Service contracts. Under this regime, the government provides venture capital for oil exploration and production. The contractor is content to provide the prescribed benefits and will receive a flat fee, whether or not there is discovery. This treaty is very appropriate for oil-producing countries with very high oil resources and are therefore very inclined to commercial discovery such as Saudi Arabia, Kuwait, Qatar, Bahrain and Abu Dhabi. Unlike risky service contracts, the company also acquires an interest in the resource acquired under the basic services contracts. Technical Service Contract In an ASD, a company can perform a clearly defined job for the host country`s national oil company. The duration is often fixed and the company does not receive the oil it produces, but benefits from a fixed royalty per barrel greater than the reimbursement of the costs incurred. With a few dollars per barrel, such a contract is much less attractive than most concession contracts or PSAs. The TSA agreements were concluded in Venezuela, Iraq, Kuwait, etc. The unit agreements the concession blocks are not described with knowledge of the extent of the prospects. As a result, an oil field may cross the concession limit. This may be limited to concessions within a country, but sometimes the accumulation extends beyond international borders. This rather common problem is solved by negotiating a “unity agreement” with the owners of the other party.
Interesting examples are the Schoonebeek oil field, a large accumulation in the eastern Netherlands, with part of it in Germany. It is clear that an optimal development and production plan must include total accumulation. The various shareholders must then agree on technical issues in the context of such an agreement. If there is no agreement, the owners of part of the field may suck the oil under the surface of their neighbours. Famous examples date back to the past in the East Texas area. There, the operators were quite busy with deviant fountains, and not always honest. In the 1960s, there was a rock and roll song with the words “See you later alligator” in Texas, which soon became “See you later deviator”. A well-known operator has been nicknamed the Whipstock Bill. Top Home Under concession (or licensing) agreements, the selected refining company or consortium conducts exploration activities. The company takes over all of the production, when it is extracted, in return for the payment of a royalty to the host state. Royalties could be in cash or in kind.
It could also take the form of a income tax or other types of fees and contributions, possibly including an additional income tax, if it exceeds a pre-defined threshold. This type of contract is called a licence and generally gives the licensee the exclusive right to explore and value oil, own and market production, and own the corresponding equipment and facilities. 5. The types of upstream oil contracts with the concession state or licensing agreements have grown considerably since their introduction in the early 1900s as unilateral treaties, when many resource-rich nations were dependencies, colonies or protections of other states or empires. The modern form of such agreements often allows an oil company to explore, develop, sell and export exclusive rights, oil or minerals from a given territory, for a specified period of time. Companies compete by offering offers, often coupled with signing bonuses, to acquire licenses for such rights. This type of agreement is widely used around the world and is used in countries as diverse as Kuwait, Sudan, Angola and Ecuador. Once the principles of the agreement have been defined, the standard contract will have to be detailed to take into account the specific issues and conditions associated with each project.
Three types of fundamental and alternative agreements generally determine the relationship between government and investors.