Transfer of Technology in Oil and Gas Contracts

36 Pages Posted: 25 Jan 2011 Last revised: 28 Mar 2015

Date Written: August 22, 2007

Abstract

Transfer of Technology is one of the significant issues in oil and gas contracts. At one side petroleum developing countries are concern about controlling and operating of all phases of their industry’s operation which in turn, has led to their awareness of the need to acquire at least an adequate understanding of the related technology. As it has been mentioned in a study prepared by UNCTAD secretariat, without some mastery of oil technology, petroleum developing countries can not ensure, for instance that their exploration efforts are adequate and that production rates are consistent with their national interest and oil requirements. Moreover where the size of the prospective reserves is not large enough to be economic and attractive for the international oil companies to invest in, but perhaps large enough for domestic or local consumption the domestic technology and basic skills of the countries concerned might be the only way to use the potentialities.

At the other side, referring to old concession contracts, the physical and temporary imports of the machinery and the equipment and skilled expatriate personnel, have been sent back to the countries where they have come from or are maintained on the job as long as is necessary, without any effective transplanting of the know-how involved to the recipient countries. Even in the case of proper and permanent transfer of technology, it seems essential to remark that there is a genuine divergence of interests between the developing petroleum countries and the International or foreign oil companies which have most important role in developing and investing in the developing petroleum countries oil and gas industry. “It is fundamental to the understanding of the transfer of technology to appreciate that development of the local technological capacity is not in the interest of multinational corporations.” In fact, notwithstanding the issue of the least amount of necessary and basic technology needed for exploration and operating a profitable oil or gas project, transfer of technology is a costly and time consuming process for an international oil company or any other investor, but the more significant part of fact is that technology in general and oil and gas industry’s technology, in our case, is a valuable good which can be monopolized by limited number of companies.

Thus transfer of such a precious technology in full can decrease the importance of those companies as a sole supplier of such an economically vital technology for petroleum developing countries. It may lead to an economic and technological competition in this regard and again decrease the dependency of petroleum developing countries to international oil and gas companies which is per se and increasingly profitable for such companies.

Apart from the problems mentioned above, usually, certain amount of vagueness, beyond the normal political and some times economic problems which may arise, cast shade on the transfer of technology; the substance of transfer of technology or a real transfer of technology, the capacity of developing petroleum countries for absorption and adoption of required technology, the various channels for transfer of technology in oil and gas industry and the suggested alternative ways.

With these initial considerations as a background, we will attempt to compare transfer of technology through different oil and gas contracts, with consideration on Iranian Oil Buyback Contracts, to find their problems and make some suggestions for improvement of transfer of technology through oil and gas contracts. For this purpose this article proposed in three main chapters to investigate the issue; in the first part we will try to clarify the concepts of “Technology” and “Transfer of Technology” For the purposes of this essay, in two distinct parts. In the second chapter, we will discuss “Transfer of Technology through Oil and Gas Contracts” as one of the main legal arrangements through that petroleum industry technology has been transferred in three sections. Third chapter relates to the Alternative Channels for the Transfer of Technology in Oil and Gas Industry apart from the traditional ways in the oil and gas contracts. We will also discuss this chapter in three sections. Finally we will conclude with due regard to all above mentioned issues.

Keywords: Transfer of Technology , oil and gas, Iran, petroleum , Islamic law, Law, China, upstream, contract, Lawyer

Suggested Citation

Mabadi, Amir Hossein, Transfer of Technology in Oil and Gas Contracts (August 22, 2007). Available at SSRN: https://ssrn.com/abstract=1745426 or http://dx.doi.org/10.2139/ssrn.1745426

Amir Hossein Mabadi (Contact Author)

affiliation not provided to SSRN ( email )

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