Risk service contract

In a risk service contract, the [international oil company (IOC)] is responsible for the capital expenditure and management of exploration and development and all exploration is undertaken at the IOC’s own risk, which means that, unless hydrocarbons are found in sufficient quantities, the IOC will not be compensated. If oil can be produced in commercial quantities, the capital expenditure and operating costs incurred are treated as a loan by the IOC to the state, which may be recovered (plus interests) from the state …

– Geoffrey Picton-Turbervill (ed), Oil and gas: a practical handbook (Globe Law and Business, 2009), p38.