduct exploration and production operations. Since the 1960s, production-sharing contracts (PSKs) have begun to replace concession contracts to become one of the most fundamental forms of the international oil and gas industry. For example, many commercial departments, legal staff and contract managers in the oil and gas industry are required to learn about CSP and their different characteristics. However, the question that often remains unanswered is what exactly is the difference between these production-sharing contracts and concession contracts. Therefore, in this article, we will try to define what CCCs are before trying to address the differences between CSPs and concession contracts. Under the concession agreement, HC or NOC revenues from the oil produced are made up of the licence fee, either in cash or in kind at the request of the HC or NOC, and an income tax that the IOC must pay on its net production income.