Abstract:
While a country’s energy resources base is a gift of nature, transforming these
resources into salable commodity like crude oil requires investment and effort.
Whether governments choose to invest directly or allow private investors to do so,
their primary reason differs in foundation. For the host government the primary
concern is to maximize social benefits derived from the exploitation of the
resource base, while the International oil companies operate with an appetite for
supernormal profits as oil and gas sector is associated with high risk-high returns.
In practice however defining what constitutes the maximum benefit to which
party is essentially a profound question which helps explaining the variety of
objectives pursued by either party – governments or oil companies over time. The
governments with different choices of regimes to pursue, in order to exploit their
natural resources efficiently, have a challenging task in deciding which and how
the companies should be awarded the exclusive rights to explore, develop, and
produce their resources, and on what conditions such rights should be awarded.
Hence, for every country, not only there is a certain excitement and quest to create
wealth, there have always been another, humbler, but hardly secondary
motivation, the desire for self sufficiency. Adding to this, the importance of oil as
an international commodity, such urgency has warranted for some of the most
challenging times in the world’s history tapestries. And in more recent times there
has been yet another, by extension of the last, as desire has turned to necessity: the
need to secure the resources to maintain economic growth; the energy to fuel the
world.
