Pure Service ContractsA service contract is a contract between a contractor and a host government that generally covers a defined technical service that must be provided or concluded for a certain period of time. The investment of the service company is generally limited to the value of the equipment, tools and personnel used to perform the service. In most cases, the reimbursement of the service contractor is determined by the terms of the contract, with little consideration given to project performance or market factors. Payment for services is usually based on daily or hourly rates, a turnkey fixed rate or other specified amount. Payments can be made at specified intervals or after the service is completed. Based on our understanding and decades of experience in the oil and gas industry, our oil and gas team provides all the commercial, financial and technical services necessary to conclude this agreement. Again, the financial structure of an oil and gas concession, as extrapolated by the historical mining code in each country, is quite simple, as it is based on two phases, exploration and production. Of course, the operating companies were very reluctant to accept these changes, not only because they reduced their growth margins, but also because they had no guarantee of lowering these royalties if the price of a barrel fell again during the remaining period of the concession. Once the principles of the agreement have been defined, the standard contract will have to be detailed to take into account the specific issues and conditions associated with each project. Three types of fundamental and alternative agreements generally determine the relationship between government and investors. Joint ventures can be created either between the recipient country and the foreign oil company or between several investors. The main objective of this article is to examine the balance of interests between the host Member State and the foreign investor, taking into account here the first type of international relations indicated.
It is fundamental to understand that the choice of contract is as linked to rhetorical needs as to anything else. The Technical Assistance Agreement is one of the few trade agreements that can be used to exploit the technological and management know-how and capital resources of multinationals, while allowing the host country to retain the presence of its state oil company. Some concessions made in Abu Dhabi with BP, ExxonMobil or Total may be 65 years old.