Building a world of
resilient communities.

MAIN LIST

 

Big Oil Likely To See Host Countries Take A Bigger Bite

HOUSTON --Energy companies are facing tougher negotiations over fiscal terms, as oil-producing countries capitalize on the tight market to push for a better returns.

Venezuela recently pushed through new royalty changes that are expected to result in lower profits for ongoing projects operated by Exxon Mobil Corp. (XOM) and ConocoPhillips (COP). Western companies also face stiffening requirements to new deals or contract renewals in Indonesia, Chad and Kazakhstan.

The trend, which some see as parallel to the renegotiations that took place in the 1970s, is expected to take some more of the earnings luster off of $50-oil in the coming quarters. Despite reporting huge earnings for the third quarter of 2004, oil companies last week signaled that tighter competition for drilling rigs and other equipment is pushing up the cost of oil field services.

"Around the world, you will see more and more, whether it is increasing royalties or windfall taxes," "The bulk is on stream within a week," Raoul Restucci, chief executive for the Americas for Royal Dutch/Shell Group (RD,SC) unit Shell Exploration & Production, said at an industry conference in Austin. "These prices are starting to bite, and they'll have consequences."

Richard Gordon, executive vice president at John S. Herold Inc., said Venezuela's move to raise royalties on a series of capital-intensive, heavy oil projects wasn't surprising. A recent Herold paper cited other negotiating standoffs, including ExxonMobil's deliberations in Indonesia and the recent effort by the Kazakh government to claim a stake in the giant Kashagan oil field in the country.

In addition to bidding for production agreements, companies may be asked to bid on signing bonuses or on extensive requirements for local content on projects, Herold said. The report likened the situation to the 1970s.

"As national oil companies rose to dominance, marginal tax rates ballooned and retroactive increases in government take became the norm rather than the exception," the report said of that period.

The U.S. could conceivably join the revenue grab from the cash-rich oil giants, most likely through a revived windfall profits tax. The previous version of the tax, repealed in 1988, raised taxes when oil prices rose significantly. Some lawmakers discussed reviving the tax when oil soared with the first Iraq war, but there has been little such talk this time around.

"It's hard to see in today's environment, in terms of talking about any new taxes," said Ian Bremmer, president of the Eurasia Group, a New York consulting firm. "It's very difficult to get through Congress."

Gordon disagreed, and calls some form of the tax "very likely" if oil companies continue to ride high prices to multibillion dollar record earnings.

"It would not take any great genius to dust off the windfall tax to cover a series of deficits," he said.

What do you think? Leave a comment below.

Sign up for regular Resilience bulletins direct to your email.

Take action!  

Find out more about Community Resilience. See our COMMUNITIES page
Start your own projects. See our RESOURCES page.
Help build resilience. DONATE NOW.

 

This is a community site and the discussion is moderated. The rules in brief: no personal abuse and no climate denial. Complete Guidelines.

Tags:  

Peak Oil Review - Mar 30

A weejly review including Oil and the Global Economy, The Middle East & …

Why This Tea Party Leader Is Seeing Green on Solar Energy

As a founder of the Tea Party movement, Debbie Dooley may be an unlikely …

2014 biggest year ever for solar, but oil price threat looms

Will only time tell whether it will be enough to keep solar panels cheap …

Rethink the Grid: Personal Power Stations

Rethinking the grid is quickly emerging as one of the hottest topics.

Goldilocks Is Dead

For oil, the Goldilocks zone has ceased to exist. This will have staggering …

US enters undulating crude oil production plateau in 2015

Feel-good-outlooks make the TV audience happy, but sleepy.

Global Shale Fail: Oil Majors Leaving Fracking Fields Across Europe, Asia

As Post Carbon Institute has pointed out in two major reports, estimated …