What Is An Upstream Agreement

The upstream sector of the oil and gas industry includes all stages, from preliminary exploration to resource recovery. Upstream companies can be involved in all stages of this stage of the life cycle of the oil and gas industry, or they can only be involved in part of the upstream sector. Another name for the upstream oil sector, which is actually more representative of what is happening at this stage of an oil and/or gas asset`s development, is the exploration and production (E&P) sector. An oil agreement defines the framework for an investor to conduct e&p activities in a defined area. The oil deal will address a wide range of issues, the most important of which are summarized in the table below. Depending on the type of oil treaty system used in a particular jurisdiction, these issues may be formulated differently and may reflect with varying importance the priorities that are most relevant to that jurisdiction. The SPI team has been directly involved in the drafting and negotiation of some of the most important upstream international agreements. These include production-sharing agreements after the opening of the former Soviet Union to Kazakhstan and Azerbaijan in the 1990s; and technical services agreements in Iran and Iraq. Team members have also been involved in the development of innovative legal and business solutions for association agreements and the drafting and negotiation of exploration agreements with Iran for exploration in the Caspian Sea. Members of the SPI team advised governments on oil and gas legislation, as well as parliamentarians and NGOs on upstream agreements under the EITI. Risky service contracts are the least used type of agreement among the three mentioned here.

They have been used by states that take a nationalist approach, or by countries like Venezuela, Iran or Iraq, which have long had oil production. Under this type of agreement, the host State entrusts the services of an oil company or consortium only to benefit from its financial and technical expertise. The company or consortium assumes the risk and responsibility and is reimbursed through a service fee, which is usually paid in cash. An example of this type of deal is the now-gone Iran buyout deals, which ultimately proved too cumbersome for any private investor. Angola, Egypt, Kenya, Tanzania, Mozambique and Uganda are among the countries that follow the production sharing agreement model, while Ghana uses the exploration and production concession contract model. Oil and gas exploration is an important part of the upstream sector. Oil exploration requires highly sophisticated techniques, and the technology available for oil exploration is advancing rapidly. For more details on typical agreements found in UK upstream oil and gas projects, see Practice Note: Upstream Oil and Gas Agreements on ukcs. .

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