LEGAL ASPECTS OF OIL & GAS INDUSTRY

Legal Aspects of Oil & Gas Industry



Legal Aspects of Oil & Gas Industry

Introduction

This assignment is based on the key issues that arise between International Oil Companies (IOC) and National Oil Companies in relation to Joint Operating Agreements (JOAs). Joint Operating Agreement is a special kind of joint venture agreement. It is usually a production sharing agreement, which is a contract concluded between a foreign company (contractor) and state-owned enterprise (state party), authorizing the contractor to carry out exploration and exploitation within a certain area (contract area) in accordance with the terms of the agreement. In the 70s the country, OPEC implemented broad nationalization of the oil industry, took over production quotas and export prices for oil, extracted in the countries - participants of the organization. As a result, under the control of the international oil cartel was only a small part of oil recovery operations in developing countries. In the late 70s, the share of the five U.S. oil companies in the international oil cartel, accounted for approximately 10.5% of production, 25% recyclable and 15% of oil transportation in the capitalist world (Oil and gas agreements: joint operations, 2008).

Power game is another big factor which plays vital part in the bargaining process between the host and the international oil industry. Some countries might have liabilities over the other country, which could also be the reason for the power influence over other, as we know that power resources are not interchangeably with respect to particular contest and context. Hence, this power to either party might lead to the dangerous results, because one can exercise the power over other whenever one pleases to.

However, in the larger context or country specific context, for IOC it is not a good approach to bargain on the basis of possession of resources. The Nesting system in bargaining was introduced by Vinod Aggarwal in 1985 with respect to the bargains within a system. However, Nest is referred here with a context of relationship between actual relative bargaining power and potential relative bargaining power which is being moderated by international and host country context. There are various factors (international and domestic) which have been discussed earlier regarding affect of potential power on the host and the international oil companies.

National Oil Companies (NOC's) Participation in Oil And Gas Projects As "Partners"

At the core of the international oil cartel is a series of agreements on the division of sources of production and oil markets, establishing quotas for production and marketing, negotiation of prices and conditions of sale of petroleum and petroleum products. The first cartel agreement signed in 1928. Participants of the international oil cartel distributed among themselves in the joint ventures and affiliates throughout the capitalist world, excluding the United States and Mexico. One of the key agreements is establishing export prices for oil. Concession agreements gave oil companies absolute rights on the extracted oil in developing countries. To obtain the maximum profit of the international oil cartel as benchmark prices for ...