Why have
Production Sharing Agreements replaced Concession Agreements for Exploration
& Production Activity? BackgroundThe rise of nationalism in oil producing
states during the 1960s was brought about from a desire by host governments to
regain greater control over their indigenous mineral assets, as well as
political motivations to wrest a higher economic rent from American and
European o
...[Show More]
Why have
Production Sharing Agreements replaced Concession Agreements for Exploration
& Production Activity?
Background
The rise of nationalism in oil producing
states during the 1960s was brought about from a desire by host governments to
regain greater control over their indigenous mineral assets, as well as
political motivations to wrest a higher economic rent from American and
European oil companies.
The typical Concession Agreements then
in force, between host governments and International Oil Companies (IOCs), had
generated a great deal of dissatisfaction over governmental returns and
finances, and have today been largely superseded by Production Sharing
Agreements (PSAs) or Production Sharing Contracts (PSCs).
The major differences between these two
contractual systems that determine relationships between host governments and
International Oil Companies are the levels of control granted to IOCs, levels
of state involvement and intervention and participation, and the financial, or
fiscal, system that divides and distributes the economic returns to both the
government and IOC.
Assignment Task
Your assignment task is to research the
reasons and justification behind host governments moving away from Concessions
and replacing with PSAs/PSCs, and why IOCs have accepted such a dramatic change
in their own share and profits from Exploration and Production activity in
resource-rich countries.
In a 2,000-word Essay you should outline
the fundamental differences between the Concession systems and PSA/PSC systems,
and the rationale behind producer countries favouring the greater economic
rentals they receive through PSAs/PSCs. Discuss why host governments have
succeeded in extracting more money from usually IOCs, and why, faced with such
a change in finances, IOCs have continued to explore for, and exploit mineral,
assets now their financial share of the profits has been seriously reduced.
Your own interpretations and conclusions
from yours researches are fundamental. Supporting your own arguments in a
robust and objective manner will qualify for better marks than a simple
re-statement of the data and opinion found in the research. This should be a
high-level review; the allowed word count is a deliberate constraint, so make
sure you write a “rounded” essay, and do not discuss in too much detail.
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