Comparative Analysis of Production Sharing Agreements (PSAs) in Yemen, Malaysia, and Indonesia

Ahmed Binsahaq

Nor Azlina Mohd Noor

Nor Anita Abdullah

 

Abstract: Production Sharing Agreements (PSAs) are a common contractual mechanism for resource allocation between host states and foreign investors, particularly in resource-rich countries. However, variations in legal and institutional frameworks can hinder effective resource utilisation and broader economic development. In Yemen, the PSA regime is hindered by legislative and institutional inefficiencies, which limit its ability to attract investment and fully develop the country’s petroleum sector. This study undertakes a doctrinal comparative analysis of the PSA models in Yemen, Malaysia, and Indonesia, focusing on four key legal dimensions: contract termination and extension provisions, abandonment obligations, dispute resolution mechanisms, and environmental safeguards. The analysis reveals that Malaysia’s PSA framework is notably efficient, characterised by streamlined extension procedures, well-structured abandonment funding, centralised dispute resolution, and stringent environmental compliance. Indonesia offers a more flexible and pragmatic model, characterised by moderate yet effective environmental oversight. In contrast, Yemen’s PSA framework is constrained by procedural delays, such as the requirement for parliamentary approval for contract extensions, rigid decommissioning fund structures, and weak enforcement of environmental standards. To address these shortcomings, this study recommends targeted legal reforms, including delegating extension approvals to the Ministry of Oil and Minerals, linking abandonment funding to production levels, and establishing a specialised environmental oversight authority.