the trend in modern petroleum agreements towards the adoption of institutional arbitration

From the review of the arbitration clauses in the petroleum agreements referred to above particularly agreements one sees that those clauses were generally ad hoe arbitration clauses(as opposed to institutional arbitration).

How there is a trend now in modern petroleum agreements towards the adoption of institutional arbitration.  In the words of one author:  With the growth and refinement of arbitration systems drafters now have available various comprehensive sets of arbitration rules and arbitral institutions that have stood the test time.

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Concept in oil The first Secretary-General of oPEC

The first Secretary-General of oPEC,  explains reasons behind the adoption of the arbitral concept in oil concession Lijn general,  there is considerable international support for the opinion that for the settlement of trade disputes arbitration is preferable to judicial procedure even where domestic differences are concerned,  for reasons which seem to be universally recognized;  arbitration is less rigid,  less costly,  and less dilatory than the normal judicial procedure.

Furthermore,  persons who invest capital on a large scale in a foreign country feel more secure having an assurance that,  if a dispute arose between them and the host country,  they would not be subject to the strict legal system of the country.  of which they are often ignorant and which they may fear may be applied with less than complete impartiality in cases involving foreigners well known that petroleum investments require large amounts of capital and advanced technology and that the element of risk,  which is usually borne by the foreign oil company,  is very high.

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The Settlement of Disputes under Petroleum Agreements general rule

The Settlement of Disputes under Petroleum Agreements general rule

Oil concessions in the Middle East dictate that s a disputes between the and the producing country which cannot be settled by negotiation or mutual agreement should be resolved by a This provision appeared in the text of the first oil concession granted in the Middle East in 1901 to the D’Arcy Exploration Company by the Persian government and has appeared in most concession agreements concluded since.  Arbitration is more attractive to its proponents in the business community including in domestic disputes than other methods of dispute resolution(e.g.,  judicial litigation)  as it can be quicker cheaper,  less formal and offer more privacy than litigation.

It also allows the parties to control the course of the proceedings and to choose the law which is to be applied,  based on the particular characteristics of the dispute.  In cases of disputes that include an international element,  the is yet another advantage arbitration secures a neutral venue for the settlement of disputes and a rally appointed tribunal,  independent from the national court of either party tribunal,  As a result of this requirement of neutrality of venue and assumes even greater significance when a company has entered into a relationship a foreign as in an oil Concession with gov a state in that party which lodges a claim against state’s own courts may fear that the ruling will not be .

Likewise,  states are generally reluctant to agree to in courts of countries other than their own the c 0 concessionaire’s country)  Fuad Rouhani,  the first Secretary-General of oPEC,  explains reasons behind the adoption of the arbitrator concept in oil concession Lijn general,  there is considerable international support for the opinion that for the settlement of trade disputes arbitration is preferable to judicial procedure even where domestic differences are concerned,  for reasons which seem to be universally recognized;  arbitration is less rigid,  less costly,  and less dilatory than the normal judicial procedure.

Furthermore,  persons who invest capital on a large scale in a foreign country feel more secure having an assurance that,  if a dispute arose between them and the host country,  they would not be subject to the strict legal system of the country of which they are often ignorant and which they may fear may be applied with less than complete impartiality in cases involving foreigners well known that petroleum investments require large amounts of capital and advanced technology and that the element of risk,  which is usually borne by the foreign oil company,  is very high.

On the other hand,  petroleum resources and their development are of vital importance to the economic growth of the country,  often representing the cornerstone of the i country’s economic development.  Furthermore,  petroleum strategically important for both consuming and pro countries,  which explains why Petroleum Agreements general rule have often beef politically charged in the past.  Collectively,  these indicate that international arbitration is the most appropriate method for the settlement of disputes which arise government of a producing country national oil company(or its and a foreign oil concessionaire.

Tax system APPLICABLE TO PETROLEUM Operations

 Tax system APPLICABLE TO PETROLEUM Operations

It is clear from the wording of this letter that this”fixed post-tax relief to the shareholders of ADM enue competitiveness of their oil operations in Abu Dhabi.

independent of the calculation of Abu Dhabi quite and should therefore,  affect the basis of taxation.  This special treatment w later extended to ADPC and the”fixed margin”  gradually in until it reached its present amount of s1.00 per barrel.

Fixing the Price of oil for Tax or Other Purposes The old-style concession agreements stipulated a payment of royalty charges on each ton of oil produced,  regardless of its sal price or the profit realized from it,  indicating that governments were not really interested in the price at which the oil was sold.

Then,  in 1950-1951,  certain oil producing countries in the Middle East(Saudi Arabia,  Iraq and Kuwait)  adopted the profit sharing principle(Abu Dhabi adopted the same principle in 1966)  According to this principle,  the host government’s share moved ed royalty per unit of production or export to 50 percent of the net company profit based on posted prices.  When the  financial arrangement was adopted,  the host countries became directly affected by the posted price(which was a tax reference used for the calculation of the companies’  profits and did n always reflect market realities).

In that period,  until the 1970s,  the posted prices of and companies crude oil were by the alone without any consultation with the host countries.  February 1959,  the oil companies decided,  without Middle he governments concerned,  to the price of Eastern oil by cut about 18 cents per barrel.  In f the spite o companies action they went on 960 by an average of about 9 recognized Continue reading

Producers might prefer a fixed LNG price to guarantee reliable minimum cash flow

Producers prefer fixed LNG price to guarantee reliable minimum cash flow 

 

LNG Prices
Take-or-pay provisions therefore can LNG of L influence LNG pricing and lessen the risk to posed by fluctuating crude oil prices that are a component  the overall LNG do terms formula result contain lift in yer fails his has price sales are Thus,  the  Dem minimum action fits Dem fore Lng scheme.  Alternatively,  producers might prefer a fixed LNG price to guarantee a reliable minimum cash flow. It is important that LNG competes in the marketplace with other sources of energy. LNG price In most of the relevant sectors,  gas can either replace or be replaced by,  competing sources.  This fact means that LNG must be priced competitively but not independently from other fuels.  Numerous contractual mechanisms have been developed to incorporate the concept of competitive inter-fuel pricing into the relationship between buyer and seller.

These mechanisms allow the price of LNG to fluctuate in response to the market price of competing fuels and effectively shift sk associated with changing prices to the seller.  Current LNG pricing provides for a floating price that is tied to some form of indicator designed to fluctuate with changes in the market price of competing fuels.

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