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Petroleum exploration and production rights : allocation strategies and design issues (English)

Petroleum has become an integral part of today's global economy and a key component of many national economies. Hence, the presence of petroleum in meaningful quantities can have important economic, developmental, and strategic consequences for a country. While a country's petroleum resource base is a gift of nature, translating this resource into saleable crude oil requires investment and effort. Whether governments choose to invest directly or allow private investors to do so, their primary concern should be to maximize the social benefits derived from the exploitation of the resource base. In practice, however, defining what constitutes maximum social welfare is essentially a political question, which helps explain the variety of objectives pursued by governments over time. In order to exploit their natural resources efficiently, many governments rely on private oil companies. Governments have a challenging task in deciding which companies should be awarded the exclusive rights to explore, develop, and produce their resources, and on what conditions such rights should be awarded. There is little empirical documentation on the design and relative effectiveness of alternative systems for the allocation of petroleum exploration, development, and production (E&P) rights and their policy implications. This paper analyzes the available evidence on the advantages and disadvantages of various practices used by petroleum producing countries to allocate petroleum E&P rights, and draws conclusions about the optimal design of E&P allocation systems.

Details

  • Author

    Tordo, Silvana Johnston, David Johnston, Daniel

  • Document Date

    2010/01/12

  • Document Type

    Publication

  • Report Number

    51840

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2010/04/20

  • Disclosure Status

    Disclosed

  • Doc Name

    Petroleum exploration and production rights : allocation strategies and design issues

  • Keywords

    allocation system;Petroleum;global gas flaring reduction;Oil & Gas;Oil and Gas;fiscal system;national oil company;oil and gas exploration;present value of revenue;oil and gas reserve;infrastructure needs;exploration and development;net present value;licensing policy;oil companies;petroleum resource;fiscal regime;petroleum producing country;petroleum exploration;administrative procedure;fast economic growth;social welfare function;corporate income tax;private oil companies;return on investment;geological risk;economic rent;general observation;winning bid;exploration of oil;design of policy;availability of information;access to information;fiscal affair;number of wells;international financial corporation;social discount rate;public policy goal;liquid petroleum gas;production of hydrocarbon;liquefied natural gas;classification of reserves;gas-to-liquids;principle of law;production sharing agreement;exchange rate appreciation;foreign exchange regulation;expressions of interest;amount of risk;availability of finance;long term borrowing;project cash flow;oil price change;petroleum reserve;resource rent;exogenous factor;allocation policy;geophysical data;exploration activity;legal regime;petroleum contract;exploration risk;market participant;petroleum sector;fiscal framework;information asymmetry;open door;risk profile;frontier area;field size;private investor;resource base;policy tool;Capital Investments;oil industry;local content;

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Citation

Tordo, Silvana Johnston, David Johnston, Daniel

Petroleum exploration and production rights : allocation strategies and design issues (English). World Bank working paper ; no. 179 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/785881468336848695/Petroleum-exploration-and-production-rights-allocation-strategies-and-design-issues