New Producer Contract Terms and Uncertainty: Lessons From the Recent Past

Patrick R. Heller, Perrine Toledano, David Mihalyi & Tehtena Mebratu-Tsegaye, New Producer Contract Terms and Uncertainty: Lessons From the Recent Past, (2022).Columbia Center on Sustainable Investment

52 Pages Posted: 28 Mar 2022

See all articles by Patrick R.P. Heller

Patrick R.P. Heller

University of California, Berkeley - Center for Law, Energy & the Environment

Perrine Toledano

Columbia University - Columbia Center on Sustainable Investment

Tehtena Mebratu-Tsegaye

Columbia University - Columbia Center on Sustainable Investment

David Mihalyi

Natural Resource Governance Institute (NRGI)

Date Written: March 2022

Abstract

The petroleum industry is volatile, and governments in “new producer” countries have operated at a significant information disadvantage when negotiating with international oil companies. This challenge is growing today; new producer countries face intensifying questions around whether to offer fiscal incentives to maintain investment in the face of 1) the pandemic-induced volatility in oil prices and 2) long-term questions about the future of the industry in the face of the climate crisis and the global energy transition.

This confluence of short-term and long-term uncertainty is prompting a reexamination of the narrative that once took hold in many new producer countries. The traditional story was one of linear progression from being non-producers to small levels of production to ultimately having oil and gas become a major economic contributor over the long term. This notion of progression was associated with a commonly held theory: After a country’s first major discovery, the geological risk that wells will be dry was expected to decrease. Countries could therefore shift from a position of having to grant tax breaks (and other concessions) to international investors, to taking a tougher stance in laws and negotiations for new projects going forward.

In this paper we examine whether this theory has been borne out in practice and make recommendations to support new producers in their navigation of the uncertainty associated with the energy transition.

Keywords: Petroleum, Oil, Gas, Sustainable Development, Climate Crisis

Suggested Citation

Heller, Patrick R.P. and Toledano, Perrine and Mebratu-Tsegaye, Tehtena and Mihalyi, David, New Producer Contract Terms and Uncertainty: Lessons From the Recent Past (March 2022). Patrick R. Heller, Perrine Toledano, David Mihalyi & Tehtena Mebratu-Tsegaye, New Producer Contract Terms and Uncertainty: Lessons From the Recent Past, (2022).Columbia Center on Sustainable Investment , Available at SSRN: https://ssrn.com/abstract=4061952

Patrick R.P. Heller

University of California, Berkeley - Center for Law, Energy & the Environment

390 Simon Hall
UC Berkeley Law
Berkeley, CA 94720
United States

Perrine Toledano (Contact Author)

Columbia University - Columbia Center on Sustainable Investment

William C. Warren Hall, 1st floor
410 West 116th Street
New York, NY 10027
United States

Tehtena Mebratu-Tsegaye

Columbia University - Columbia Center on Sustainable Investment

William C. Warren Hall, 1st floor
410 West 116th Street
New York, NY 10027
United States

David Mihalyi

Natural Resource Governance Institute (NRGI) ( email )

80 Broad Street
New York, NY 10004
United States

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