Multinational Firms and Oil Contract Negotiations in Latin America … · 2017. 11. 17. · The Legacy of Multinational Firms in Latin America Important role for MNCs in Latin American

Multinational Firms and Oil Contract Negotiationsin Latin America

Xander Slaski

Princeton University

November 14, 2015

Xander Slaski — Princeton University

Research Question and Motivation

1 What determines the bargaining power of Latin Americangovernments vis-a-vis multinational oil firms?

2 Petroleum contracts as measure of bargaining power

3 Main findings: Economic factors and the quality of thenational oil company matter, but corruption has the largestinfluence


The Puzzle

Vaca Muerta oil field in Patagonia: massive oil and gasreserves

Cristina Kirchner asked Chevron to develop field less than twoyears after nationalizing YPF

Benefits for Chevron: special exemptions on prices, allowedChevron to sell twenty percent of its production abroadwithout paying export taxes or repatriating profits, intervenedin an Argentine Supreme Court case


Oil Contracts as Measure of Bargaining Power

Operationalizing bargaining power between states and firmsremains a challenge

Stopford and Strange (1991): “how powerful themultinationals have become is a notoriously difficult questionto answer”

Malesky (2009) finds that foreign direct investment has asignificant impact on economic reforms in developing countries

Desbordes and Vauday (2007) use WBES data to show thatfirms are able to extract better deals from developing countrygovernments

Previous literature on obsolescing bargain (Vernon 1971)


Implications for Resource Curse Literature and DependencyTheory

Resource curse: when do states get financial flows fromextractive industries?

Implications for a wide array of other extractive industries andstate-firm negotiations more broadly

Dependency theory: bargaining power favored developedcountries in the core at the the expense of those in theperiphery (Moran 1978, Bierstecker 1981, Cardoso and Faletto1979, Frank 1970, Valenzuela and Valenzuela 1978, Barnetand Muller 1974)

Determining the sources of bargaining power is an empiricalquestion (Cohen 2007, Moran 2006)


The Legacy of Multinational Firms in Latin America

Important role for MNCs in Latin American economies andpolitical systems

Latin American economies are highly dependent oncommodities, including oil, and business is important (Ross2001, Dunning 2008, Karl 1997, Karcher and Ross Schneider2012, Ross Schneider 2013, Pinto, Murillo and Schrank 2014)

Implications for democratic responsiveness: others looked atpolicy switches (Stokes 2001)

Influence of international economic forces: Campello (2015)argues that leaders have greater autonomy in redistributionwhen commodity prices are high


Multinationals in the Oil Sector

Oil is fungible and the single most traded global commodity

Massive size of oil and gas companies, NOCs and MNCs

Nationalization and privatization: national or semi-nationalcompanies

Controls for differences in capital and labor-intensiveness thatwould complicate cross-sectoral analyses

Small set of international firms, controlling for variation acrosscompanies and management


Conceptualizing Bargaining Power

Negotiations between international firms and states areinherently conflictual: firms and states both want to divide arelatively fixed profit

Oil prices are key: determines sharable profits


Three Main Causal Mechanisms

Economic Performance The degree to which the countryhas other options to spur economic growth determines itsneed for investment and its willingness to accept a smallershare of oil rents

Political Institutions States with more corruption or vetoplayers are likely to have more opportunities for bribery orpolitical capture

Petroleum Resources: A state with a strong national oilcompany is less likely to need the technical expertise of aforeign oil company, ensuring that the terms of the deal donot too heavily favor the MNC


Hypotheses

H1 Economic strength hypothesis: States with lower per capitaGDP, lower growth, higher inequality, higher unemployment,higher debt, higher energy imports or fewer currency reserveswill have less favorable contract terms

H2 Political capture hypothesis: Fewer constraints on theexecutive and higher political risk or higher corruption willlead to less favorable deals

H3 Petroleum expertise hypothesis: A less technicallyexperienced national oil company, greater reliance onresources, or lower reserves will lead to less favorable oil deals


Variables and Data

The primary independent variable is Oilt , the world price of oilin year t (I use Brent)

The dependent variable, Dealit , is an index of the terms of theoil contracts for country i in year t: Amount flowing to state /total revenue of field

Country-year-oilfield contract level data, available from2003-2014

This data comes from Wood Mackenzie, an oil and gasconsulting firm


Methodological Plan

1 Data on oil prices comes from the BP Statistical Yearbook.

2 I use annual data from the Centre for Research on theEpidemiology of Disasters to instrument for the annual priceof oil. As does Ramsay, I use only out of region accidents (allregions except Caribbean, Central and South America)

3 Amelia II package in R to impute missing data


Oil Producers in Latin America

Only a small number of countries in Latin America are majorproducers of oil, and among those, Venezuela, Mexico, Brazil areby far the largest producers in international terms

more than 5 % GDP from oil less than 5% GDP from oil> 2 bbl Mexico, Brazil, Venezuela Argentina< 2 bbl Colombia, Ecuador Chile, Paraguay, Uruguay,

Bolivia, Belize, Suriname most of central America


National-level Economic Characteristics

1 Per capita GDP (in current US dollars)

2 Annual percent growth in GDP

3 Inequality (Gini Index)

4 Unemployment

5 External debt, total private and public

6 Currency Reserves


Institutional Variables

1 Political constraints on executive (from Henisz 2000)

2 Composite political risk rating, risk rating (InternationalCountry Risk Guide)

3 Corruption from the Corruption Perceptions index (fromTransparency International)


Petroleum Resource Variables

1 Technical expertise of firms (Moodys rating of NOC)

2 Resource dependence (percent of GDP from oil rents)

3 Private energy investment

4 Proven reserves (in thousand million barrels, from BP’sAnnual Statistical Review)

5 Energy Imports (percent of GDP from WDI/IMF Data)


Methodological Plan

The instrument is determined by: Oilt = αt + Accidentst + εt

The exclusion restriction requires that:cov(Accidentst ,Dealit = 0)

and that it is uncorrelated with the covariates (other than oil)cov(Accidentst , εt |Xit) = 0

here Xit is the set of covariates listed above, excluding oil prices

The instrument satisfies the exogeneity restriction in that accidentsare plausibly unrelated to negotiations in Latin America, exceptthrough changes in the price of oil


Full Model

Dealitj = αitj + Oilt + Xit + Oilt ∗ Xit + εitj

Where Xit is a matrix of economic and political covariates forcountry i in year t for oilfield j .

Interaction terms (Oili ∗ Xit) of central importance

The non-interaction terms serve as as controls

I also include country fixed effects


In addition to the basic and full models, I run three alternativemodels:

1 An economic model, which includes only the variables oneconomic performance

2 An institutional model, which includes only the variables onpolitical institutions

3 An a petroleum resources model, which includes only thevariables measuring the domestic petroleum economy


Economic Model: Instrumented

Table: Economic Model: Instrumented

State Take of OIl Rents:

GDP Per Capita 4.391∗∗∗ (0.436)Economic Growth −0.504 (0.434)Inequality (Gini Index) 0.246∗∗ (0.107)Unemployment −0.382 (0.373)Currency Reserves −0.068∗∗∗ (0.017)FDI as percent of GDP 1.937∗∗∗ (0.225)Instrumented Oil Price (Brent) 1.010∗∗∗ (0.093)GDP Per Capita x Instrumented Oil Price (Brent) −0.056∗∗∗ (0.006)Economic Growth x Instrumented Oil Price (Brent) 0.013∗∗ (0.006)Inequality (Gini Index) x Instrumented Oil Price (Brent) −0.001 (0.001)Unemployment x Instrumented Oil Price (Brent) 0.002 (0.005)Currency Reserves x Instrumented Oil Price (Brent) 0.001∗∗∗ (0.0002)FDI as percent of GDP x Instrumented Oil Price (Brent) −0.026∗∗∗ (0.003)Constant −12.593∗∗ (5.024)

Observations 4,881

R2 0.507

Adjusted R2 0.504Residual Std. Error 12.018 (df = 4857)F Statistic 217.020∗∗∗ (df = 23; 4857)

Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Political Model: Instrumented

Table: Political Model: Instrumented

State Take of Oil Contracts:

Political Constraints −10.434 (8.259)Political Risk Index 0.665∗∗∗ (0.166)Corruption Rating 15.916∗∗∗ (1.631)Instrumented Oil Price (Brent) 0.604∗∗∗ (0.170)Political Constraints x Instrumented Oil Price (Brent) 0.294∗∗∗ (0.112)Political Risk Index x Instrumented Oil Price (Brent) −0.005∗∗∗ (0.002)Corruption Rating x Instrumented Oil Price (Brent) −0.092∗∗∗ (0.021)Constant 9.049 (9.070)

Observations 4,881

R2 0.504


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Oil Resources Model: Instrumented

Table: Oil Resources Model: Instrumented


Energy Imports (Percent of Economy) −0.001 (0.013)Percent Economy from Oil −0.827∗∗∗ (0.288)Private Energy Investment −0.112 (0.507)Oil Reserves 0.137 (0.130)Moodys Rating of National Oil Company 0.034 (1.273)Instrumented Oil Price (Brent) −0.008 (0.095)Energy Imports (Percent of Economy) x Instrumented Oil Price (Brent) 0.0002 (0.0002)Percent Economy from Oil x Instrumented Oil Price (Brent) 0.023∗∗∗ (0.004)Private Energy Investment x Instrumented Oil Price (Brent) 0.002 (0.007)Oil Reserves x Instrumented Oil Price (Brent) −0.002 (0.002)Moodys Rating of National Oil Company x Instrumented Oil Price (Brent) −0.013 (0.017)Constant 41.659∗∗∗ (5.136)

Observations 4,881

R2 0.516


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Full Model: Instrumented


GDP Per Capita −0.144 (0.159)Economic Growth −1.110∗∗ (0.500)Inequality (Gini Index) 2.597∗ (1.334)Unemployment −3.229 (2.040)Currency Reserves 0.101∗∗∗ (0.039)FDI as percent of GDP 2.625∗∗∗ (0.439)Political Constraints −78.881∗∗∗ (17.466)Political Risk Rating 1.404∗∗∗ (0.438)Corruption Rating −28.710∗∗∗ (10.116)Energy Imports 0.099∗∗ (0.045)Percent Economy from Oil 0.197 (0.594)Private Energy Investment 5.058∗∗ (2.061)Oil Reserves −0.795∗∗ (0.373)Moodys Rating of National Oil Company −22.158∗∗∗ (7.328)Instrumented Oil Price (Brent) −0.951∗∗ (0.371)Economic Growth x Instrumented Oil Price (Brent) 0.018∗∗ (0.007)Inequality (Gini) x Instrumented Oil Price (Brent) −0.027 (0.018)Unemployment x Instrumented Oil Price (Brent) 0.035 (0.028)Currency Reserves x Instrumented Oil Price (Brent) −0.002∗∗∗ (0.001)FDI as percent of GDP x Instrumented Oil Price (Brent) −0.035∗∗∗ (0.006)Political Constraints x Instrumented Oil Price (Brent) 1.375∗∗∗ (0.235)Political Risk Rating x Instrumented Oil Price (Brent) −0.018∗∗∗ (0.006)Corruption x Instrumented Oil Price (Brent) 0.567∗∗∗ (0.138)Energy Imports x Instrumented Oil Price (Brent) −0.001 (0.001)Percent Economy from Oil x Instrumented Oil Price (Brent) 0.012 (0.008)Private Energy Investment x Instrumented Oil Price (Brent) −0.061∗∗ (0.028)Oil Reserves x Instrumented Oil Price (Brent) 0.010∗∗ (0.005)Moodys Rating of National Oil Company x Instrumented Oil Price (Brent) 0.275∗∗∗ (0.100)Constant 91.965∗∗∗ (19.771)

Observations 4,881

R2 0.558


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Comparative Statics: GDP Per Capita

10 15 20

1618

2022

2426

2830

Range of PolConstraints:Brent.pred

Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and GDP Per Capita on State Take from Oil Contracts Oil prices ($40 to $100), GDP Per Capita ($2k and $10k)

Simulations for Oil prices, 40 to 100 dollars, GDP Per Capita of $2k and $10kXander Slaski — Princeton University

Comparative Statics: Economic Growth (-2 % vs. 10%)

18 19 20 21 22 23 24 25

0.0

0.2

0.4

Predicted Values: Y|X

23 24 25 26 27

0.0

0.4

Predicted Values: Y|X1

18 19 20 21 22 23 24 25

0.0

0.2

0.4

Expected Values: E(Y|X)

23 24 25 26 27

0.0

0.4

Expected Values: E(Y|X1)

0 2 4 6 8

0.00

0.25

First Differences: E(Y|X1) − E(Y|X)

18 20 22 24 26

0.0

0.3

0.6

Comparison of Y|X and Y|X1

18 20 22 24 26

0.0

0.3

0.6

18 20 22 24 26

0.0

0.3

0.6

Comparison of E(Y|X) and E(Y|X1)

18 20 22 24 26

0.0

0.3

0.6


Comparative Statics: Inequality (40 vs 60 Gini Index)

20 30 40 50 60

0.00

0.05


21 22 23 24 25

0.0

0.4


20 30 40 50 60

0.00

0.05


21 22 23 24 25

0.0

0.4


−30 −20 −10 0 10

0.00

0.04


20 30 40 50 60

0.00

0.20


20 30 40 50 60

0.00

0.20

20 30 40 50 60

0.00

0.20


20 30 40 50 60

0.00

0.20


Comparative Statics: Unemployment (5 % vs 15%)

10 15 20 25 30

0.00

0.08


20 22 24 26 28 30

0.00

0.20


10 15 20 25 30

0.00

0.08


20 22 24 26 28 30

0.00

0.20


−10 −5 0 5 10 15 20

0.00

0.06


10 15 20 25 30

0.00

0.20


10 15 20 25 30

0.00

0.20

10 15 20 25 30

0.00

0.20


10 15 20 25 30

0.00

0.20


Comparative Statics: Currency Reserves (10 billion vs 150billion

22 23 24 25 26 27

0.0

0.4


18 20 22 24

0.00

0.25


22 23 24 25 26 27

0.0

0.4


18 20 22 24

0.00

0.25


−8 −6 −4 −2 0

0.00

0.25


18 20 22 24 26

0.0

0.4


18 20 22 24 26

0.0

0.4

18 20 22 24 26

0.0

0.4


18 20 22 24 26

0.0

0.4


Comparative Statics: Moodys Rating of NOC (3 to 7)

15 20 25 30 35 40

0.00

0.06


15 20 25 30

0.00

0.10


15 20 25 30 35 40

0.00

0.06


15 20 25 30

0.00

0.10


−30 −20 −10 0 10 20

0.00

0.04


10 15 20 25 30 35 40

0.00

0.10


10 15 20 25 30 35 40

0.00

0.10

10 15 20 25 30 35 40

0.00

0.10


10 15 20 25 30 35 40

0.00

0.10


Comparative Statics: Oil Reserves (1 bbl to 5 bbl)

15 20 25 30 35

0.00

0.08


15 20 25 30 35

0.00

0.08


15 20 25 30 35

0.00

0.08


15 20 25 30 35

0.00

0.08


−1.0 −0.5 0.0 0.5 1.0

0.0

0.6

1.2


15 20 25 30 35

0.00

0.08


15 20 25 30 35

0.00

0.08

15 20 25 30 35

0.00

0.08


15 20 25 30 35

0.00

0.08


Comparative Statics: Resource Reliance

10 15 20

510

1520

2530

35


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Resource Reliance on State Take from Oil Contracts Oil prices ($40 to $100), Percent Economy from Oil Rents (2% to 15%)


Comparative Statics: Political Constraints (.2 to .8)

20 21 22 23 24

0.0

0.4


30 35 40

0.00

0.15


20 21 22 23 24

0.0

0.4


30 35 40

0.00

0.15


5 10 15 20

0.00

0.15


20 25 30 35 40

0.0

0.4


20 25 30 35 40

0.0

0.4

20 25 30 35 40

0.0

0.4


20 25 30 35 40

0.0

0.4


Comparative Statics: Political Risk (50 to 80)

18 20 22 24 26

0.00

0.25


20 25 30

0.00

0.15


18 20 22 24 26

0.00

0.25


20 25 30

0.00

0.15


−10 −5 0 5 10

0.00

0.08


20 25 30

0.00

0.25


20 25 30

0.00

0.25

20 25 30

0.00

0.25


20 25 30

0.00

0.25


Comparative Statics: Corruption

10 15 20

050

100


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Corruption on State Take from Oil Contracts Oil prices ($40 to $100), Corruption (4 to 6)


Conclusion

Thank you

Please send comments to [email protected]


Economic Model: Naive

Table: Economic Model: Naive

Dependent variable:

State Profit Share of Oil

GDP Per Capita 2.932∗∗∗ (0.470)Economic Growth 0.981∗∗∗ (0.127)Inequality (Gini Index) 0.399∗∗∗ (0.127)Unemployment 1.630∗∗∗ (0.228)Currency Reserves 0.080∗∗∗ (0.024)FDI as percent of GDP 1.226∗∗∗ (0.096)Oil Price (Brent) 1.182∗∗∗ (0.080)GDP Per Capita x Oil Price (Brent) −0.040∗∗∗ (0.004)Economic Growth x Oil Price (Brent) −0.011∗∗∗ (0.002)Inequality (Gini Index) x Oil Price (Brent) −0.002∗ (0.001)Unemployment x Oil Price (Brent) −0.021∗∗∗ (0.003)Currency Reserves x Oil Price (Brent) −0.001∗∗∗ (0.0002)FDI as percent of GDP x Oil Price (Brent) −0.016∗∗∗ (0.001)Constant 41.255∗∗∗ (0.662)

Observations 4,881

R2 0.551


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Economic Model: Naive

Table: Political Model: Naive

Dependent variable:

State Profit Share of Oil

Political Constraints 54.336∗∗∗ (4.930)Political Risk Index 2.110∗∗∗ (0.128)Corruption Rating 23.902∗∗∗ (1.334)Oil Price (Brent) 2.207∗∗∗ (0.111)Political Constraints x Oil Price (Brent) −0.553∗∗∗ (0.060)Political Risk Index x Oil Price (Brent) −0.022∗∗∗ (0.001)Corruption Rating x Oil Price (Brent) −0.209∗∗∗ (0.013)Constant 41.255∗∗∗ (0.674)

Observations 4,881

R2 0.534


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Oil Resources Model: Naive

Table: Oil Resources Model: Naive

Dependent variable:

government.take

Energy Imports (Percent of Economy) 0.074∗∗∗ (0.013)Percent Economy from Oil −0.550∗∗∗ (0.193)Private Energy Investment −2.227∗∗∗ (0.247)Oil Reserves 0.552∗∗∗ (0.068)Moodys Rating of National Oil Company −2.398∗∗∗ (0.635)Oil Price (Brent) −0.182∗∗∗ (0.040)Energy Imports (Percent of Economy) x Oil Price (Brent) −0.001∗∗∗

(0.0001)PercentEconOil x Oil Price (Brent) 0.015∗∗∗ (0.002)PrivateEnergyInvestment: x Oil Price (Brent) 0.024∗∗∗ (0.003)Oil Reserves x Oil Price (Brent) −0.006∗∗∗ (0.001)Moodys Rating of National Oil Company x Oil Price (Brent) 0.013∗ (0.007)Constant 41.255∗∗∗ (0.674)

Observations 4,881

R2 0.535


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Full Model: Naive

Table


government.take

GDP Per Capita −0.280 (0.180)Economic Growth 1.615∗∗∗ (0.195)Inequality (Gini Index) −2.387∗∗∗ (0.657)Unemployment 2.691∗∗∗ (0.941)Currency Reserves 0.146∗∗∗ (0.034)FDI as percent of GDP 0.635∗∗∗ (0.182)Political Constraints 20.149∗∗ (9.914)Political Risk Rating 0.375∗ (0.221)Corruption Rating 37.050∗∗∗ (5.331)Energy Imports 0.063∗∗ (0.025)Percent of Economy from Oil −0.897∗∗ (0.381)Private Energy Investment −4.157∗∗∗ (1.057)Oil Reserves 0.882∗∗∗(0.199)Moodys Rating of National Oil Company 4.275 (3.724)Oil Price (Brent) 0.659∗∗∗ (0.186)Economic Growth:Brent −0.019∗∗∗ (0.002)Inequality (Gini) x Oil Price (Brent) 0.033∗∗∗ (0.007)Unemployment x Oil Price (Brent) −0.035∗∗∗ (0.010)Currency Reserves x Oil Price (Brent) −0.001∗∗∗ (0.0003)FDI as percent of GDP x Oil Price (Brent) −0.007∗∗∗ (0.002)Political Constraints x Oil Price (Brent) −0.084 (0.110)Political Risk Rating x Oil Price (Brent) −0.003 (0.003)Corruption Rating Oil Price (Brent) −0.349∗∗∗ (0.059)EnergyImports:Brent −0.0001 (0.0003)Percent Economy from Oil x Oil Price (Brent) 0.018∗∗∗ (0.002)Private Energy Investment x Oil Price (Brent) 0.051∗∗∗ (0.011)Oil Reserves Oil Price (Brent) −0.010∗∗∗ (0.002)Moodys x Oil Price (Brent) −0.074∗ (0.040)Constant 41.255∗∗∗ (0.022)

Observations 4,881

R2 0.607


Note: ∗p<0.1; ∗∗p<0.05; ∗∗∗p<0.01


Comparative Statics: GDP Per Capita

20 22 24 26 28

0.00

0.20


20 21 22 23 24 25 26

0.0

0.3


20 22 24 26 28

0.00

0.20


20 21 22 23 24 25 26

0.0

0.3


−6 −4 −2 0 2 4

0.00

0.15


20 22 24 26 28

0.0

0.3


20 22 24 26 28

0.0

0.3

20 22 24 26 28

0.0

0.3


20 22 24 26 28

0.0

0.3


Comparative Statics: Economic Growth

10 15 20

1015

2025

30


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Economic Growth on State Take from Oil Contracts Oil prices ($40 to $100), Economic Growth (−2% and 10%)


Comparative Statics: Inequality

10 15 20

020

4060


Exp

ecte

d V

alue

s: E

(Y|X

)

median

ci95

ci80

ci99.9

Effect of Oil Price and Gini on State Take from Oil Contracts Oil prices ($40 to $100), Gini (40 and 60)

Simulations for Oil prices, 40 to 100 dollars, GDP Per Capita of $2k and $10k


Comparative Statics: Unemployment

10 15 20

1020

3040


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Unemployment on State Take from Oil Contracts Oil prices ($40 to $100), Unemployment (5% and 15%)


Comparative Statics: Currency Reserves

10 15 20

1015

2025

3035


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Currency Reserves on State Take from Oil Contracts Oil prices ($40 to $100), Currency Reserves (10 Billion to 150 billion)


Comparative Statics: FDI over GDP

18 20 22 24 26

0.00

0.25


15 20 25 30

0.00

0.15


18 20 22 24 26

0.00

0.25


15 20 25 30

0.00

0.15


−10 −5 0 5 10 15

0.00

0.10


20 25 30

0.00

0.25


20 25 30

0.00

0.25

20 25 30

0.00

0.25


20 25 30

0.00

0.25


Comparative Statics: FDI over GDP

10 15 20

−20

020

4060


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and FDI on State Take from Oil Contracts Oil prices ($40 to $100), FDI as percent of GDP (10% to 50%)


Comparative Statics: Oil Reserves

10 15 20

020

4060


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Oil Reserves on State Take from Oil Contracts Oil prices ($40 to $100), Oil Reserves (1 bbl to 5 bbl)


Comparative Statics: Moodys Rating of NOC

10 15 20

020

4060


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Political Constraints on State Take from Oil Contracts Oil prices ($40 to $100), Moodys Rating of NOC (3 to 7)


Comparative Statics: Resource Reliance

10 12 14 16 18 20

0.00

0.20


26 28 30 32

0.0

0.3


10 12 14 16 18 20

0.00

0.20


26 28 30 32

0.0

0.3


5 10 15 20

0.00

0.15


10 15 20 25 30

0.0

0.3


10 15 20 25 30

0.0

0.3

10 15 20 25 30

0.0

0.3


10 15 20 25 30

0.0

0.3


Comparative Statics: Energy Imports

26 28 30 32 34

0.00

0.25


26 28 30 32 34 36

0.00

0.20


26 28 30 32 34

0.00

0.25


26 28 30 32 34 36

0.00

0.20


0.5 1.0 1.5 2.0

0.0

1.0

2.0


26 28 30 32 34 36

0.00

0.25


26 28 30 32 34 36

0.00

0.25

26 28 30 32 34 36

0.00

0.25


26 28 30 32 34 36

0.00

0.25


Comparative Statics: Energy Imports

10 15 20

2025

3035

4045


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Energy Imports on State Take from Oil Contracts Oil prices ($40 to $100), Percent of Energy Imported (5% to 25%)


Comparative Statics: Private Energy Investment

15 20 25

0.00

0.15


10 20 30 40 50

0.00

0.04


15 20 25

0.00

0.15


10 20 30 40 50

0.00

0.04


−20 −10 0 10 20 30 40

0.00

0.03


10 20 30 40 50

0.00

0.15


10 20 30 40 50

0.00

0.15

10 20 30 40 50

0.00

0.15


10 20 30 40 50

0.00

0.15


Comparative Statics: Private Energy Investment

10 15 20

−20

020

4060

80


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Private Energy Investment on State Take from Oil Contracts Oil prices ($40 to $100), Percent of Energy from Private Investment (5% to 25%)


Comparative Statics: Political Constraints

8 10 12 14 16 18 20

010

2030

4050

60


Exp

ecte

d V

alue

s: E

(Y|X

)

median

ci95

ci80

ci99.9

Effect of Oil Price and Political Constraints on State Take from Oil Contracts Oil prices ($40 to $100), Political Constraints (.2 to .8)

Simulations for Oil prices, 40 to 100 dollars, GDP Per Capita of $2k and $10k


Comparative Statics: Political Risk

10 15 20

1020

3040

50


Expe

cted

Val

ues:

E(Y

|X)

median

ci95

ci80

ci99.9

Effect of Oil Price and Political Risk on State Take from Oil Contracts Oil prices ($40 to $100), Political Risk (50 to 80)


Corruption

30 35 40 45 50

0.00

0.10


40 50 60 70 80 90 100

0.00

0.04


30 35 40 45 50

0.00

0.10


40 50 60 70 80 90 100

0.00

0.04


10 20 30 40

0.00

0.06


30 40 50 60 70 80 90

0.00

0.10


30 40 50 60 70 80 90

0.00

0.10

30 40 50 60 70 80 90

0.00

0.10


30 40 50 60 70 80 90

0.00

0.10


Moodys Ratings of NOCs


Oil Rents


Private Energy Investment


Oil Reserve Data


Country Risk Ratings


Historic Oil Prices


Recent Oil Prices


Natural Disaster Occurences


Natural Disaster Occurences

PARTIAL ASSIGNMENT OF CONCESSION AGREEMENT OVER THE CERRO NEGRO HYDROCARBONS AREA.

In the City of Buenos Aires, Argentine Republic, on July 4th, 2008, between CLEAR S.R.L. (CUIT 30-62215921-6), a company duly incorporated under Argentine Law, with domicile in Av. Roque Sáenz Peña n° 971, 8° floor, City of Buenos Aires, represented in this act by Mr. Cristóbal Manuel LÓPEZ, DNI 12,041,648, in his capacity of Partner and Manager, hereinafter “CLEAR” or the “ASSIGNOR”, on the one side, and on the other side Pluris Sarmiento Petroleo S.A., a company duly incorporated under the Argentine Law, with domicile in Marcelo T. de Alvear 636 4° floor , represented in this act by Mr. Sacha H. Spindler, Canadian Passport number WD 135465 in his capacity of signing authority, hereinafter the “ASSIGNEE”–hereinafter individually referred as to the Party and jointly as the “Parties”- agree to sign this ASSIGNMENT contract (hereinafter the “Contract”), and;

A).- WHEREAS:

1.- CLEAR holds rights of exploration and exploitation under a concession regime (hereinafter the “Concession”) –pursuant to Law 17,319-, over the hydrocarbons area “Cerro Negro” (hereinafter the “AREA”), located in the Province of Chubut, Argentine Republic, which location, surface and limits are detailed in the map attached as Annex I, which shall be deemed part of this Assignment contract.

2.- The Concession is governed by Law 17,319 and the Concession Agreement, which authentic copy is attached as Annex II and shall be deemed part of this contract, and which terms, clauses, conditions, obligations and rights are known and accepted by the Parties.

3.- The Concession over the Area, which remains in full force and effect, has a validity term of 20 years, as from December 1, 2005. Thus, it is due on December 1, 2025 with the possibility of obtaining a five year extension of the term of the Concession as long as all the requirements of the Concession Agreement have been duly complied with.

4.- ASSIGNEE has stated its intention of acquiring 75% of CLEAR’s rights over the Area and CLEAR has stated its intention of assigning 75% of its rights over the Area.

B).- Definitions:

For the purposes of this Assignment contract, the Parties hereby agree that the terms defined in this chapter shall be deemed to have the following meanings:

Common Shares of Pluris Nevada: the common shares of Pluris Nevada, for a nominal par value of U$S 0.0001 per share, with equal rights to all other Common Shares of Pluris Nevada.

Approval from Petrominera Chubut S.E: the approval of Petrominera Chubut S.E. of CLEAR’s assignment to ASSIGNEE of the Assigned Rights over the Area and the appointing of ASSIGNEE or whomever the ASSIGNEE designates as operator of the Area.

Affiliate Company: refers to any company or legal entity that controls or is controlled by an entity that controls the Party. “Control” means the direct or indirect possession of fifty percent (50%) or more of the voting rights in the company or other legal entity.

Assigned Rights over the Area: for the purposes of this Assignment Contract, it shall refer to seventy five percent (75%) of CLEAR’s participation interest in the Concession Agreement over the Area, which comprises the acquisition and undertaking of 75% of the rights and obligations over the Area arising from Law 17,319 and the Concession.

Closing Date: for the purposes of this Assignment Contract, it shall be deemed to be the date when, after having put into place the financial structure necessary for this Assignment Contract, ASSIGNEE performs the payment of the


First Stage Results

Table: Instrumented Oil Prices

1990 35.7361991 33.6051992 37.5991993 37.1601994 40.1021995 64.8491996 35.4291997 32.8481998 41.7901999 50.4612000 35.5532001 30.9862002 36.4032003 38.1412004 58.4912005 78.0742006 32.7172007 41.7382008 67.9342009 35.3112010 45.7892011 118.2922012 59.3242013 54.1522014 46.905


The bargaining process: caveats

There are significant transaction costs to renegotiatingcontracts

Contracts include not only terms about how to divide thefunds, but a host of other special provisions and non-fiscalbenefits to the state

Examining contracts at a particular point in time capturecontracts that were negotiated at a number of points in thepast and thus capture bargaining power at a range of times inthe past.

Contract terms may also vary depending on the stage of oildevelopment – exploration, development, and production(which can themselves be broken down into substages).


Documents

Multinational Firms and Oil Contract Negotiations in Latin America … · 2017. 11. 17. · The Legacy of Multinational Firms in Latin America Important role for MNCs in Latin American