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Book Chapter

International Petroleum Contract Analysis: The Commercial Terms

By
Daniel Johnston
Daniel Johnston
Daniel Johnston & Co., Inc.
Hancock, New Hampshire, U.S.A.
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Published:
January 01, 2000

Abstract

Exploration and production contracts between international oil companies and host governments encompass a nearly infinite variety in terms of legal structure, financial terms, mechanical aspects, and terminology. Contract analysis and design is part art and part science; however, the science of contract analysis is not an ancient one. Standards are evolving, but so are new contract arrangements and systems. Production-sharing contracts for the petroleum industry were born only about 30 years ago in Indonesia, but have become the fiscal system of choice for most of the many countries that have opened their doors in the past 10 years. The objective here is to provide explanation, definitions, and methodology for evaluating the commercial terms of a contract or system; furthermore, examples and statistics are provided to add perspective into the ranges and limits that exist for various key components of systems worldwide.

A hypothetical “Contract X” is used as an example to illustrate important financial aspects of a typical production-sharing contract. It is depicted and examined with the use of flow diagrams, back-of-the-envelope calculations, and cash flow analysis to show the division of profits, revenues, and entitlement; furthermore, it is graphically and statistically compared and contrasted with various systems worldwide.

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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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