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Contracting methods in oil and gas industry

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Added on  2020-01-07

Contracting methods in oil and gas industry

   Added on 2020-01-07

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CONTRACTING METHOD
Contracting methods in oil and gas industry_1
TABLE OF CONTENTSQ1. Different type of contracting methods used by oil and gas industry ...................................1Q2. Ways in which global oil and gas industry function ...........................................................3REFERENCES ...............................................................................................................................5
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Q1. Different type of contracting methods used by oil and gas industry Contracting is the way for forming the legal relationship between the parties. In thiscontext, it is assessed that there are four different type of contracting methods assessed which aregenerally being used by the oil and gas industry such as IOC’s (International oil company) andHG’s (Host government). The detailed explanation about the same is depicted in below:PSC (Production sharing agreement): It is the legal relationship which is being heldbetween government and the resource extracting company. In this contract, decision istaken by the parties that how much resource such as oil will be received by both theparties which is being extracted from different nation (Stein, 2014). Concessions: It is the type of negotiated contract that is being formed between companyand the government (Concession, 2015). Here, government grants rights to the firms withregard to operate their business within nation. However, while carrying out operationcompanies have to follow all the government's jurisdictions and different conditions. Joint Venture or Partnerships: It is the temporary partnership between two companies. Itis basically formed with an aim to gain the mutual benefit such as sharing of costs andrisk etc. Risk/Service contracts: It is the contract in which party who explore oil will incur all theexploration risks. Thus, here contractor is not entitled to share of production withgovernment but it is liable to share the profits. Among all Production sharing agreement is the major form of contract which is beingused by oil and gas companies. The detailed explanation about the same is depicted in below:Feature of PSC It is the legal frame of references which defines about the terms and conditions which isbeing held between the parties such as HG and IOC. This agreement is formed throughdirect negotiation and either parties do not have any right with regard to impose anythingover other party.In this agreement, IOC will enter into relationship with the minister of nation on behalf ofgovernment (Hatami, Sheikholeslami and Ganji, 2014). This contract is valid for specific duration and decision about the same is taken by thegovernment of country. 1
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