A question about oil companies

[blindswelledrat]

WHen an oil company finds oil in another country, on average how much of that oil technically belongs to them?
You see phrases like "BP own a 100% working interest in Site X" but presumably that doesnt mean that they own all the oil they develop?
ie Do the government of the country get 75% of the developed revenue of the OIL?

[ThatPhilBrettGuy]

Who gets what vary greatly. You'd think it'd be a country by country thing but even that doesn't hold true.

[Shake&Bake]

Which country?

[Corpulent Tosser]

As above it varies greatly, in some countries it is just a tax on the revenue, others the government have a stake in the development.

For example here in Azerbaijan the government's state own oil company has a percentage of each development, in addition to the government taxing the revenue.

[blindswelledrat]

[quote=Shake&Bake]Which country?
[/quote]

Two that spring to mind- Iraq and Uganda

[blindswelledrat]

Why didnt that quote work?

[XJSJohn]

If i remember correctly, in Algeria BHP had to go into partnership with Sonatrac (Algerian State oil company) in order to do business.

Sonatrac got all the LNG, and BHP got the "exotics" that were a byproduct of the extraction, which came to some 7% of production.

For this, BHP had to build the Ohanet Refinery too, which for want of a better term, realy is in the arse end of the world


It was a few years ago now that i was involved in this project, and the details i have spouted are just what i picked up whilst there.

Edited by XJSJohn on Wednesday 15th April 09:40

[blindswelledrat]

Is that 'normal' or is that an extremely bad deal for BHP?
Presumably with exploration cost plus risk accounted for there isn't that much money to be made there?

And back to my analogy- if someone has a 100% working interest (which presumably BHP didnt?) then the deal is different to that one?

Coincidentally my brother in law was a geologist for BHP and worked on that Algeria one too!

[Landlord]

blindswelledrat said:

Why didnt that quote work?

The & in his user name screwed it up.

[XJSJohn]

I don't think it was their best deal, but it was still a successful venture, and also an opertunity for them to get into the North African arena.

I probably knew or met your brother in law then, was he based in Nuthouse Place or in country?

Edited by XJSJohn on Wednesday 15th April 09:47

[blindswelledrat]

XJSJohn said:

I don't think it was their best deal, but it was still a successful venture, and also an opertunity for them to get into the North African arena.

I probably knew or met your brother in law then, was he based in Nuthouse Place or in country?

A 'large' Scot based in London but visited Algeria a few times.

[Justin_Tvr]

Alot of ventures are made with a 50/50 with the countries govt, the oil companies then plough in the technology and cash to start-up the project.

[XJSJohn]

blindswelledrat said:

XJSJohn said:

I don't think it was their best deal, but it was still a successful venture, and also an opertunity for them to get into the North African arena.

I probably knew or met your brother in law then, was he based in Nuthouse Place or in country?

A 'large' Scot based in London but visited Algeria a few times.

I do believe I know who you mean, and may or may not have had a few beers with him in the "Elusive Camel"!

[Shake&Bake]

For the most part in the Middle East (not worked in Iraq)what happens is that the project will go out to tender to the usual multinationals, on the pretence that they will incur all construction costs from green fields to exportation. Once the plant has begun exporting, the multinational will retain 70 - 80% profit untill such time they have recouped there construction, start up costs. Then it will revert back to local company having a 51% share with multi taking 49%.

It would be very rare for the likes of BP to want to have 100% interest, as with everything there is a huge risk factor (increased construction costs, unforeseen costs hard rock etc) so they would usually take a maybe 25 - 30% share and spread the risk to 2 - 3 other multis.

HTH

[blindswelledrat]

Justin_Tvr said:

Alot of ventures are made with a 50/50 with the countries govt, the oil companies then plough in the technology and cash to start-up the project.

As in- the oil company foots the exploration and development costs and they share the revenue (profit?) 50-50?

[Justin_Tvr]

blindswelledrat said:

Justin_Tvr said:

Alot of ventures are made with a 50/50 with the countries govt, the oil companies then plough in the technology and cash to start-up the project.

As in- the oil company foots the exploration and development costs and they share the revenue (profit?) 50-50?

Hard to generalise as its a case by case basis though this is sometimes how it goes.

[blindswelledrat]

[quote=Shake&Bake]For the most part in the Middle East (not worked in Iraq)what happens is that the project will go out to tender to the usual multinationals, on the pretence that they will incur all construction costs from green fields to exportation. Once the plant has begun exporting, the multinational will retain 70 - 80% profit untill such time they have recouped there construction, start up costs. Then it will revert back to local company having a 51% share with multi taking 49%.

It would be very rare for the likes of BP to want to have 100% interest, as with everything there is a huge risk factor (increased construction costs, unforeseen costs hard rock etc) so they would usually take a maybe 25 - 30% share and spread the risk to 2 - 3 other multis.

HTH
[/quote]


Good generalization. That was what I guessed.
OK, how might the same work for a smaller Oil Company:
To be more specific-the one that prompted this question was Heritage Oil.
THey have two significant finds in Uganda and Iraq. None of the information seems to specify thier exact deals other than thier working interest being 50% and 75% respectively.
I was trying to work out how much potential future revenue they might have hence the question

[Jasandjules]

blindswelledrat said:

I was trying to work out how much potential future revenue they might have hence the question

How long is a piece of string!?!? How large is the oil field, how successful are they at obtaining it etc.. and how many problems do they have along the way....

I have invested in a couple of small oil companies, it's quite simply a punt...

[XJSJohn]

BSW the question is do they plan on operating the find or to sell it (or a significant stake) on to a bigger operator who will then manage the extraction.

[blindswelledrat]

[quote=Shake&Bake]It would be very rare for the likes of BP to want to have 100% interest, as with everything there is a huge risk factor (increased construction costs, unforeseen costs hard rock etc) so they would usually take a maybe 25 - 30% share and spread the risk to 2 - 3 other multis.

HTH
[/quote]

I was told this by someone else and I have never really understood the logic behind it.
Take BP, for example. Their business is finding and developing oil and presumably they go to enormous lengths to find opportunities to do this. It is a risk industry.
So why give half away of every 'opportunity'?
On average the risks pay off in a big way. That is the whole basis of the industry. THus if you took all the risks and keep all the proceeds you are far far better off.
I dont get it.