logo

The Oil And Gas Industry Essay

   

Added on  2020-01-28

10 Pages2504 Words47 Views
Legal Aspects of Oil & Gas Industry A229625Name:Institution:Course:Date:

2LEGAL ASPECTS OF OIL & GAS INDUSTRY A229625 Table of ContentsIntroduction.................................................................................................................................................3Understanding the Relative Bargaining Power............................................................................................3Conclusion...................................................................................................................................................9References.................................................................................................................................................10

3LEGAL ASPECTS OF OIL & GAS INDUSTRY A229625 IntroductionThe ability of parties in a situation, for instance, an oil contract to exercise influence over eachother is called bargaining power. Before oil companies get into a contract to explore and producea natural resource in an individual foreign country, the company must have agreed upon somethings with the host government. The main reason of having these agreements is to ensure thatboth parties share the profits from the oil equitably. However, during the negotiations so as toenter into the contract, the oil company may feel as if it is being charged too much tax whereasthe government feels like it's charging too little tax. The citizens may also feel like no tangiblebenefits are coming from the taxes paid by the companies (McMillan and Waxman, 2007). Inthis essay, the primary focus is to understand factors that affect the relative bargaining power ofthe host government and the oil company bidding to enter into the contract. Understanding the Relative Bargaining Power Before the host government and the international oil get into a contract, certain conditionsdetermine the bargaining power of both parties. For the oil company to have a bargaining powerwhich will generate enough profits for its sustainability, it must have resources that are valuable,rare, and not easily imitable and lack equivalent substitutes (Eden & Molot, 2002). In otherwords, either the oil company or the host government must possess something that the otherparty wants e.g. the raw materials, capital, technological knowhow, managerial skills just tomention a few. Without these entry conditions, it is not possible to have a mutual benefitbetween the two parties. The bargaining power between both sides may differ in strength based on several factors. Thehost may be having a stronger bargaining power than the oil company or the other way round.

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Features of an Ideal Hydrocarbon Fiscal System
|4
|810
|88

Contracting methods in oil and gas industry
|7
|1980
|160

Legal Aspect of Oil and Glass Industry
|9
|2641
|312

Report on Fiscal System Structure of Petroleum Rights and Contract Agreements
|7
|1276
|49

Customs Regulatory Compliance Management Assignment
|11
|3146
|109

Assignment Renewable Energy: Geothermal in the UK
|9
|1776
|38