ISSUES IN OIL AND GAS

Contemporary issues in oil, gas and energy

Contents

The importance of marketing and marketing concerns to upstream oil and gas organizations1

The practical implementation and principles of taxation regimes of oil and gas industry in different areas of the glove3

Tax/Royalty Regimes4

Royalties4

Income Tax4

Resource Rent Tax5

Production Sharing5

Strategic responses of energy sectorto crucial international issues and challengess, initiatives of governments6

Contractual clauses in the main contracts in the oil and gas industry8

Types of Contracts9

Modern Concessions9

Production-sharing Agreements10

Joint Ventures10

Conclusion11

References13

Contemporary issues in oil, gas and energy

The importance of marketing and marketing concerns to upstream oil and gas organizations

Initially, National Oil Companies did not supply oil to independent refiners in a direct manner. International Oil Companiess used to supply them (Levy, 1982, p. 122). The shift from surplus to shortage provided an opportunity to National Oil Companies to supply oil to them as alternative suppliers. Throughout the 1970 era, direct marketing by National Oil Companiess from nations that were exporting substituted for 3rd party sale by IOCs. By 1980, third party crude oil sales by IOC fell below one million barrels per day. Timing and extent of the move to the strategy of direct marketing varied from country to country. Circumstances specific to each country affected the adoption of marketing patterns. Directly marketed crude oil is referred to those crude oil exports that are not marketed through IOCs which once owned, or currently own production facilities in the countries that export (Levy, 1982, p. 123). Due to Iranian Evolution that occurred in 1978, a cutback occurred in supply of oil. As a consequence, oil costs on the market became higher than that present on contracts. This resulted in creation of a great motivation for oil manufacturing nations to produce oil at high costs. The organizations that were left short of oil reacted to this shortfall by cutting back sales to 3rd party. Therefore, purchasers of third party oil started to search for direct supply parties.

Considering the prospect to expand direct marketing, a few exporters reduced oil supplies to their customers which were long-term in nature. They started selling to independent buyers. These cutbacks reduced 3rd party sale further. A fresh set of purchasers appeared. Consumer countries' governments became alert by their increased threat to cutbacks in supply of oil. They started purchasing crude oil from oil producing countries in a direct manner. Countries such as Denmark, Ireland, Sweden and Belgium started procuring oil directly. An oil producing country of Saudi Arabia called Petromin established a direct marketing arrangement with the Danish government on the condition that they set up a marketing network owned by their state. Another condition was set up that Dane should not market their contracted oil via current channels of Oil Company. In early 1980s, when things had settled down, the international market of crude oil presented a completely new picture than it had looked two years back. By mid 1980, the seven major countries for production of oil were buying 7% of their total requirements of crude oil on the open ...