Fiscal design elements are important, but so are the means by which governments choose to allocate acreage or projects. As can be seen today, there is significant competition for a limited amount of exploration capital. At the same time,...
Most governments go to a lot of effort to distance themselves as much as possible from exploration risk. This can be done through management of block sizes, relinquishment, and ringfencing, discussed in turn below.
Block size and configurations
Block size...
The investor’s response to any given tax instrument or regime depends on the interrelations that link each of their profit decisions. For example, it may be supposed that a high royalty rate would cause early abandonment of a field...
Keep in mind, however, that most fiscal systems in the world are moderately regressive. The revenue the governments receive will go up, but Government Take will go down on average. Finally, it is important to remember that the differences...
In the universe of oil contracts, two main families of fiscal system exist. The first family includes ‘concessionary’ systems, so-called because the government grants the company the right to take control of the entire process – from exploration to...
Oil is the world’s number one strategic commodity. It is of vital interest to developed and emerging markets that rely on imported oil and gas. It is also vitally important to exporting nations, many of them among the poorest...
A risk associated with complex contracts is that the true market value of the contract may be better understood by the oil companies than by the government. For instance, if oil prices are highly volatile, and there is no...
The privatisation in an economy can set in motion a vicious circle. Even without corruption, rapid privatisation means that governments receive less than fair market value for the companies they sell-off. While privatisation has highlighted the problem, conflicts over...
Demand is weaker, but it is getting better. There are challenges for both demand and supply sides for all oil-producing economies. The Organization of Petroleum Exporting Countries (OPEC) members must stick to compliance.
The focus of the peak oil...
There are further problems with the timing and manner of privatisation. The International Monetary Fund (IMF) once urged as rapid a privatisation as possible. They were worried that so long as resources remained under the control of the government,...