798-975 Production sharing contracts (FA 2000, s. 81)
Oil companies which enter into production-sharing contracts with overseas governments (or their representatives) are now able to continue to claim capital allowances on plant and machinery even after the plant and machinery is transferred to the overseas government.
It is common for oil companies to enter into ‘production sharing contracts’ with overseas governments. Typically, the contract allows the company to set up oil production within the overseas country or territory and to take all the profits from the source. After a number of years, the overseas government takes control of the production and enjoys the profits thereafter.