05.07.2009
Under a typical production-sharing agreement, the contractor is responsible for the field development and all exploration and development expenses. In return, the contractor recovers costs (investments and operating expenses) out of the gross production stream. The contractor normally receives payment in oil production and is exposed to both technical and market risks.
A portion of produced oil that the operator applies on an annual basis to recover defined costs specified by a production sharing contract.
Use of money from saloe of oil and gas to cover expenses
This is not “capital cost”. It is the cost of raising funds such as capital assets. Capital can be either operating capital, cash as a capital asset, or fixed asset capital. > >