Key Areas And Features In Negotiating Oil And Gas Contracts With International Oil Companies

“Discoveries of oil and gas generate much excitement and great effort is put into understanding technical, commercial and legal aspects of field development. In fact however the first challenges to governments are negotiation challenges.”

Examine and evaluate the key areas and features that governments should focus on during their negotiation process and in the drafting of contracts with the International Oil Companies. 

Challenges in Negotiation

The negligible mention of a natural asset discovery, particularly of oil and progressively of gas, inspires national and individual longing for wealth and any expectations of prosperous circumstances, energized like never before by late dramatic increments in oil costs. Mexico, Bolivia, Kazakhstan, and numerous more other developing countries see their natural assets as a benefit not belonging to any private organization (Daniel, Keen, & McPherson, 2010). Regardless of who may possess the surface rights and land, nations claim all  the advantages, and this position is frequently cherished in the state's most essential law, its constitution. Contract negotiation is a major component of oil business exchanges between oil organizations and governments.

Negotiation is not just a necessary procedure of taking and giving; it involves different complexities and strides. At each progression in the negotiation chain, assortments of agreements need to be negotiated and conveyed to a conclusion. It is commonly acknowledged that these challenges include overcoming technical engineering and related business hurdles being developed and exploited. Without a doubt, from the perspective of many producing countries, the key obstacles focus on administration issues, as evidenced by the recharged yearning to build up state possessed energy organizations. Truth is told, be that as it may, the principal challenges are usually negotiation problems (Likosky, 2009). As usual, resource-rich countries will look to pull in the cooperation of global organizations with the skill and assets to help them market and exploit their energy assets.

However, at whatever point governments begin negotiating, they locate that major gas and oil organizations frequently have more prominent financial resources, unrivaled knowledge of the oil or mining fields, and more experience with regards to negotiating contracts. In fact, most nations where oil companies work have far fewer assets than the oil organizations themselves. Governments are always excited as they want to understand technical, commercial and legal aspects of the field of the gas and the oil (Chima, 2011). Governments need to make numerous discoveries that are concerned with the gas and the oil that have been discovered by the various personnel and companies.

Through the findings that governments will find, they need to make negotiations with the different staff members and the organizations that have discovered the gas and the oil. These negotiations are always necessary as they will be able to make these two parties to be able to work together (Christopherson & Rightor, 2012). However, governments always face a challenge when they want to make negotiations with these individuals. Governments ought to use some better strategies that will enable them to be able to come up with an understanding between them and the different organizations that deal in the oil and gas operations.

Key Areas for Governments to Focus On

There are key areas that all the governments should be able to check into for them to be able to enter into negotiations with the various individuals or organizations that have discovered the gas and oil. These key areas will make them be able to achieve their target of coming together with the companies that have discovered the oil and the gas. There are some major key areas that governments around the world should be able to focus to enable them concentrate on the negotiations that are involved between them and the other individuals who discovered the oil and the gas (Frynas, 2010). The following are the key areas that the government should take keen note on Technical, commercial, environmental, social, economic, and political. These are the key areas that the government should be able to take keen on for them to be able to come into negotiations. These areas have been explained in the following ways;

The technical sector is the primary industry in which many organizations have been able to focus on that will enable each and every organization will be able to make their focus on. The technicality is a vital sector that each and every organization need for them to be able to make improvements in the activities that they are engaging their selves into. The technicality plays a significant role than any other part of the organization that can form the primary function in the various agencies.

The technical aspect is the critical area in different organizations as these organizations can move to another level when they have a better technical background (Inkpen & Moffett, 2011). The negotiations that are to be involved in the government and the individuals or organizations that have discovered gas and oil depend on the technicality. Governments need to focus on the technicality that is involved in the given area in which the discovery has been able to be made. This critical area will enable the governments to come up with better ideas that are concern with the technicality that is involved between them (Kolstad & Wiig, 2009). Governments have to observe the technicality that is involved in the organizations or the area that the gas or oil has been discovered (Meadowcroft, 2009). Therefore, this is a critical area that all the governments need to check on for them to be able to have a better negotiation with the organization or individuals who have discovered oil and gas in the various areas.

Technical Aspect

The second area is the environmental. It is the area in which each and every activity usually takes place within an organization. The environment in which an organization is taking their operations needs to be checked on as the environment will be able to bring in a positive result to the organization to which they are taking on their organizations (Mitchell, Marcel, & Mitchell, 2012). The environment to which each and every organization is working on should always be the priority to them. The context in which they are working on will determine the value of which each and every organization will be producing their products and selling to their customers. When governments need to make negotiations with the various personnel or organizations that have been able to discover the oil and gas, they ought to take a keen note of the environment to which the discovery has been made.

It is important for governments to take keen note in the given environment in which the discovery has been made that will be able to assist them in making better negotiations with the various organizations that are a concern. The environment, in which the discovery has been made, needs to be checked on by the government. All the governments should make negotiations depending on the environment to which the discovery has been made. They should give priority to the environment to which they feel will be able to bring in a positive result to whatever they are going to be able to come in with the other organizations (Christopherson & Rightor, 2012). Therefore, the environment in which the discovery has made usually plays a significant role in governments when they want to make negotiations.

The third area is the economics. The economy is the value given to an organization or an individual. Each and every individual always has a value thus making each one a different one. The organizations do have their values according to the products that they are producing to their customers (Tietenberg & Lewis, 2016). Each product that the organizations produce always has a measure of value. The values of the products that are to be produced depend on the economy that the industry or the organization has. If the economy of the organization is good, then the products that the organization will be producing and selling to their customers will be of high quality.

Alternatively, when the organizations have a weak economy, they will not be able to produce more quality goods that will be able to attract more of the customers thus will reduce their selling rate. The economy of each and every organization, therefore, plays a significant role when an organization wants to come into any negotiation with any interested party at hand. When governments want to make better negotiations with the various organizations and personnel that have been able to discover oil and gas, any government needs to check on the economy of the given party that has discovered the gas and the oil.

Environmental Aspect

Governments should be able to have a prior knowledge about the economy of the given party (Tordo, Warner, Manzano, & Anouti, 2013). It will be able to make the governments know how they will be able to come and work together with the given party that is producing the oil and the gas. Governments will have a better idea of how they will be able to invest in the given products with the given company or individuals that have made the discoveries. This makes the economy of a given company or individual to play a significant role for them to be able to make the negotiations that are involved between them.

The fourth area that governments should focus on is the social aspect. It is the act in which an individual or a given organization can interact with the other parties or organizations that are within their premises and other areas (Victor, Victor, & Yueh, 2010). A given company or organization always need to have a good relationship with the other people that are directly or indirectly connected to them. They need to have this better relationship with these other people as it will be able to bring in a positive result to the company.

An organization that has a better background that is based on a social aspect is able to have a better development and also has the high chances of earning more profit that the other organizations that might not have a better social background (Vivoda, 2009). This makes the social background of each and every organization to be able to play a significant role in the given industry. When an organization would want to come into negotiation with other interested organization or individual, they need to have a social background.

Governments always need to have consultations with the organizations that are producing the oil and the gas (Mitchell, Marcel, & Mitchell, 2012). Governments need to check on the social background of the given organization that has discovered these products. The social background of the given organization or company that has made the discovery of oil and gas will determine how the government is going to make its negotiation.

Governments will have an easy negotiation with an organization that has a better social background. This is because they will be able to work together as a team so that they may be able to achieve the set goals. This makes the social aspect to have a greater impact on the different governments when they want to make negotiation with the relevant organizations or individuals that have been able to make the discovery of oil and gas in the various regions.

Conclusion:

If governments can take keen note in these areas, they will be able to come up with better negotiation skills that will make it come into an agreement to form a partnership with these oil companies. Therefore, these are the major areas of concern with the negotiations that will involve the governments and the oil companies.

References:

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