Evolving Oil & Gas Contracts and Tax and Regulatory Risks

Abstract

In light of the recent resurgence of resource nationalism and the current economic troubles, natural resources companies are once again facing substantial risks to their investments, and their returns on investments, arising from governmental actions. However, these risks are much less about expropriation or confiscatory taxation as in the past, and are increasingly more to do with subtle changes to tax regimes, local content demands and customs or other regulatory changes. Many industry contracts entered into in the past have not fully addressed such risks, and more refined contracting strategies may be required by investors to adequately address these newer more subtle risks. This paper outlines some personal reflections of the author from the perspective of an international energy investor, given his involvement in oil & gas projects in 5 continents over the past decade; however, any reflections in this paper should not be considered to be those of the author’s employer nor to be referring to any projects of the author’s employer but rather to the experience of international oil companies (IOCs) generally across a variety of jurisdictions.