MSc Oil and Gas Management Plenary Session 3 Write a short report of no more than 750 words giving a critical comparison between using Service Contracts and Joint Venture agreements in the Oil and Gas industry. You will be expected to include reference to articles and sources of information from your reading and independent study so far. It is up to you on the format of how the work is presented but it must be written and typed. This report will be given in for marking and you will receive formative feedback. Service Contracts and Joint Venture agreements Course: Name Service Contracts and Joint Venture agreements Yours Name Professor's Name [optional] Date: October 31, 2015 University 1 Service Contracts and Joint Venture agreements For oil and gas companies it is essential to build powerful alliances to get success. During their trading process, several of the challenges they will face in field of mutual interest. Sometimes, joint ventures are used to obtain the effective production and sometimes service contracts are used for better results. They both have their own merits and demerits over each other. In this paper, I will be doing the critical comparison between service contracts and joint agreements in oil and gas industry. Joint Ventures were introduced by Iranian, Egyptian, ENI and Italian GOE. It was formulated in 1957 being a participant in management decision. On other hand, Argentine government introduced the service contract for the first time in 1958-1961 and there are basically three types of service contract- Exploration, Development, and Drilling Joint ventures can be categorized into two types- Primary form of joint venture and Secondary form of joint venture. In primary form of joint venture, venturing parties work together by a contract made between them and divide the production share. In secondary form of joint venture, international organization and the government work together by means of equity venture. In recent years, some countries have shown their interest in adoption of service contracts rather than other approaches. A service contract is made between the host government and the international oil company. The agreement defines the conditions under which the international explore natural oil or gases. Generally, no any government hands over the extraction of natural oil to any international organization. They are first met with the contracts and then establish their plan to explore natural oil or gases. 2 Service Contracts and Joint Venture agreements Services contract is the vast known method which make any international organization able to install extraction plant. Oil and gas industry comes with number of competitors and they all compete with each other to get the contract. Service contract is the easiest and simple method to get the license to install the plant. One other method, called joint venture is also used by the government and international organizations. Joint ventures are also considered fourth type of contractual arrangement. State is also involved with the aid of joint venture through a domestic oil company which seeks partnership in a group of companies or an individual company. Like a public services agreement, no company can get ownership right to oil with the help of service contract. In public service agreement an international company can get ownership or similar title but under situation of service contract, the same is not true. Joint venture gives right to any international company to sell, produce, develop and explore natural oil. For the reason that there is no generally acknowledged structure or form for joint ventures, they are less frequently used as the fundamental agreement between a host government and an oil company. Joint venture need organizations and host governments to do things together, consequently if the any one of them not succeed to work together the discussions can be thorough and incongruity general. The benefit of using joint venture for a host government is that it does not participate solely in process of decision making. In fact, the decision is taken jointly in the supervision of the international company seeking for shared stake. Joint venture is having another side where government has disadvantage of having it. More extended negotiations are required for joint ventures and also legal advice is required in excess because they does not incorporate simple 3 Service Contracts and Joint Venture agreements format that can be understood easily. They have ambiguous format and another problem is that the cost is to be divided between the host government and the international company. Here the government is responsible for extraction of natural resources. Government is also liable for any damage made to the environment. In case of joint venture, private company is titled as operator and managerial decisions are taken by GOE. Only GOE is allowed to make management committee and give permission for the budget or any other work flow. JV incorporates ownership of concession rights and assets. Concession rights are the sharing of net revenues and operation cost. The major difference between joint venture and service contract is that, joint venture can be made between government and company or company to company but service contract is only made between the host government and the international company seeking for oil extraction. JV is also found in public service contract and concession. But, service contract is found only in PSC. Service contract differs from public service contract in terms of nature of payment either crude or cash. ExamplesBrazil has shown great opportunities for the foreign oil exploration companies which wants to increase their business in oil industry. Brazil is having such potential in oil and petroleum sector that its local producers like \"Petrobras\" are investing in various types of service agreements. Various foreign companies are entered in the Brazil to participate into joint ventures investments to grow their business. 4 Service Contracts and Joint Venture agreements In 1966, Indonesia has permitted international companies to invest into oil and gas industry through service contracts while ignoring rest other methods. In Iran, several non-OPEC and OPEC companies have found investing through services contracts to take benefits of opportunities. 5 Service Contracts and Joint Venture agreements REFERENCES Hossain, K. (1979). Law and Policy in Petroleum Development: Changing Relations Between Transnationals and Governments: a Comparative Study Sponsored by the Commonwealth Secretariat. London: F. Pinter (Publishers). Mariti, P., & Smiley, R. H. (1983). Co-operative agreements and the organization of industry. The Journal of industrial economics, 437-451. Daniel Johnston. (1994). International petroleum fiscal systems and production sharing contracts. PennWell Books. Ghandi, A., & Lin, C. Y. C. (2014). Oil and gas service contracts around the world: a review. Energy Strategy Reviews, 3, 63-71. Joint ventures in the oil and gas supply-chain in Brazil is retrieved from http://www.mondaq.com/brazil/x/198090/Joint+Ventures+in+the+Oil+and+Gas+SupplyChain+i n+Brazil 6 Service Contracts and Joint Venture agreements Course: Name Service Contracts and Joint Venture agreements Yours Name Professor's Name [optional] Date: October 31, 2015 University 1 Service Contracts and Joint Venture agreements For oil and gas companies it is essential to build powerful alliances to get success. During their trading process, several of the challenges they will face in field of mutual interest. Sometimes, joint ventures are used to obtain the effective production and sometimes service contracts are used for better results. They both have their own merits and demerits over each other. In this paper, I will be doing the critical comparison between service contracts and joint agreements in oil and gas industry. Joint Ventures were introduced by Iranian, Egyptian, ENI and Italian GOE. It was formulated in 1957 being a participant in management decision. On other hand, Argentine government introduced the service contract for the first time in 1958-1961 and there are basically three types of service contract- Exploration, Development, and Drilling Joint ventures can be categorized into two types- Primary form of joint venture and Secondary form of joint venture. In primary form of joint venture, venturing parties work together by a contract made between them and divide the production share. In secondary form of joint venture, international organization and the government work together by means of equity venture. In recent years, some countries have shown their interest in adoption of service contracts rather than other approaches. A service contract is made between the host government and the international oil company. The agreement defines the conditions under which the international explore natural oil or gases. Generally, no any government hands over the extraction of natural oil to any international organization. They are first met with the contracts and then establish their plan to explore natural oil or gases. 2 Service Contracts and Joint Venture agreements Services contract is the vast known method which make any international organization able to install extraction plant. Oil and gas industry comes with number of competitors and they all compete with each other to get the contract. Service contract is the easiest and simple method to get the license to install the plant. One other method, called joint venture is also used by the government and international organizations. Joint ventures are also considered fourth type of contractual arrangement. State is also involved with the aid of joint venture through a domestic oil company which seeks partnership in a group of companies or an individual company. Like a public services agreement, no company can get ownership right to oil with the help of service contract. In public service agreement an international company can get ownership or similar title but under situation of service contract, the same is not true. Joint venture gives right to any international company to sell, produce, develop and explore natural oil. For the reason that there is no generally acknowledged structure or form for joint ventures, they are less frequently used as the fundamental agreement between a host government and an oil company. Joint venture need organizations and host governments to do things together, consequently if the any one of them not succeed to work together the discussions can be thorough and incongruity general. The benefit of using joint venture for a host government is that it does not participate solely in process of decision making. In fact, the decision is taken jointly in the supervision of the international company seeking for shared stake. Joint venture is having another side where government has disadvantage of having it. More extended negotiations are required for joint ventures and also legal advice is required in excess because they does not incorporate simple 3 Service Contracts and Joint Venture agreements format that can be understood easily. They have ambiguous format and another problem is that the cost is to be divided between the host government and the international company. Here the government is responsible for extraction of natural resources. Government is also liable for any damage made to the environment. In case of joint venture, private company is titled as operator and managerial decisions are taken by GOE. Only GOE is allowed to make management committee and give permission for the budget or any other work flow. JV incorporates ownership of concession rights and assets. Concession rights are the sharing of net revenues and operation cost. The major difference between joint venture and service contract is that, joint venture can be made between government and company or company to company but service contract is only made between the host government and the international company seeking for oil extraction. JV is also found in public service contract and concession. But, service contract is found only in PSC. Service contract differs from public service contract in terms of nature of payment either crude or cash. ExamplesBrazil has shown great opportunities for the foreign oil exploration companies which wants to increase their business in oil industry. Brazil is having such potential in oil and petroleum sector that its local producers like \"Petrobras\" are investing in various types of service agreements. Various foreign companies are entered in the Brazil to participate into joint ventures investments to grow their business. 4 Service Contracts and Joint Venture agreements In 1966, Indonesia has permitted international companies to invest into oil and gas industry through service contracts while ignoring rest other methods. In Iran, several non-OPEC and OPEC companies have found investing through services contracts to take benefits of opportunities. 5 Service Contracts and Joint Venture agreements REFERENCES Hossain, K. (1979). Law and Policy in Petroleum Development: Changing Relations Between Transnationals and Governments: a Comparative Study Sponsored by the Commonwealth Secretariat. London: F. Pinter (Publishers). Mariti, P., & Smiley, R. H. (1983). Co-operative agreements and the organization of industry. The Journal of industrial economics, 437-451. Daniel Johnston. (1994). International petroleum fiscal systems and production sharing contracts. PennWell Books. Ghandi, A., & Lin, C. Y. C. (2014). Oil and gas service contracts around the world: a review. Energy Strategy Reviews, 3, 63-71. Joint ventures in the oil and gas supply-chain in Brazil is retrieved from http://www.mondaq.com/brazil/x/198090/Joint+Ventures+in+the+Oil+and+Gas+SupplyChain+i n+Brazil 6 Service Contracts and Joint Venture agreements Course: Name Service Contracts and Joint Venture agreements Yours Name Professor's Name [optional] Date: October 31, 2015 University 1 Service Contracts and Joint Venture agreements For oil and gas companies it is essential to build powerful alliances to get success. During their trading process, several of the challenges they will face in field of mutual interest. Sometimes, joint ventures are used to obtain the effective production and sometimes service contracts are used for better results. They both have their own merits and demerits over each other. In this paper, I will be doing the critical comparison between service contracts and joint agreements in oil and gas industry. Joint Ventures were introduced by Iranian, Egyptian, ENI and Italian GOE. It was formulated in 1957 being a participant in management decision. On other hand, Argentine government introduced the service contract for the first time in 1958-1961 and there are basically three types of service contract- Exploration, Development, and Drilling Joint ventures can be categorized into two types- Primary form of joint venture and Secondary form of joint venture. In primary form of joint venture, venturing parties work together by a contract made between them and divide the production share. In secondary form of joint venture, international organization and the government work together by means of equity venture. In recent years, some countries have shown their interest in adoption of service contracts rather than other approaches. A service contract is made between the host government and the international oil company. The agreement defines the conditions under which the international explore natural oil or gases. Generally, no any government hands over the extraction of natural oil to any international organization. They are first met with the contracts and then establish their plan to explore natural oil or gases. 2 Service Contracts and Joint Venture agreements Services contract is the vast known method which make any international organization able to install extraction plant. Oil and gas industry comes with number of competitors and they all compete with each other to get the contract. Service contract is the easiest and simple method to get the license to install the plant. One other method, called joint venture is also used by the government and international organizations. Joint ventures are also considered fourth type of contractual arrangement. State is also involved with the aid of joint venture through a domestic oil company which seeks partnership in a group of companies or an individual company. Like a public services agreement, no company can get ownership right to oil with the help of service contract. In public service agreement an international company can get ownership or similar title but under situation of service contract, the same is not true. Joint venture gives right to any international company to sell, produce, develop and explore natural oil. For the reason that there is no generally acknowledged structure or form for joint ventures, they are less frequently used as the fundamental agreement between a host government and an oil company. Joint venture need organizations and host governments to do things together, consequently if the any one of them not succeed to work together the discussions can be thorough and incongruity general. The benefit of using joint venture for a host government is that it does not participate solely in process of decision making. In fact, the decision is taken jointly in the supervision of the international company seeking for shared stake. Joint venture is having another side where government has disadvantage of having it. More extended negotiations are required for joint ventures and also legal advice is required in excess because they does not incorporate simple 3 Service Contracts and Joint Venture agreements format that can be understood easily. They have ambiguous format and another problem is that the cost is to be divided between the host government and the international company. Here the government is responsible for extraction of natural resources. Government is also liable for any damage made to the environment. In case of joint venture, private company is titled as operator and managerial decisions are taken by GOE. Only GOE is allowed to make management committee and give permission for the budget or any other work flow. JV incorporates ownership of concession rights and assets. Concession rights are the sharing of net revenues and operation cost. The major difference between joint venture and service contract is that, joint venture can be made between government and company or company to company but service contract is only made between the host government and the international company seeking for oil extraction. JV is also found in public service contract and concession. But, service contract is found only in PSC. Service contract differs from public service contract in terms of nature of payment either crude or cash. ExamplesBrazil has shown great opportunities for the foreign oil exploration companies which wants to increase their business in oil industry. Brazil is having such potential in oil and petroleum sector that its local producers like \"Petrobras\" are investing in various types of service agreements. Various foreign companies are entered in the Brazil to participate into joint ventures investments to grow their business. 4 Service Contracts and Joint Venture agreements In 1966, Indonesia has permitted international companies to invest into oil and gas industry through service contracts while ignoring rest other methods. In Iran, several non-OPEC and OPEC companies have found investing through services contracts to take benefits of opportunities. 5 Service Contracts and Joint Venture agreements REFERENCES Hossain, K. (1979). Law and Policy in Petroleum Development: Changing Relations Between Transnationals and Governments: a Comparative Study Sponsored by the Commonwealth Secretariat. London: F. Pinter (Publishers). Mariti, P., & Smiley, R. H. (1983). Co-operative agreements and the organization of industry. The Journal of industrial economics, 437-451. Daniel Johnston. (1994). International petroleum fiscal systems and production sharing contracts. PennWell Books. Ghandi, A., & Lin, C. Y. C. (2014). Oil and gas service contracts around the world: a review. Energy Strategy Reviews, 3, 63-71. Joint ventures in the oil and gas supply-chain in Brazil is retrieved from http://www.mondaq.com/brazil/x/198090/Joint+Ventures+in+the+Oil+and+Gas+SupplyChain+i n+Brazil 6 Service Contracts and Joint Venture agreements Course: Name Service Contracts and Joint Venture agreements Yours Name Professor's Name [optional] Date: October 31, 2015 University 1 Service Contracts and Joint Venture agreements For oil and gas companies it is essential to build powerful alliances to get success. During their trading process, several of the challenges they will face in field of mutual interest. Sometimes, joint ventures are used to obtain the effective production and sometimes service contracts are used for better results. They both have their own merits and demerits over each other. In this paper, I will be doing the critical comparison between service contracts and joint agreements in oil and gas industry. Joint Ventures were introduced by Iranian, Egyptian, ENI and Italian GOE. It was formulated in 1957 being a participant in management decision. On other hand, Argentine government introduced the service contract for the first time in 1958-1961 and there are basically three types of service contract- Exploration, Development, and Drilling Joint ventures can be categorized into two types- Primary form of joint venture and Secondary form of joint venture. In primary form of joint venture, venturing parties work together by a contract made between them and divide the production share. In secondary form of joint venture, international organization and the government work together by means of equity venture. In recent years, some countries have shown their interest in adoption of service contracts rather than other approaches. A service contract is made between the host government and the international oil company. The agreement defines the conditions under which the international explore natural oil or gases. Generally, no any government hands over the extraction of natural oil to any international organization. They are first met with the contracts and then establish their plan to explore natural oil or gases. 2 Service Contracts and Joint Venture agreements Services contract is the vast known method which make any international organization able to install extraction plant. Oil and gas industry comes with number of competitors and they all compete with each other to get the contract. Service contract is the easiest and simple method to get the license to install the plant. One other method, called joint venture is also used by the government and international organizations. Joint ventures are also considered fourth type of contractual arrangement. State is also involved with the aid of joint venture through a domestic oil company which seeks partnership in a group of companies or an individual company. Like a public services agreement, no company can get ownership right to oil with the help of service contract. In public service agreement an international company can get ownership or similar title but under situation of service contract, the same is not true. Joint venture gives right to any international company to sell, produce, develop and explore natural oil. For the reason that there is no generally acknowledged structure or form for joint ventures, they are less frequently used as the fundamental agreement between a host government and an oil company. Joint venture need organizations and host governments to do things together, consequently if the any one of them not succeed to work together the discussions can be thorough and incongruity general. The benefit of using joint venture for a host government is that it does not participate solely in process of decision making. In fact, the decision is taken jointly in the supervision of the international company seeking for shared stake. Joint venture is having another side where government has disadvantage of having it. More extended negotiations are required for joint ventures and also legal advice is required in excess because they does not incorporate simple 3 Service Contracts and Joint Venture agreements format that can be understood easily. They have ambiguous format and another problem is that the cost is to be divided between the host government and the international company. Here the government is responsible for extraction of natural resources. Government is also liable for any damage made to the environment. In case of joint venture, private company is titled as operator and managerial decisions are taken by GOE. Only GOE is allowed to make management committee and give permission for the budget or any other work flow. JV incorporates ownership of concession rights and assets. Concession rights are the sharing of net revenues and operation cost. The major difference between joint venture and service contract is that, joint venture can be made between government and company or company to company but service contract is only made between the host government and the international company seeking for oil extraction. JV is also found in public service contract and concession. But, service contract is found only in PSC. Service contract differs from public service contract in terms of nature of payment either crude or cash. ExamplesBrazil has shown great opportunities for the foreign oil exploration companies which wants to increase their business in oil industry. Brazil is having such potential in oil and petroleum sector that its local producers like \"Petrobras\" are investing in various types of service agreements. Various foreign companies are entered in the Brazil to participate into joint ventures investments to grow their business. 4 Service Contracts and Joint Venture agreements In 1966, Indonesia has permitted international companies to invest into oil and gas industry through service contracts while ignoring rest other methods. In Iran, several non-OPEC and OPEC companies have found investing through services contracts to take benefits of opportunities. 5 Service Contracts and Joint Venture agreements REFERENCES Hossain, K. (1979). Law and Policy in Petroleum Development: Changing Relations Between Transnationals and Governments: a Comparative Study Sponsored by the Commonwealth Secretariat. London: F. Pinter (Publishers). Mariti, P., & Smiley, R. H. (1983). Co-operative agreements and the organization of industry. The Journal of industrial economics, 437-451. Daniel Johnston. (1994). International petroleum fiscal systems and production sharing contracts. PennWell Books. Ghandi, A., & Lin, C. Y. C. (2014). Oil and gas service contracts around the world: a review. Energy Strategy Reviews, 3, 63-71. Joint ventures in the oil and gas supply-chain in Brazil is retrieved from http://www.mondaq.com/brazil/x/198090/Joint+Ventures+in+the+Oil+and+Gas+SupplyChain+i n+Brazil 6