These forms range from confidentiality agreements to service contracts to gas sales agreements and they all reflect, to some extent, industry custom in the. An example is the kenyan model9 which provides as follows at clause 2. In the upstream 4 bassey udo, kachikwu gives oil and gas midterm report. Thus, if a client suspects that a contract counterparty may be at risk of filing bankruptcy, particular care should be taken in advance to identify all of the potential liens that might be available and ensure that such liens are. Negotiate an acceptable oil and gas lease for your particular land. Because of the diversity of ownership of oil and gas interests andor the need to share economic. Oil and gas in albania petroleum low nr7746, date 28071993. Each situation and transaction is different, and ideally the oil and gas lease should be. Daywork footage turnkey as the contracts go from daywork to footage to turnkey, the drilling contractor takes on additional responsibility. The oil and gas offshore industry has come up with proper rules and guidelines governing the contracts used to preside over the allocation of liabilities and risks schramn, 2009.
Pdf readings in the international oil and gas agreements and. A primer on oil and gas leases and surface use agreements for. Main features of contracts for the sale of crude oil and refined products, including lpg 26 product group products light distillates aviation and motor gasolines, and light distillate feedstock. In reality, it is rarely delivered as circumstances are constantly changing. Energy policy center, levin college of urban affairs. Pdf oil and gas service contracts around the world. Daywork drilling contract a drilling contract under which the lease operator compensates the drilling contractor on the basis of the amount of time the contractor spends conducting drilling operations. An analysis of comparative practice in certain african jurisdictions. The drilling of an oil and gas well is an expensive and hazardous endeavor requiring great expertise. In a service contract, similar to a production sharing agreement, the closest legal framework, the international oil company brings the technology. A widespread myth exists that there is some form of standard oil and gas lease. A drilling contract should address the standard of performance expected of the drilling contractor. Oil and gas contract, claims and dispute management. Doc production sharing contracts vs service contracts from.
A service contract 2 is a longterm contractual framework that governs the relation between a host government and international oil companies iocs in which the iocs develop or explore oil or natural gas fields on behalf of the host government in return for predetermined fees and in which in most cases the host government does not hand over. Aug 21, 20 standard contracts developed by the international association of drilling contractors contracts iadc. Issues in service contracting in the oil and gas industry. Analyzing oil and gas farmout agreements reprint, first. This is an arrangement whereby the oil company is engaged by the government entity as a contractor to infuse the entire risk capital for exploration and production of petroleum. Crine was founded in 1992 as a cost reduction initiative to reduce the capital costs of developing oil and gas fields. In the event the contractor fails to make any discovery of oil reservoir, the contract is frustrated without any obligation on any of the parties.
Deals with oil, gas and lng sales contracts dealing in detail with their respective terms goes through shipping contracts, including ship leasing, time and voyage charterparty terms, contracts of affreightment and bills of lading. Standard form contracts provided by industry bodies such as logic are frequently used by parties operating in the offshore oil and gas industry. About 70% of total government revenue, more than 60% of gross domestic product, roughly 90% of export earnings and more than 90% of the foreign exchange revenues in qatar are derived from the oil and gas sector. Local content and procurement requirements in oil and gas. In reality, there are as many forms of oil and gas leases out there as can be imagined. Evidence and implications oxford institute for energy studies. In addition, all three may be subject to association or jointventure agreements.
Stabilisation clauses in international petroleum contracts. Management was more focused on proper risk management and contract. Pdf compatible concept of contract law with oil and gas. Governments are aware that most oil companies have greater financial resources, better knowledge of the oil fields as well as further experience in negotiating contracts. Though farmout agreements are ubiquitous in the late 1980s, practitioners and scholars have not standardized farmout agreements to the degree that they have oil and gas. The oil and gas lease is a unique form of legal transaction with its own peculiar language and rules, and its basic terms have developed over the years to serve the needs of landowners and the. Introduction the importance of fiscal stability is a popular mantra for the oil and gas industry. Oil and gas production shari ng contracts regulated by the oil a nd gas law are written contracts with terms and conditions contained in indo nesia. Oil and gas is typically sold at an indexed price rather than a fixed price. Shining a light on good practice recommendations governments should take a systematic approach to improve transparency across the entire process by which they award oil, gas and mining rights.
Middle distillates jet and heating kerosene, gas and diesel oil, including marine bunkers. Introductionupstream oil and gas production and exploration entail high risks that require costeffective and effective means for risk allocation, indemnity, and assessment of liabilities between contractor and operator taverne, 2008,p. Oil and gas law is also different from the law that ap. This offers an investorfriendly introduction to how contracts in this industry are drafted. In each case, there is a discrete set of bankruptcy risks to manage. The light, sweet crude oil contact, launched in 1983, is the most actively traded futures contract based on a physical commodity in the world. Consider the array of commercial and business relationships in the oil and gas industry. Double click on the pdf and a separate page will open. Many first purchasers of oil and gas companies that first purchase and take title to the production, such as companies engaged in the business of transporting oil and gas from the oilfields are generally not in the business of accepting the price risk associated. Today national oil companies nocs control approximately 90 percent of the worlds oil reserves and 75 percent of production similar numbers apply to gas, as well as many of the major oil and gas infrastructure systems. Contracts, the authors believe epc contracts will continue to be a preeminent form of construction contract used on largescale oil and gas projects in most jurisdictions. Pdf rentierism is a significant concern for most oil producing countries, in particular, those in the developing world. Any insurance office that writes oil and gas risks should.
The volume of gas available for sale by the oil and gas company is a function of the volume of gas produced and the fiscal terms in place. Depending on the nature of the operations and the degree of risks involved in the oil and gas industry jahn, 2008,p. Unlike the income tax in iraq for individuals and businesses, which is 15 percent, the tax rate for oil and gas and related industries is 35 percent. The gas gathering and processing services are oftentimes provided under separate contracts between the producer and midstream company, but may all be contained in one contract. Daywork drilling contract a drilling contract under which the lease operator compensates the drilling contractor on the basis of the amount of time the. Contract psc was introduced in indonesia in 1966 and pscs are now used widely to record arrangements for oil and gas exploration. Oil and gas law introduction oil and gas law is a combination of elements of contract law, property law, and tort law. Agreement risk of bankruptcy joint operating agreement any joint interest owner service contract contract counterparty sale contracts buyer or seller lease lessee. Encouraging the responsible development of indianas oil and gas in a manner that is protective of public health and safety, and the environment landowners guide to oil and gas leasing oil and gas.
The online ei source book platform was conceived and. A primer on oil and gas leases and surface use agreements. The most common types of contracts used are farmoutsfarmins, or well trade agreement. Pdf this paper explores different understandings of the concepts of rent and economic rent applied to the oil and gas industry in the light of.
Oil and gas law is unique given the very nature of oil and gas, and the terms and phrases about this area of law are equally unique. Petroleum means crude oil andor natural gas existing in their natural condition but excluding helium occurring in association with petroleum or shale. Main features of contracts for the sale of crude oil and. These contracts, and the others that make up the exchanges energy.
The personnel involved in this key function are required to negotiate, support and manage effective contracts. The nymex division heating oil futures contract, the worlds first successful energy futures contact, was introduced in 1978. This can be directly as producers or as the gatekeepers for exploitation by private oil companies pocs. Whereas is the policy of republic of albania to encourage exploration for and production of. Each situation and transaction is different, and ideally the oil and gas. In the late 1980s, as american oil and gas companies began to look more and more to international opportunities to explore for hydrocarbons, landmen were recast as petroleum negotiators, since oil and gas property rights owned by sovereign nations were uncomplicated.
This should cover all stages of the contracting process, namely planning, the allocation and award. Though farmout agreements are ubiquitous in the late 1980s, practitioners and scholars have not standardized farmout agreements to the degree that they have oil and gas leases. Cost of production, taxes, government controls, or market forces set by local or regional supply and demand often determine the price of gas sold. The oil and gas sector is the prime source of this funding. The first editions of these model contracts were published in 1997, as crine contracts. Crine was founded in 1992 as a cost reduction initiative to reduce the capital costs of developing oil and gas. Whereas, the colorado oil and gas conservation act, c. The research attempts to look at the causes of the imbalance in international oil and gas contracts with an eye on the observation that one of the causes of the imbalance are the investment treaties because they focus on a states obligations. The enduser community using this resource is diverse, and includes representatives of government, industry, academic institutions, nongovernmental organizations, and individuals. The modern form of such agreements of ten grants an oil company exclusive rights to explore, develop, sell, and export oil or minerals extracted from a speci. Gas from several wells is gathered through a series of small pipelines gathering lines and then. The case for publishing petroleum contracts in nigeria. However, the majority of the issues raised are applicable to epc contracts used in all.
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