Analyzing and Understanding Petroleum Fiscal Systems
03/08/2021 07:32
ORCID author identifier is: https://orcid.org/0000-0002-0946-9898
Upstream petroleum (Oil, Gas and Condensates) sector occupies very critical position and, accordingly, has influential impacts on the national economies of Iraq, some Middle East and North America- MENA countries, as well as many other developing countries that are endowed with such natural resources. This importance is manifested through many significant economic parameters at macro-economy level, including balance of payments, trade balance, State budget (covering both investment and recurrent allocations), current account, it’s share in GDP among others. Foreign exchange and revenues generated through this sector are the main fiscal determinants for financing socio-economic development plans. Moreover, ownership of petroleum resources is, mostly, vested to the people through legal instruments such as constitutions.
The development of petroleum resources requires, in most cases, different forms of cooperation with and the involvement of the international oil companies-IOCs through variety of legal means and instruments such as contracts, agreements, memoranda of cooperation or understanding, protocols and alike. The involvement of IOCs (regardless of their ‘home country’ and associated geostrategic and geopolitical implications) is thus regulated and, accordingly, impacted by different components of the "Fiscal System” that are highlighted in or premised on many host-country national laws, regulations, directives among others and then translated into specific provisions, i.e., articles, and inserted into and comprised in these binding documents, mostly named contracts or agreements, with an IOC or a consortium of IOCs.
Analyzing and professionally understanding upstream petroleum fiscal systems is a prerequisite qualification for all those who are involved directly in the development of petroleum resources in any country, particularly the related authorities and entities. Also, the comparative assessments of different fiscal systems is critically vital for national decision makers to be conversant with prior to deciding which system and what components of that system serve better their national aspirations in developing the upstream petroleum.
As a matter of practical and implementation purpose, understanding upstream petroleum fiscal system, of a concluded contract or agreement, is not and should not be confined only to those who are involved directly; reasonable familiarity with the components of the fiscal system of the concluded contracts is surely needed for many more others of officials at different branches of government as well as experts, research and consulting centres, academics, media, civil society organisation, economists, petroleum professionals and political leaders among others.
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Best regards,
Ahmed Mousa Jiyad,
Norway
2 August 2021
