The Prevalence of Production Sharing Contracts in Oil and Gas

Introduction

Background

The nature of the environment in which a business operates determines how it engages other players in the sector. This, therefore, determines the types of contracts that businesses get into. The oil and gas industry relies on contracts to carry out its activities just like other business entities do. The oil and gas industry mainly engages production sharing contracts, driven by the numerous stakeholder interests the sector has.

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Research Topic

The Prevalence of Production Sharing Contracts in Oil and Gas (Case Study of Sonangol, an Angolan Oil Company)

Aim

The aim of the study is to establish the prevalence of production sharing contracts in the oil and gas industry, with particular interest in Sonangol, an oil company in Angola.

Objectives

The objectives of the study are:

1. To determine the nature of the oil and gas business in Africa
2. To determine the types of contracts administered in the oil and gas sector
3. To determine the share of production sharing contracts relative to other types of contracts
4. To establish the reasons for adoption of production sharing contracts at Sonangol

Research questions

• What types of contracts does Sonangol engage
• Are production sharing contracts prevalent at Sonangol
• Why does Sonangol adopt production sharing contracts
• What benefits and challenges do Sonangol get by using production sharing contracts

Literature Review

Key Words

Contracts, Production Sharing Contracts, Effects, Prevalence, Economics, International Oil Companies, National Oil Companies, Angola

Key Literature

• Bindemann, K., 1999. Production Sharing Agreements: An Economic Analysis
• This source touches on the economics of production sharing agreements with reference to oil and gas in Angola and the Middle East.
• Bindemann, K. 2000. The Response of Oil Contracts to Extreme Price Movements. Discussion Paper. Department of Economics (University of Oxford).
• Fattouh, B. and Darbouche, H., 2010. North African oil and foreign investment in changing market conditions. Energy Policy, 38(2), pp.119-1129.

Gaps in Literature

Most literature refers to situations in North Africa and the Middle East and not Angola or Sonangol.
The most available literature is more than five years old. Chances are that the conditions have changed, rendering them irrelevant to current circumstances

This section presents an analysis of existing literature on Oil and Gas in Africa and Angola in particular, while studying the types of contracts that oil and gas companies utilize. This is broken down into subtopics as follows:

Oil and gas in Africa

This section provides a general overview of the oil and gas industry, highlighting the major players: companies, countries, communities, and other stakeholders.
History of the oil and gas industry in Africa
Challenges in the African oil and gas industry

Oil and gas in Angola

This section provides an overview of the Angolan oil and gas industry, highlighting the major players: companies, communities, and other stakeholders.
History of the oil and gas industry in Angola
Challenges in the Angolan oil and gas industry
Merits of oil and gas to the Angolan Economy

Contracting in the Oil and Gas Industry

Types of contracts administered in the global oil and gas industry
Comparison between contracting in Africa and the Middle East

Production Sharing Contracts

Identify the parties involved
Terms and conditions
Benefits/demerits

Contracting at Sonangol (Types of contracts)

Encompasses all types of contractual agreements Sonangol engages

Criteria Sonangol uses to select the type of contractual agreements it uses

Ratio of contracts based on the type

Production sharing contracts at Sonangol

• The nature of production sharing contracts at Sonangol
• Parties involved
• Responsibility
• Terms and conditions
• Research Methodology

The study will follow the constructivist approach and rely on the analysis of secondary data that will be obtained both from the private and public domain. Of particular interest will be records from Sonangol and researches published in journals. The research will use catalogs to locate relevant books and indexes to locate appropriate periodicals. In addition, the study will use the Internet to find relevant electronic resources and databases. An analysis of the books, periodicals, and databases would follow to ascertain the authority and quality of information. Data analysis will be quantitative.

Findings

1. Reasons for the adoption of production sharing contracts at Sonangol
2. Advantages of production sharing contracts at Sonangol
3. Disadvantages of production sharing contracts at Sonangol
4. Comparison between production sharing contracts and other types of contracts at Sonangol

Discussion

Discuss the reasons for the prevalence of production sharing contracts at Sonangol, their merits, demerits, and challenges.

Conclusion

Summary of the suitability of production sharing contracts at Sonangol. Are they the best for the oil and gas industryShould they be upheld?

References

• List of all works cited in the study
• Appendices
• Relevant documents, tables, and graphs

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