Duval et al - Participation Agreements

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Transparency and Accountability

Policy, Legal and Contractual Framework

Sector Organization and Institutions

Fiscal Design and Administration

Revenue Management and Distribution

Sustainable Development

Duval, C., Le Leuch, H., Pertuzio, A., and Weaver, J., Participation Agreements (chapter 8), in International Petroleum Exploration and Exploitation Agreements: Legal, Economic and Policy Aspects, (New York: Barrows Company Inc., 2nd edition, 2009)

In this chapter the authors note that state participation in international petroleum agreements is a common practice in oil industry in so far as the host government, directly or through its national oil company, holds an equity interest in an international petroleum agreement as a co-venturer along with the international oil company and finances its proportionate share of petroleum costs.

They observe, however, that this type of agreement is not to be construed as a separate type of international petroleum agreement; rather, it is a provision in an existing international petroleum agreement that grants the host country the right to become a party in the rights and obligations of the  underlying international petroleum agreement signed with an international oil company. Further, the authors identify four different forms of state participation: (1) fixed state participation, in which the host country or its government is granted a defined participation interest in the international petroleum agreement which remains the same throughout the term of the agreement; (2) progressive state participation, which varies during the term of the petroleum agreement either by triggered levels of production or another criterion; (3) optional state participation, in which the state exercises its interest’s right upon meeting a given condition stipulated in the agreement; (4) carried interest, which allows the national oil company to participate in the management and control of the joint venture through representation on the operating committee.

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