The authors remark that PSAs as legal instruments defining the relationships between the host countries and the international oil companies are more popular in developing countries and newly opened countries. Under this type of agreement the international oil company carries out the petroleum operations in a certain area under the supervision of the host country or its national oil company but at its own risk. When petroleum is produced, it belongs to the host country with the exception of a share of production that is to be taken in kind by the international oil company for cost recovery and for profit sharing. After cost recovery, the balance of production is shared based on a predetermined percentage split between the host country and the international oil company. The net income of the international oil company is usually taxable and the equipment and installations are the property of the host country, either immediately or over time, in accordance with the cost recovery schedules.