Daniel Johnston, 2000. "International Petroleum Contract Analysis: The Commercial Terms", 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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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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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.