The Role Of Host Governments In International Petroleum Operations
Authors: Prast William G. 
Published: December 2007

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This paper is to be presented at the Eastern Regional Meeting to be held in Pittsburgh, Pa., on Nov. 5–6, 1964, and is considered the property of the Society of Petroleum Engineers. Permission to publish is hereby restricted to an abstract of not more than 300 words, with no illustrations, unless the paper is specifically released to the press by the Editor of the JOURNAL OF PETROLEUM TECHNOLOGY or the Executive Secretary. Such abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in JOURNAL OF PETROLEUM TECHNOLOGY or SOCIETY OF PETROLEUM ENGINEERS JOURNAL is granted on request, providing proper credit is given that publication and the original presentation of the paper.

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Introduction

The international oil industry is the scene of some of the most important economic conflict in the world. Goals sought by the nations and the companies that are involved vary widely. Those nations that are net fuel importers seek low-priced supplies. Conversely, the nations that are net exporters want to maximize income from their natural resources. Oil companies, both public and private, seek to implement either impartial commercial decisions or the aims of their national government or an amalgamation of the two.

Petroleum exports are a key source of foreign exchange and government income for the major oil-exporting states. For those countries that are economically underdeveloped, the importance of this revenue is magnified. Consequently, these nations have begun to seek an expanded role in the operation of their domestic oil industry.

The host governments have begun to enhance the role of the producer state through new agreements with both the established international majors and with smaller companies. State-sponsored oil companies have been formed in the host nations, and these have begun to work both independently and with the foreign oil firms. Efforts have met with certain successes, and one may expect that the host governments will make future attempts to improve their position.

The rapid increase in activity by the host governments of the major developing, oil-exporting nations makes an evaluation of their present and potential economic role timely. This paper will touch upon avenues of host government participation, and will suggest some forms for such participation.

NEW ADVANTAGES FOR HOST GOVERNMENTS

The period since the establishment of the "fifty-fifty" profit-sharing agreements has seen the formation of a new series of oil exploration and production agreements that offer the producer governments a larger share of the profits and management of the oil industry.

The more prominent new advantages include the following:

The government receives a larger share of the gross production profits through an increased rate of taxation. The government receives a carried interest in the enterprise, such that the government does not bear a risk during the exploration stage, but is entitled to a partnership participation if the venture succeeds in discovering commercially recoverable quantities of crude oil.