Concession for Exploration and Production | Report
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Added on 2020-02-03
Concession for Exploration and Production | Report
Added on 2020-02-03
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Table of ContentsINTRODUCTION................................................................................................................................2CONCLUSION....................................................................................................................................7REFERENCES.....................................................................................................................................81
INTRODUCTIONOil and Gas is most important sector or energy in the world which depends on naturalresources only. Oil producing states focuses upon nationalism for the purpose of making moremoney with the help of getting economic advantage. It assists nation to create monopoly anddemand of the product rest the those specific countries only. Present report is based onconcession for exploration and production activity and its major impact on governmental returnand finances (Conrow, 2003). Furthermore, reason behind replacement of production shareagreements are also explained along with proper justification. In addition to this, fundamentaldifferences between concession system and production sharing agreements (PSA)/PSC systemshas been explained along with rationale behind producer countries favoring the greater economicrental. Apart from this, reason behind extraction of more money by government fromInternational Oil Companies (IOCs) are also discussed.According to the given scenario it has been found that concession agreements are beingreplaced with production sharing agreements in order to make out more profitability frominternational oil companies (Ross and Crossan, 2012). Here, concession agreement refers tonegotiated contract between government and an organization to operate a business withgovernment jurisdiction. However certain condition work better for the smooth flow of businessbetween these two parties. Under this, business requires to pay the royalty which was 12.5earlier. On the basis of particular concession permission was provided to them for operation orproduction of crude oil in particular areas for longer time span. It can be critically evaluated thatduring modern era concession is granted for fixed period of exploitation is 30-40 years.However, exploration period for the same is 3-5 years. Not only this, but government revenueand areas are deprived from royalties as well as net taxes or income.Apart from this, production sharing contract merely give right to receive particular shareof production or income from selling of oil and gas. At this juncture, government profit oil andtaxes are included in the revenue of government. It facilitates to enhance overall rate of returnand meet the organizational objectives in an effectual manner. This kind of contract at first tookplacer in Indonesia in 1966 (Ramos and Veiga, 2011). After this, era scope of nationalistincreases and at the same time concession agreement became less profitable for the business. Atthis juncture, at first government denied to gran new concessions and accordingly new petroleum2
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