Government Bid-Round Practices and Experiences Worldwide1
Susan Hodgshon, Bryan Land, 2000. "Government Bid-Round Practices and Experiences Worldwide", 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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Today’s international marketplace for petroleum acreage seems to be richer in opportunities than at any time in the past. Host governments stand at the gateway controlling and regulating access to all these opportunities. This chapter examines how this responsibility is exercised by governments. Its specific focus is on host-government experiences in employing competitive bid rounds. Bid rounds have been the preferred method of acreage allocation for a number of decades in the U.S. offshore, the North Sea, and Australia offshore. Now they are used in countries as diverse as Brazil, Iran, and the Faroe Islands. Recent trends suggest that bid rounds are launched in at least 20 countries each year.
Governments employ bid rounds to maximize the commitments made by companies having to compete with each other for rights. Bid rounds are also consistent with principles of competition and fairness that many governments are introducing to eliminate monopolies, restrictive licensing practices, and, in particular, corruption. There are still many countries that rely upon bilateral dealing, however, and others that combine both.
The chapter examines a number of practical aspects of bid rounds, including the availability of and access to relevant data, block selection, qualification for bid participation, bid factors, evaluation and award procedures, and bid round administration. Examples are given of how governments contend with issues such as the introduction of transparency into bid evaluation, creation of a level playing field for all competitors, and the control of data by existing rightholders.
The trend that has been observed over the past decade toward more clearly defined and more openly competitive and transparent licensing is likely to continue, although this may be tempered by reduced external funding. If the limited resources of finance and expertise are to be efficiently used in a depressed exploration environment, particularly for frontier and underexplored countries, the most effective investment by international and other agencies may well be to establish an international licensing fair. Above all, each country needs to develop a licensing strategy in the context of its own needs, culture, and institutional framework. The one thing they do not need is a model form bid-round procedure.
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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.