Politics and International Exploration
Marian W. Downey, Edwin G. Corr, 2000. "Politics and International Exploration", International Oil and Gas Ventures: A Business Perspective, George E. Kronman, Don B. Felio, Thomas E. O’Connor, Mindy S. Kronman
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Oil and gas exploration and production in foreign countries are guided by the same science and engineering principles as in the United States and Canada, but the political, economic, social, and cultural environment of developing countries can be quite different. Politics and personal relationships play a greater role in business, especially in energy, where in most countries the state owns subsurface minerals. Investors must deal more with government and often with a state-owned energy company.
Most international energy investments are long term and are at risk to changes in price, taxation, profit share, and operational control, even given exploration success. Political risk is defined as the likelihood that future unilateral government actions, dissident political forces, or social movements will deteriorate the return on planned foreign investment.
Investors cannot precisely predict the future, notwithstanding sophisticated modelers’ quantified calculations. We advise testing plans against possible future “what-if” scenarios, mitigating harm through good geology/technology and calculation of risk capacity, and through detailed, intimate knowledge of the country and people with whom investors will do business. Sources of information are provided, as well as advice on relationships with host-country persons.
The content of the contract and the personal relations developed during the negotiation phase establish the context and parameters within which the company will operate. Particularly important are interests in parallel with the host government, contractual flexibility, and the ability of the company technology to deliver results that may exceed expectations. Negotiating tips are provided. Outside arbitration, risk insurance, and partnering are assessed as ways to lessen risk.
There are many successful international operations. Those who want to work and live in the exciting and rewarding energy professions should consider the international arena, where the greatest opportunies currently seem to be for the oil and gas business.
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A “one-stop” business view on how to succeed in international exploration and production. Success in the international upstream arena requires more than the technical ability to find oil and gas. Relationships with governments and people, mutually beneficial contracts, workable strategies, and implementation plans are necessary to build strong, mutually beneficial, and profitable ventures. Key components that drive exploration and production in the global environment are examined. Specific topics include negotiating for success, contracts, the role of technology in international strategies, cross-cultural relationships, alliances, and international upstream financing. Authors from around the world, representing industry, governments, national oil companies, consultants, and academia, contributed their perspectives. Views are provided from both sides of the negotiating table, the corporate boardroom, the resident manager, the explorationist, the businessman, and the theoretician. Geoscientists, engineers, and negotiators, who are, or would like to be, involved in the global energy business will find this collection an important reference.