Petroleum Licences/Contracts: Force Majeure and Renegotiation Issues in Relation to the Recent Oil Price Collapse

Lynch, Joyce C (1987) Petroleum Licences/Contracts: Force Majeure and Renegotiation Issues in Relation to the Recent Oil Price Collapse. LL.M(R) thesis, University of Glasgow.

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The purpose of this paper is to consider the legal ramifications which are thrown up once there is a contract in place between the host state and an oil company for the exploration and exploitation of its oil resources and a massive change in the pricing structure occurs. The specific area of concern is the contractual obligations in relation to the drilling of exploratory wells in the work programme which in most cases constitute a basic term of the contract and which under the United Kingdom petroleum regime is considered a precondition to the grant of a licence to explore and exploit the oil resources. The discussion is centred around the U.K. petroleum arrangements mainly because former British Colonies including Trinidad and Tobago which are oil producers have relied upon the U.K. regime as a working model. It is being argued that the petroleum "contract" has undergone changes overtime unlike a contract in classical terms, moving away from the concept of a grant of a "concession" or "licence" to the foreign oil companies, who held the balance of the power because of their massive capital and technology, to the notion of the modern day governmental contract where, although its legal nature is controversial, its effect is essentially a mutual economic arrangement under which the foreign oil companies' profit expectations are balanced by the host states' interest in achieving maximum economic benefits for its oil resources in the national interest. In addition, the agreement is being concluded against a very complex background of inter alia emerging international legal norms and principles respecting permanent sovereignty over natural resources and a new international economic order, an unregulated international oil market as well as diverse political and social factors. The central issue is whether in the changed economic conditions brought on by the recent oil price collapse the oil companies can claim a right to renegotiate the contract in relation to the work obligations in the work programme in order to secue their profit expectations whether or not a stipulation for renegotiation exists in the contract. Related issues concern the general nature and legal nature of the petroleum contract concluded between a state party and private companies and the general nature and legal nature of the concept of force majeure and whether such a concept is applicable in the case where some oil companies have claimed that the drilling obligations have become too onerous because of the drastic price fall. Finally, it is being contended that in the complex oil industry the future would reveal shifts in the balance of power with the foreign investors claiming increased rights inter alia the right to renegotiate the work programme when economic conditions have changed and which would most certainly impact upon the British law and practice that at present, in certain respects, operate contrary to international practice in the oil industry.

Item Type: Thesis (LL.M(R))
Qualification Level: Masters
Keywords: Law
Date of Award: 1987
Depositing User: Enlighten Team
Unique ID: glathesis:1987-77617
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 14 Jan 2020 11:53
Last Modified: 14 Jan 2020 11:53

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