Oil Agreements

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Traditional concession agreements before 1940 were granted to large territories, sometimes to the whole country, for example. B irak. These grants were long-term (50 to 99 years). The IOC has had all the discretion and control to explore and verify whether or not a particular field can develop. Participation agreements: the NOC is “carried” by an international oil company (IOC). The NOC weighs on the IOC by not fully compensating the IOC for the risks involved in exploration or for making a commercial discovery. The IOC suffers the total losses and therefore needs greater success to compensate, depending on NOC`s share, in the joint venture. But the IOC benefits, for example, from the fact that the NOC is treated as a partner in nationalist treats. This did not result in delays, postponements or investments expected immediately. This was clearly contrary to the interests of host governments. Treaties do not provide for waivers of unexplored areas.

Other more traditional concession agreements have granted the IOC “in situ” oil, with market and price powers. Royalties were flat or fixed for unit rates and were sometimes credited with income tax. There was no or little signing bonus and sometimes no income tax. These conditions have often been “frozen” for the duration of the agreement. Concession or licensing agreements have evolved considerably since their introduction in the early 1900s as unilateral treaties, when many resource-rich nations were dependencies, colonies or protectorates of other states or empires. The modern form of such agreements often allows an oil company to explore, develop, sell and export exclusive rights, oil or minerals from a given territory, for a specified period of time. Companies compete by offering offers, often coupled with signing bonuses, to acquire licenses for such rights. This type of agreement is widely used around the world and is used in countries as diverse as Kuwait, Sudan, Angola and Ecuador. The joint venture (“JV”) generally involves a commercial agreement between two or more parties who are willing to pursue a joint venture in a form to be clarified.

A joint venture can be compared to a modern marriage that has a time of bale and requires parties that they know and understand each other`s objectives, interests and business methods. The low success rate of modern marriage also applies to joint ventures in companies. Given the permanent nature of the joint enterprise structure, it is not surprising that joint ventures are less often used as an underlying agreement between an oil company and a host government. Nigeria was an exception: the national oil company preferred this format until it could no longer fulfill its share of the financial commitments of the joint venture. Today, in Nigeria, the new agreements are mainly EPI. Since a joint venture requires parties to jointly fulfill their business objectives by not resolving important issues before entering a joint venture, the parties merely postpone a possible disagreement or impasse, particularly where a joint venture is a 50-50 agreement. Longer-term negotiations, which will take place over a broad period of time, are necessary to ensure that all issues are dealt with in a thoughtful manner.

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