Production sharing agreement interpretation

I have been looking at the production sharing agreements (PSA) that Tanzania is offering to investors, and do not understand why the Tanzania Petroleum Development Corporation (TPDC) should be given a share of the oil as a share of the profit? It is also hard for us to understand why there should be a limit on the amount of contract expenses that can be recovered?
27 February 2012

We are unsure why you don’t want the TPDC to be given a share of the oil. The oil would be drilled and extracted from Tanzanian soil, so the TPDC and the people of Tanzania have the right to participate through this agreement. This is what is currently being advocated. Perhaps you mean that the TPDC should get a share of the profits in cash terms, and not oil terms. This may not be acceptable, as oil is also required locally here.

As for the contract expenses that can be recovered from the crude oil produced: the PSAs do not limit you to any such recovery. The only exception would be if the production of crude oil in a year was quite low. In such a situation, only a maximum percentage of expenses could be recovered during that period, with the rest being carried forward to the following year. This seems quite fair to us