Duval et al - Concession Agreements

full all chapter5 chapter6 chapter7 chapter8 chapter9

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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., Weaver, J., Concession Agreements (chapter 5),  in International Petroleum Exploration and Exploitation Agreements: Legal, Economic and Policy Aspects, (New York: Barrows Company Inc., 2nd edition, 2009)

The authors discuss concession agreements and look at the evolution to their modern forms and explore their legal nature. The authors focus on the main features of international petroleum agreements, summarizing them as follows: (a) the international oil company has an exclusive right to explore for and following a commercial discovery, to exploit petroleum at its own risk and expense in a certain area and for specific period of time; (b) the international oil company owns the entirety of the petroleum production and can freely dispose of it subject to any obligation to supply the domestic market and possibly the payment of royalty in kind; (c) the host country is and remains the sole owner of the petroleum in the ground; (d) the international oil company pays a royalty on the production to the host country and the host country chooses whether to take the royalty in kind or in cash; (e) the international oil company pays income taxes on the profits derived form its exploitation operations as well as any other taxes that may be applicable.

It is also noted that in the modern concessions the contract area and the duration are limited, and the international oil company is required to employ nationals of the host country and to provide much greater information to the host countries regarding their petroleum operations.

The authors conclude that though the concession regime is sometimes criticized it is still widely used throughout the world. It has the advantage of being flexible enough to accommodate different approaches in its implementation.

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