Oil and Gas Legal IssuesPresentation

Group Members: Stephanie Polykarpou, Thelys Stamatelis, Lianqiu WANG, Quan Ke

Theme:

“Choosing between Production Sharing Contracts, Joint venture and Service Contracts presents formidable intellectual challenges as to optimal and legal drafting considerations. Critically discus citing typically clauses and risk issues that may arrive”.

Content Introduction Joint Venture Product Sharing Contract Service Agreement Conclusion

Introduction

Definition of the “Contract ” Definition of the “Oil and Gas

Contract” Types of The Oil and Gas Contract Cut-in Angles of the Oil and Gas

Contract• Concerns of the Contractual Clauses Currently• Contracts Forms vs. Revenue Sharing

Joint Ventures

Background

1. Definition

2. Reasons to choose the JV

Joint Venture

Upstream

Capital Intense

Risk Concerntra

te

Access to Resources

Access to Technology

Downstream

Supply Chain Optimization

Market Position

Regulation requirement

Political Sensitive or

Energy Security

Development of the JV

Past Current

Future

Joint Venture

Types of JV1. Full assets JV2. Full business JV3. Market Alliance

Special Clauses in Joint Venture

Financial/Capital Management of Partners

Taxes

Production Sharing Agreements

1. In 1960s Indonesia proclaimed PSCs as the main type of contract in the oil and gas industry.

2. Nowadays more than 40 countries use this type of contract.

3. The state is usually represented by the government or by a National Oil Company

Production Sharing Agreements

Characteristics.

• Exploration remains with the government• State has managerial role• IOC responsible for costs• Profit oil is divided between the contractor and the state

Production Sharing Agreements

5. Certain clauses:• Tax• Contract duration and commerciality 6. In such contracts there always are some risks:• The host state does not own any risks at all• But.. the intervention of the law• The host state also incurred some disadvantages.

Service Contract

The background of Service Contract The type of service contract Risk service contracts(Rsc )and Pure

service contracts (Psc) Differences between Rsc and Psc

Service contract

  Service Contract

Pure Service Contract (PSC) Risk Service Contract (RSC)

Ownership Control Risk Ownership Control Risk

Foreign Oil Company

No No No No No Exploration

Host State

Full Full All Risks Full Full All Risks

conclusion

JV vs. Service contract JV vs. PSC

References

Outlines of the Presentation of Dr. Irina Paliashvili, the President of the Russian-Ukrainian Legal Group at the Seminar on the Legislation on Production Sharing Agreements, September 14,1998

Kirsten Bindemann, Production Sharing Agreements: An Economic Analysis, Oxford Institute for Energy Studies WPM 25, October 1999

Centre for Energy Economics, Bureau of Economic Geology, Jackson School of Geosciences the University of Texas at Austin

Bake and Makenzie, Production Sharing Contracts: Implications for Pre-Salt Development in Brazil

Dr Ingilab Ahmadov, Contracts and Revenue sharing mechanisms- an international perspective, Public Finance Monitoring Centre (Baku), 5-6 February 2009,

Jenic Radon, The ABC of Petroleum Contracts: Licences-Concessions Agreements, Joint Ventures, and Productin Sharing Agreements, 70

….references

Talal Al-Emadi Joint Venture Contracts among current Negotiated Petroleum Contracts (2004)

Bindemann 6 supra note 15, at 11, (“oil exploration and development can only be conducted by virtue of one of several forms of contracts granted either by the government or its NOC”).

With respect to the type of remuneration, the payment can be regarded as profit or fees. The method of the remuneration, on the other hand, is either a percentage of the production (in kind) or fixed amount (cash). D. Johnston Production Sharing Agreement’ cEnTrE For PETrolEum min. l. & Pol’y. 1, 1–68 (1994).

M Sa Riberio, The New Oil and Gas Industry in Brazil: An Overview of the Main Legal Aspects 36 TEx. inT’l. l. J. 141, 143–65 (2001).

Michael Likosky, Contracting and regulatory issues in the oil and gas and metallic minerals industries (2009)

Omorogbe, Y. (1997). The Oil and Gas Industry: Exploration and Production Contracts. Lagos: Malthouse Press. Page 60-67

Neto, J.S.C. (1985). ‘Risk-bearing service contracts in Brazil”, Journal of Energy and Natural Resources Law 3: 114.

Smith, E.E. (1991-2). “From concessions to service contracts”, Tulsa Law Journal, 27, p. 493. Smith, E.E., Dzienkowski, J.S., Anderson, O.L., Conine, G.B., Lowe, J.S. and Kramer, B.M.

(2000). International Petroleum Transactions. Colorado: Rocky Mountain Mineral Law Foundation (2nd edition).