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 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

Low oil prices put pressure on China's energy policy

2015 ◽  
Keyword(s):  
Oil And Gas ◽  
Oil Prices ◽  
International Market ◽  
Domestic Demand ◽  
Energy Prices ◽  
Content Type ◽  
Oil Companies ◽  
National Oil Companies ◽  
Financial Pressure ◽  
Difficult Time

Subject Effect of low oil prices on China. Significance China is the world's second-largest oil user and imports nearly 60% of its annual requirements. If oil prices remain below 50 dollars per barrel, China's import bill for crude oil will fall by tens of billions of dollars in 2015, while the national oil companies (NOCs) face a difficult time as their profits from oil production are squeezed. However, the consequences are not straightforward due to the government's role in setting energy prices and the mix of commercial and state objectives of the NOCs. Impacts Financial pressure on China's NOCs will not be as great as on their international counterparts. The NOCs are likely to embark on a spree of buying overseas oil and gas assets. With contracted gas supplies exceeding domestic demand, Chinese LNG importers will sell surplus on the international market.

Entrepreneurial implications of Nigeria's oil industry local content policy

2011 ◽  
Vol 5 (3) ◽  
pp. 223-241 ◽  
Author(s):  
Ugwushi Bellema Ihua ◽  
Olatunde Abiodun Olabowale ◽  
Kamdi Nnanna Eloji ◽  
Chris Ajayi
Keyword(s):  
Oil And Gas ◽  
Oil And Gas Industry ◽  
General Level ◽  
Gas Industry ◽  
Content Type ◽  
Oil Companies ◽  
Local Content ◽  
National Oil Companies ◽  
Indigenous Entrepreneurs ◽  
Entrepreneurial Activities

PurposeThe purpose of this paper is to investigate the efficacy of Nigeria's oil and gas industry local content (LC) policy, with particular reference to how the policy has enhanced entrepreneurial activities and served as panacea to resolving some of the country's socio‐economic challenges within the oil‐producing Niger Delta region.Design/methodology/approachSurvey data were randomly obtained from a questionnaire sample of 120 indigenes in Bayelsa, Delta and Rivers states; and subjected to factor‐analysis using varimax rotation to identify the most crucial factors likely to influence the success of the policy. Cronbach's α was also applied to ascertain the reliability of the data and overall agreement amongst respondents.FindingsThe study reveals a general level of indifference amongst the respondents, and an insignificant level of entrepreneurial implication, regarding the LC policy. Notwithstanding, the need to create business prospects, jobs opportunities, and establish special quota arrangements to benefit indigenes of the oil producing host‐communities were found to be most crucial in their assessment of the policy's efficacy.Practical implicationsIt is expected that the policy should stimulate and open up more channels for budding entrepreneurial activities, job opportunities and wealth generation. These would mitigate situations of unwarranted militant activities, social disorder and disguised criminalities such as kidnapping and destruction of oil installations, resulting from perceived marginalisation, massive unemployment and poor living standards experienced within the region.Originality/valueThe study provides insights into how the LC policy, if properly harnessed and judiciously implemented, can generate win‐win outcomes for the nation, multi‐national oil companies, host communities and indigenous entrepreneurs.

Legal Safeguards in Egypt's Petroleum Concession Agreements

2008 ◽  
Vol 22 (4) ◽  
pp. 387-396
Author(s):  
Minas Khatchadourian
Keyword(s):  
Host Country ◽  
Oil And Gas ◽  
Gas Production ◽  
Foreign Investors ◽  
Oil Companies ◽  
Production Sharing ◽  
Arbitration Clause ◽  
Legal Perspective ◽  
The Government ◽  
Oil Company

This article deals with the concession contracts for the exploration and the production of oil and gas in Egypt. Such tripartite contracts are concluded between the Government of Egypt (GOE) as the host country, a National Oil Company (NOC) as the concession holder and an international oil company (IOC) as the foreign contractor who receives a part of the oil or gas production on a production sharing agreement (PSA). From an Egyptian legal perspective, this contract is qualified as a State contract which is supposed to give the Government some exorbitant powers towards its counterparts. However, in order to attract foreign investors into this kind of agreement and encourage international oil companies to explore natural resources, several legal safeguards are incorporated in the concession agreement. Examples of this include placing the contract in the framework of a legislative act, granting the contract a supremacy on any contrary legislation, stabilization clause, adaptation of the contract through renegotiation, arbitration clause, etc.

scholarly journals Value chain organization models of Taiwanese electronic information enterprises in Mainland China and their spatiotemporal evolution processes

PLoS ONE ◽  
2021 ◽  
Vol 16 (7) ◽  
pp. e0254402
Author(s):  
Chen Siyue ◽  
Wei Suqiong ◽  
Huang Gengzhi ◽  
Zhang Hongou
Keyword(s):  
Vertical Integration ◽  
Value Chain ◽  
Mainland China ◽  
Value Added ◽  
River Delta ◽  
Electronic Information ◽  
Spatiotemporal Evolution ◽  
Production Sharing ◽  
Chain Organization ◽  
Organization Models

This study examines Taiwanese investment in Mainland China as it is an important part of cross-strait economic cooperation. Using sample data from Taiwanese-listed electronic information enterprises in Mainland China (1990–2016), this study combines ArcGIS spatial visualization and case analysis to investigate their value chain organization models and spatiotemporal evolution regularity. The results show that the value chain of the electronic information industry for Taiwanese investments in Mainland China has three models: vertical integration, modularization in production sharing, and production extension. Vertical integration is the main production organization model of these Taiwanese listed electronic information enterprises, expanding from single production to the entire manufacturing value chain, followed by sales, and finally R&D. This model is still in use in the Western Taiwan Straits Economic Zone, whereas the other four Taiwanese investment agglomerations, namely the Bohai Economic Rim, Yangtze River Delta, Pearl River Delta, and Western Delta Economic Circle, began to expand to both ends of the production link, particularly to the sales link. High-value -added enterprises adopting production sharing models began to show a trend of expansion to inland cities, and enterprises adopting the manufacturing–sales model (a production expansion model) had the widest distribution. Finally, at the city level, the value chain fragmentation structure of Taiwanese and developed countries’ cross-border (multinational) enterprises in Mainland China were consistent, that is, they matched the Chinese city hierarchy; at the regional level, however, the Western Delta Economic Circle pioneered to become a hub for Taiwanese electronic to information enterprises set up their R&D and sales links in Mainland China. Investigating chain-alike spatiotemporal expansion of Taiwanese investment in Mainland China is important for the integration and development of the value chain, production network, and enterprise spatial organization theories.

scholarly journals Renewed energy in Asia's upstream

2019 ◽  
Vol 59 (2) ◽  
pp. 582
Author(s):  
Gero Farruggio ◽  
David Dixon
Keyword(s):  
Solar Wind ◽  
Service Sector ◽  
Oil And Gas ◽  
Oil Companies ◽  
National Oil Companies ◽  
Grid Connection ◽  
New Energy ◽  
Operational Expenditure ◽  
And Storage

Upstream is enjoying a renewed optimism in pricing and project developments, and the growth outlook is positive. That said, current investment in upstream across Asia is less than half that of renewable projects, which accounted for over US $180 billion in 2018. Got your attention? It certainly has for national oil companies and regional oil and gas players as companies explore the opportunities presented by lowering solar and storage costs. In this paper we analyse capex trends and forecasts across both sectors in Australia and the region. Will this growth continue, who is set to gain and by how much? We explore the growing role of renewables in the oilfield service sector. Australia is not alone in experiencing a renewables boom; the trend continues across Asia, with government initiatives more often than not being the catalyst and the boom then fuelled by a seemingly endless supply of insatiable investors. Australia is experiencing a frenzy of activity; developers are rushing to grab land and be the first past the post on grid connection. What can we expect as the renewable energy target transitions to the national energy guarantee, to whatever comes next? We compare the corporate landscapes across the upstream and new energy sectors, and explore what is driving them closer each year as miners and upstream operators turn to solar, wind and storage to reduce operational expenditure and boost field economics. Adani has one of the largest solar pipelines in Australia; will Woodside follow suit? Finally, we compare returns for recently commissioned renewable and upstream projects.

scholarly journals Evaluating the Petroleum Contracts of Kurdistan Region in the Surveying and Applying the Deloitte Data (A Comparative Review)

2021 ◽  
Vol 8 (7) ◽  
pp. 236
Author(s):  
Beston Muhammed Qadir ◽  
Hazhar Omer Mohammed ◽  
Hawre Latif Majeed
Keyword(s):  
Oil And Gas ◽  
Cost Recovery ◽  
Large Contribution ◽  
Regional Government ◽  
Kurdistan Region ◽  
Oil Companies ◽  
Production Sharing ◽  
Comparative Review ◽  
Oil And Gas Resources ◽  
The Cost

A production sharing contract has been chosen by the Kurdistan Regional Government as supposedly the most appropriate contract model for the oil and gas resources of the Kurdistan Region, among several other forms of contract. In general, in terms of royalty, cost recovery, and sharing the residual sales as negotiated, the Kurdish model is similar to its foreign model, although the proportions are most likely to differ. The model of the Region specified 10 percent for the Royalty: Up to 45 percent for cost recovery, often between 7-9 percent of the company's share of the profit in the agreement. Investigating Deloitte reports and then comparing the 2017 to 2019 data shows the unstable output with a fair boost and stability at the later date as for 2017. A large contribution from the Kirkuk oil fields to the production of the overall region is noted until 16 Oct 2017. Around one-third of the revenues of oil went to the production oil companies, although as agreed for cost recovery, it is still less than 40 percent. The payment of the companies of Oil production could be explained as a collective sum between 9% of the profit oil and 25-28% of the sales oil's gross values! The cost recovery payment could not have been funded in the contract, which explains the region's claim about the debts of the companies, in its agreed manner.

The decommissioning of oil and gas fields: Egyptian law and policy

2019 ◽  
Vol 12 (4) ◽  
pp. 287-293
Author(s):  
Mostafa Elshazly
Keyword(s):  
Oil And Gas ◽  
Legal Framework ◽  
Legal Aspects ◽  
Regulatory Framework ◽  
Oil Companies ◽  
National Oil Companies ◽  
Oil And Gas Fields ◽  
Law And Policy ◽  
Legal Challenges ◽  
Gas Fields

Abstract Legal issues around the decommissioning of oil and gas fields have generally been given insufficient attention by energy lawyers in most jurisdictions worldwide. Oil and gas lawyers, and other stakeholders in Egypt, face the same challenge. This article discusses the topic of the decommissioning of oil and gas fields in the context of the legal aspects and the regulatory framework for decommissioning in Egypt, demonstrating the main challenges relating to the legal framework for decommissioning arrangements in the country. At the heart of the legal challenges associated with the decommissioning of oil and gas fields in Egypt lies the most important question: who should pay the associated costs, and when? This article also presents some recommendations to enhance the current regulatory framework for the decommissioning of oil and gas fields in Egypt, to maintain the balance of interests between international oil companies and national oil companies active in Egypt.

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.

The rise of the national oil companies and impact on Australia

2009 ◽  
Vol 49 (2) ◽  
pp. 591
Author(s):  
Brent Steedman
Keyword(s):  
Oil And Gas ◽  
Price Volatility ◽  
Oil And Gas Industry ◽  
Gas Industry ◽  
Oil Companies ◽  
Service Companies ◽  
National Oil Companies ◽  
Current Period ◽  
Service Contracts ◽  
Emerging Issues

The oil and gas industry is facing a period of major transition as national oil companies (NOCs) improve their operating capabilities and change their investment models KPMG’s Global Oil and Gas Centre of Excellence has commissioned a report which analyses this changing environment, interviews senior executives from major NOCs to understand their views and offers our insights into emerging issues for the oil and gas industry. NOCs are moving outside their national boundaries, partially privatising their assets and demanding more from potential partners and investors. The key findings from this survey are as follows: the growing capabilities of NOCs the definite shift from the use of ownership to service contracts; the success of service companies; international oil companies are responding to the changing landscape; and, investment in people and skills is a top NOC priority. The potential impact of the above findings on the Australian oil and gas sector are significant, and include: reduced access to international service companies; shortage of skills increased opportunities for Australian service companies; and, increased focus by international oil companies on upstream opportunities in Australia. KPMG’s report was prepared during a period of rising oil prices. Even during the current period of price volatility, the majority of findings continue to be relevant for participants in the oil and gas industry.

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