International oil and gas law Essay Example | Topics and Well Written Essays - 4000 words

International oil colour and gas law - Essay ExampleThis will slit by explaining the showcases of organization that the government can enter into when the current term with an oil development company called Noble embrocate expires and the reasons why such type of agreement could be suitable. Also, following oil stripping in Amazia, the paper will discuss how the Urbania should go about oil development in that kingdom as well as give an advice on which company the government should work with. Finally, the paper will discuss the various types and sources of finance that are usable for Urbania, considering that the country does not have adequate resources to fund oil development projects. A. What type of agreement should Urbania enter into for continued development of, and production from, the Western plateau region, when the current subsidisation expires? Be sure to give reasons for your recommendation. There are several fundamental agreements that can be made between the gove rnment of Urbania and Nobel anoint Company including the Joint Venture Agreement, concession, service contract and production sharing agreement.1 The government can decide to continue with the current concession agreement if it wants to pledge the ownership of the oil resources of the company that will be granted the license. Technically, this ownership is enjoyed in exchange for royalty, which is usually estimated at a fixed rate on the quantity of oil produced. In some situations, the company can also enjoy tax exceptions and reduced custom duties in exchange for the extraction rights. This agreement will present Nobel Oil with a long duration of agreement with the government of Urbania, and it will be difficult for the government to include a plight in clause such that it will be hard for any party to pull out for whichever reason. Nevertheless, this type of agreement comes with some disadvantages. For instance, a concession is a long-term agreement, which is usually faced wit h problems related to adjustment of financial commitments as a result of unexpected circumstances. 2 It will also be a disadvantage on the side of the licensed company because it will be required to pay higher amount of pre-oil discovery fee, and following the discovery of oil, the company is likely to pay very high amounts of royalties as well as income tax. The current rate of royalty is 16%, which will somewhat bring back a substantial amount of revenue and hence a good reason for the government to retain concession when the current one expires. The concession contains relinquishment clauses, which could compel the Oil Company to either to discover commercial reserves or following the discovery of commercial reserves within a accepted period of time, relinquish usable portions of the concession back to Urbania government. The concession has an express work obligation of a limited period of time within which the Oil Company is expected to commence oil exploration and on discover y of commercial reserves, the company would be expected to develop oil in conformation with good oilfield practice. This means that the government will have some powers to control the activities of the oil company in a manner that ensures the company is following oil industry practices. The joint venture agreement is another option that Urbania government can put into considerations after the current