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Book Chapter

Politics and International Exploration

By
Marian W. Downey
Marian W. Downey
Sarkeys Energy Center, University of Oklahoma Norman
, Oklahoma, U.S.A.
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Edwin G. Corr
Edwin G. Corr
Energy Institute of the Americas, University of Oklahoma Norman
, Oklahoma, U.S.A.
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Published:
January 01, 2000

Abstract

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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Contents

International Oil and Gas Ventures: A Business Perspective

George E. Kronman
George E. Kronman
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Don B. Felio
Don B. Felio
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Thomas E. O’Connor
Thomas E. O’Connor
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Mindy S. Kronman
Mindy S. Kronman
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American Association of Petroleum Geologists
ISBN electronic:
9781629810683
Publication date:
January 01, 2000

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