THE CONTRACTUAL RELATIONSHIPS BETWEEN OIL COMPANIES AND HOST STATES Abba Kolo CEPMLP, University of Dundee

HOST STATE OPTIONS ON DEVELOPMENT OF PETROLEUM RESOURCES - Develop it alone through the national oil company - Engage the services of oil companies (e.g. Saudi Arabia) - Partner with oil companies through Joint ventures, concessions, or production sharing contracts (What matters is substance of the contract not label) because it lacks capital, technology and management skills - Contracts are generally entered into with central government (through the national oil company) not regional or host communities, and payments to most host states are confidential

Typical contractual clauses Parties and their main objectives Contract will reflect the parties’ relative bargaining power influenced by factors such as geology, oil prices, political risk rating of the country etc -Fiscal issues – bonuses, royalties, tax (Ring fence/consolidation) -Cost recovery/amortisation -State participation -Work programme -Production split -Environmental issues -Economic linkages -Stabilisation clause -Dispute settlement