Making joint ventures work

2013 ◽  
Vol 53 (2) ◽  
pp. 464
Author(s):  
David Ibels ◽  
Marc Van Grondelle ◽  
Jonathon Peacock ◽  
Jonathan Smith
Keyword(s):  
Joint Ventures ◽  
Joint Venture ◽  
Oil And Gas ◽  
Warning Signs ◽  
Global Perspective ◽  
First Year ◽  
Cost Overruns ◽  
Oil Companies ◽  
Scant Attention ◽  
Gas Market

No LNG capital project in Australia can survive without excelling in joint ventures; yet, the practicalities of them are often overlooked. The Australian oil and gas market has some of the most complex joint-venture arrangements in the world, and there is much we can learn from a global perspective about how to make them work. Too often, joint ventures are forced marriages between two or more parties who misunderstand each other and have widely differing aims. Organisations often rely too much on the joint-venture agreement, devote too few resources to the venture itself, and pay scant attention to any warning signs of trouble. The authors see that international oil companies typically have about 30–40% of their portfolios tied up in joint ventures. This is set to grow to about 70–80% during the next 5–8 years as they enter new territories in the hope of securing new resources. Although joint ventures are familiar ground for oil and gas companies, such operators often struggle to make them work. Cost overruns, schedule delays, compliance issues, renegotiations, and erosions of value are common. There are, however, ways to make joint ventures work more effectively, including: knowing what is expected of all parties and monitoring these expectations; improving transparency of information between joint-venture parties; ensuring expectations are realistic and continuing to validate them; paying particular attention in the first year of a joint venture; proactively strengthening existing joint ventures; and, staffing and resourcing joint ventures with care.

How to avoid aches and pains in your joint ventures

2016 ◽  
Vol 56 (2) ◽  
pp. 559
Author(s):  
Brent Steedman
Keyword(s):  
Joint Ventures ◽  
Joint Venture ◽  
Oil And Gas ◽  
Cost Savings ◽  
Oil And Gas Industry ◽  
Capital Allocation ◽  
Operating Efficiency ◽  
Global Business ◽  
Gas Industry ◽  
The Right

The Australian oil and gas industry is in a period of substantial challenges, including a significant decline in oil prices, fluctuating spot gas prices, a relentless drive for operating efficiency, and tight capital allocation, together with increased regulatory scrutiny and a reputation for below-standards productivity. On the upside, these market challenges provide significant opportunities for companies to bring in new investors, implement new operating models, apply innovation to update processes and practices, and restructure activities. Making material step-changes, requires companies to review, amend, and update joint venture operating agreements (JVOAs). KPMG has worked with many of Australia’s leading oil and gas companies on a range of joint venture engagements. This extended abstract outlines why JVOAs need to be reviewed with respect to the following key opportunities and challenges: Fast-changing global business operating models. Available cost savings by eliminating inconsistent management and operating models between joint ventures. Planning for potential restructuring, including separation of infrastructure (e.g. plants, pipelines, support) from reserve ownership. Sharing of services (e.g. maintenance and logistics) between unrelated joint ventures. Transparency of costs and asset performance. Improved joint venture governance (not more or over-governance) between participants to attract investment. Effective resourcing, noting the right transition of capabilities between deal-makers and joint venture operators. With this extended abstract the authors aim to provide ideas for consideration. Each of these ideas will impact JVOAs. The authors’ proposition is that now is the right time to complete a comprehensive review of JVOAs to enable organisations to move fast as new and innovative opportunities arise.

scholarly journals National oil companies: business models, challenges, and emerging trends

2013 ◽  
Vol 11 (1) ◽  
pp. 713-722 ◽  
Author(s):  
Saud M. Al-Fattah
Keyword(s):  
Business Models ◽  
Joint Venture ◽  
Oil And Gas ◽  
Oil Companies ◽  
National Oil Companies ◽  
Emerging Trends ◽  
Challenges And Opportunities ◽  
Oil Company ◽  
Gas Supply

This paper provides an assessment and a review of the national oil companies’ (NOCs) business models, challenges and opportunities, their strategies and emerging trends. The role of the national oil company (NOC) continues to evolve as the global energy landscape changes to reflect variations in demand, discovery of new ultra-deep water oil deposits, and national and geopolitical developments. NOCs, traditionally viewed as the custodians of their country’s natural resources, have generally owned and managed the complete national oil and gas supply chain from upstream to downstream activities. In recent years, NOCs have emerged not only as joint venture partners globally with the major oil companies, but increasingly as competitors to the International Oil Companies (IOCs). Many NOCs are now more active in mergers and acquisitions (M&A), thereby increasing the number of NOCs seeking international upstream and downstream acquisition and asset targets

scholarly journals After the Crash - Oil Price Recovery and LNG Project Viability

2019 ◽  
Author(s):  
Uyiosa Omoregie
Keyword(s):  
Energy Demand ◽  
Oil And Gas ◽  
Paris Agreement ◽  
Oil Price ◽  
Expansion Phase ◽  
Oil Companies ◽  
Demand Growth ◽  
Crude Oil Prices ◽  
Additional Demand ◽  
Gas Market

Crude oil prices fell below the 2009-2014 five-year average in early September 2014. The drastic fall in price was from a monthly peak of $112 per barrel (bbl) in June 2014, falling to $62/bbl in December. Since 2016 the oil and gas market has gone through a period of rebalancing, resulting in modest recovery in prices. Oil price recovery reached a peak of $85/bbl in October 2018. Gas prices have also achieved similar modest price recovery. The industry has now entered an expansion phase: the five largest international oil companies exceeded expectations for 2018. The outlook for gas is encouraging. It is projected that gas will supply the largest share of energy demand growth, supplying over 40% of additional demand by 2035. Also, the United Nations 2015 Paris Agreement on climate change has led to a re-emphasis on gas as a ‘transition’ ‘cleaner’ fuel. A window of opportunity exists for new LNG projects to commence production in anticipation of an undersupplied market (2025-2035). LNG projects provide long and stable dividends for shareholder companies, certain risks found in tight oil and upstream projects are absent.

The Role of The European Bank in The Energy Sector

1994 ◽  
Vol 12 (5) ◽  
pp. 351-357
Author(s):  
John Coleman
Keyword(s):  
Private Sector ◽  
Nuclear Power ◽  
Joint Venture ◽  
Oil And Gas ◽  
Private Investment ◽  
Energy Sector ◽  
Oil Companies ◽  
European Bank ◽  
Oil And Gas Sector ◽  
Total Project

The European Bank for Reconstruction and Development was established in 1991 and is owned by the western industrialized countries, including Canada, and the former communist countries of Europe and Central Asia. Its purpose is to assist the latter countries to make the transition from command to market economies in a democratic framework. The Bank, with an initial capital of approximately US$1.2 billion, directs 60 per cent of its resources towards private enterprises and state-owned enterprises which are being privatized. The remainder of the EBRD's lending is directed to governments for infrastructure development. The EBRD's lending, now at US$1.5 to 2 billion a year, is small in relation to the investment needs of its countries of operation. As a result, the Bank tries to maximize its leverage by limiting its share in total project financing to 35 per cent and encouraging co-financing by other lenders and investors. Through its lending it tries to create a demonstration effect and to encourage institutional reforms which increase private investment flows. In the energy sector, most of the EBRD's lending has been in the oil and gas sector in Russia, but it is open for business in other sectors and in all countries of operation. Unlike other development banks, the EBRD is prepared to finance nuclear power projects, especially for improving the safety and extending the operating life of nuclear power stations built before the fall of communism. In this connection, it operates a Nuclear Safety Account established by the G-7 countries after the 1992 Munich Summit. The Bank also is prepared to finance conventional power plants where these would permit the closure of obsolete or unsafe nuclear plants. In the oil and gas sector, most of the EBRD's lending has related to private sector, joint venture projects in Russia, aimed at oilfield rehabilitation and development. Three of the eight projects done so far have involved Canadian firms, reflecting their expertise in secondary and tertiary recovery, and cold weather operations. The private sector ventures supported by the Bank normally involve joint stock companies owned 50 per cent by western partners and 50 per cent by Russian state oil companies, which are being privatized or are operating according to private sector principles. The joint stock companies make up the difference between the EBRD's financing and total project cost through equity contributions in cash and kind, and through debt financing. The EBRD adds value not simply through its own financing. Its involvement in a project promotes co-financing by other investors. Its influence on behalf of foreign and local investors can help overcome administrative and regulatory difficulties affecting projects. Furthermore, the EBRD can give potential clients the benefit of its accumulated knowledge on how to structure the deal to meet host country priorities and regulations and to benefit from the greatest possible financing from the EBRD and from other lenders and investors.

Oil exploration and discovery in the basement rocks of Bach Ho field: Documentation, facts and lessons

2021 ◽  
Vol 11 ◽  
pp. 37-44
Author(s):  
Van Hoi Tran ◽  
Van Duc Nguyen ◽  
Xuan Son Pham
Keyword(s):  
Joint Venture ◽  
Oil And Gas ◽  
Rapid Development ◽  
Oil And Gas Industry ◽  
Study Data ◽  
Basement Rock ◽  
Industrial Oil ◽  
Gas Market ◽  
Total Oil ◽  
Granite Basement

During the 40 years of operation and development (1981 - 2021), the Vietnam - Russia Joint Venture "Vietsovpetro" has witnessed many historical milestones, but the discovery of industrial oil for the first time from the fractured and weathered granite basement at exploration well BH-6 on 11 May 1987 is the most important one. From the first oil in the basement rock of Bach Ho field, Vietsovpetro consecutively discovered industrial oil in other fields in its area of operation, such as Dong Bac Rong (1991), Dong Nam Rong (1995), Nam Rong (2005), Nam Trung Tam Rong (2006), etc. At the beginning of 2018, the 2P (P1+P2) oil reserve from the basement rock accounted for 74% of Vietsovpetro's total balanced reserves at that time. As of 1 October 2021, the total oil produced from the basement reached 235 million m3 (195 million tons), accounting for 86% of Vietsovpetro's total oil output. Being encouraged by the success and experience of Vietsovpetro, other domestic and foreign oil and gas companies (PVEP, JVPC, Talisman, and Petronas, etc.) have explored and discovered oil and gas from the granite basement and put the fields of Rang Dong, Su Tu Den, Hong Ngoc, and Hai Su Den, etc. into operation. This fact has, at the same time, created a strong attraction for domestic and foreign investors, making important contributions to the rapid development of Vietnam's oil and gas industry which was still very young at the time. The above-mentioned shows that it is time to study data and documents, draw lessons from success and failure gained during the 40 years of basement exploration. The outcomes should be used as a basis to formulate an appropriate exploration strategy for Vietsovpetro in the coming decades with strong fluctuations in the oil and gas market expected, and the inevitable depletion of non-renewable resources worldwide.

TRENDS IN THE DEVELOPMENT OF THE OIL AND GAS MARKET AND THE MAIN MEASURES OF STATE SUPPORT AIMED AT THE IMPLEMENTATION OF ARCTIC OIL AND GAS PROJECTS

2021 ◽  
Vol 5 (11) ◽  
pp. 31-38
Author(s):  
Igor V. Selin ◽  
◽  
Mikhail V. Ulchenko ◽  
Keyword(s):  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Gas Production ◽  
State Support ◽  
Gas Industry ◽  
Oil Companies ◽  
Oil Reserves ◽  
Exploration Drilling ◽  
Gas Market ◽  
High Level

This article is devoted to the study of the main trends in the development of the oil and gas market, as well as the transfer of state support aimed at the implementation of Arctic oil and gas projects. The analysis showed that 2020 turned out to be extremely difficult for the oil and gas industry as a whole. The volumes of oil and natural gas production and consumption decreased, and due to a reduction in revenue, large domestic companies began to save on exploration drilling. Given the high level of «depletion» of oil reserves in traditional fields, with an increase in demand, in the short term, domestic oil companies will not be able to quickly increase production volumes and take advantage of favorable market conditions.

Critical success factors for partnerships in the oil and gas contracting industry

2013 ◽  
Vol 53 (2) ◽  
pp. 462
Author(s):  
Rick Robinson ◽  
Robert Powers
Keyword(s):  
Joint Ventures ◽  
Success Factors ◽  
Joint Venture ◽  
Oil And Gas ◽  
Critical Success ◽  
History Of ◽  
Pros And Cons ◽  
Individual Entity ◽  
The Relationship

The advent of mega LNG projects in Australia has encouraged the Australian contracting industry to establish partnerships with local or international peers to bolster capability and take advantage of larger work scopes to handle the contracting risks. The types of partnerships generally fall into three broad categories: Unincorporated joint ventures formed between partner companies, specifically to win and deliver a project. Each partner retains its individual entity and the relationship is finalised once the project is delivered. Incorporated joint ventures that take a long-term view to the partnership. The incorporated entity focuses on winning and delivering work on multiple projects, without a specific end date. Client contractor integration is the aligned relationships between clients and contractors to achieve delivery of optimal outcomes, thereby achieving mutual benefits. Clough’s history in partnering dates back to 1957, when Harold Clough started the company’s first joint venture with Christiani and Nielsen of Denmark. During a 55-year period, the company has delivered more than 130 projects in joint-venture or client contractor-integration arrangements. This rich history of partnering is used to explore the pros and cons of different partnering arrangements through a series of partnership case studies. Despite the relationship differences, there is a number of critical factors for successful partnerships, with the ultimate goal of adding value to the owner’s project. These factors, including focal interface points, financial and project management systems, and HSE unity and support, are explored using a case study about the BAM Clough Joint Venture, Clough’s most successful long-term partnership, which has been in place since 1964.

Vertical Integration Strategy Implementation Through Hybrid Upstream and Downstream Concession Agreements

2021 ◽  
Author(s):  
Dr. Abdulla Al Jarwan ◽  
Fathesha Sheikh
Keyword(s):  
Vertical Integration ◽  
Value Chain ◽  
Joint Venture ◽  
Oil And Gas ◽  
Strategy Implementation ◽  
Oil Companies ◽  
National Oil Companies ◽  
Integration Strategy ◽  
Production Sharing ◽  
Host Government

Abstract Upstream developments in prolific oil and gas fields are highly profitable and hence attract various investors/partners, whereas Downstream developments profitability is margin based and challenging under certain situations to receive similar interest for investment in the same location. Vertical Integration Strategy implementation through hybrid upstream and downstream concession agreements can help address this issue. The seventies witnessed major changes in the oil industry's structures and strategies resulting from the nationalization of oil and gas reserves. This ultimately led to a separation between the upstream sector with national oil companies (NOCs) controlling most of the world reserves and crude production, and the downstream sector with the international oil companies (IOCs) controlling the largest share of the refining and marketing aspects in the main consuming countries. In the recent past, NOCs have started forward integration of its upstream sector with downstream sector to take advantage of the synergies and increase profitability. This paper takes the strategy a step more forward by exploring the possibility of developing oil and gas assets through a hybrid upstream/downstream concession agreement that can be awarded by the host government. The model hybrid agreement is built by integrating a typical upstream concession agreement with downstream equity-based joint venture (JV) agreement. It also takes the learnings from Production Development Production Sharing Agreement (DPSA) applied in the development of a Gas-To-Liquids (GTL) asset or Liquefied Natural Gas (LNG) asset which are usually developed as an integrated upstream and downstream business model. It is also feasible to build the hybrid agreement based on upstream Production Sharing Agreement (PSA) instead of a Concession Agreement. The paper will discuss how the hybrid upstream and downstream concession agreement is built and how it will distribute the risk and rewards across the entire value chain for investors, expand the scope of investment and support in the economic development of the host country.

scholarly journals Joint Ventures in the Canadian Energy Industry

2012 ◽  
Vol 50 (2) ◽  
pp. 373 ◽  
Author(s):  
Brad Grant
Keyword(s):  
Joint Ventures ◽  
Joint Venture ◽  
Oil And Gas ◽  
Asia Pacific ◽  
Energy Industry ◽  
Risks And Benefits ◽  
Key Issues

This article explores the concept of a joint venture and the use of joint venture agreements in the Canadian energy industry. The discussion is particularly timely as there have been a number of significant joint ventures in the Canadian energy industry, particularly with respect to Asia Pacific investors who have spent billions of dollars to lock up parts of Canada’s oil and gas reserves. With a growing demand for energy among Asia Pacific countries, the article suggests that joint ventures will continue to be significant in the development of Canada’s energy industry. This article provides an overview of the different forms of joint ventures (the corporation, partnership, and contractual joint venture) and the risks and benefits associated with each. This article also addresses some of the key issues with respect to joint ventures generally. 

scholarly journals Fiduciary Relationships in Oil and Gas Joint Ventures

1970 ◽  
Vol 8 (2) ◽  
pp. 233 ◽  
Author(s):  
D. A. MacWilliam
Keyword(s):  
Joint Ventures ◽  
Joint Venture ◽  
Oil And Gas ◽  
Oil And Gas Industry ◽  
Fiduciary Duty ◽  
The Other ◽  
Gas Industry ◽  
Full Disclosure ◽  
Fiduciary Relationships ◽  
The Many

A party to a joint venture agreement in the oil and gas industry is often faced with the problem of determining whether or not he owes a fiduciary duty to his joint venturer. This article examines the many factual situations in oil and gas joint ventures which, could give rise to a fiduciary duty and concludes that the extent to which the fiduciary principle is applicable to various relationships involving interests in oil and gas has not yet been determined by the courts. As such, the author suggests that in addition to attempting to provide in the agreement for those circumstances which could give rise to a fiduciary duty, a party to a joint venture who desires to avoid a breach of a fiduciary duty should make full disclosure to and attempt to get the consent of the other contracting party.

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