Negotiation context oil and gas

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INTRODUCTION TO NEGOTIATIONS
Shirley B Mushi (PhD)
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Covered Areas

• Contract Negotiation Context
• The Negotiation Hurdle
• The Ownership Shift
• Negotiation Parameters

Key Negotiation issues to be covered after the
break
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Contract Negotiation Context
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Contract Negotiation Context Cont.....

• The hurdle is how can the challenge of rising
  expectations, desires and demands be satisfied?
• Naturally, a state sees the challenge involves
  overcoming technical engineering and related
  commercial hurdles in exploration and
  development. Plus of course control and
  management issues and hence the desire to set up
  state owned companies. 
• However, the first challenges are typically
  negotiation challenges.

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The Negotiation hurdle
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The Ownership shift
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Negotiation Parameters
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The Setting Parameter
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the setting Continued
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Worth emphasizing
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The Negotiator Parameter
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Expertise
Expert advisors are the motor of successful
negotiations
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The conflict-of-interest problem
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conflict-of-interest Cont...
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The time horizon parameter
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Withstand change
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The stability predicament
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The Catch
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The Catch

• Through stability clauses, oil companies limit
  the normal prerogatives of any legislature and
  government, such as their right to enact and
  issue protective environmental, labor, and other
  regulatory laws. 
• These clauses are immune even to judicial
  challenge by the host countrys domestic courts.
  National domestic courts are often disempowered
  in an oil contract.
• A government finds itself in the position of
  having to bargain with the oil companies for the
  right to modernize its legal system with the
  enactment of new safety standards, to maintain
  national fiscal stability by increasing its tax
  rates, and to adopt international treaties in the
  future.

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Note
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Can Developing countries avoid stability clauses?
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(No Transcript)
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The Information parameter
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The Contractual model Parameter
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The Content/ issues Parameter
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The Negotiating Process