International Offshore Leasing Practices

In formulating their leasing practices, some countries are interested in maximum government revenue, others in maintaining low prices, still others in the industrial spill-overs resulting from the development of a natural resource. As a consequence of these varied goals, the regulations differ greatly from country to country. Introduction Governmental leasing practices are designed to achieve optimum resource development consonant with the goals of a particular country, and to provide the resource owners with a share of the income. In most countries, these practices are the same offshore and on, the major exception being the U. S. Some countries are interested in maximum governmental revenue, others in maintaining low prices, and still others in the industrial spill-overs resulting from the development of a natural resource. As a consequence of these varied goals, the regulations may differ greatly from country to country. Most of the nations of the world have coastlines with attendant offshore areas available for development. To summarize the regulations for all of these countries would be an extremely complex and, in some ways, useless task. Many of the nations have no offshore production, and thus their regulations have no real impact except perhaps negatively. Some countries have detailed petroleum legislation, others have none. In both cases, most petroleum exploration and exploitation privileges given to companies in recent years have been let after negotiation or competitive bidding. Sometimes the contract bears little resemblance to the regulations, and in such cases we have used the latest agreement available to us. For the sake of simplicity only those countries will be studied that are major offshore producers, or whose regulations illustrate a system. It should be noted that in considering the regulations we have made no judgment about what constitutes an offshore area. In all cases we have accepted, as a matter of convenience, the definition of the nation concerned. Thus, in the case of Venezuela, Lake Maracaibo would be classified as an offshore area. Offshore regulations have been discussed in some detail in a recent publication,* and so win not be repeated here. The pertinent details of regulations and contracts have been summarized in Tables 1A and 1B. These summaries are by no means definitive; they set forth only the broad outline of the individual country's regulations, or contractual agreements. The latter will vary from agreement to agreement, but we have tried to arrive at a common denominator within each country. The United States The Federal system (Table 1A) in the U. S. and that used by the individual coastal states are quite similar. The major differences are in magnitude rather than type. For example, all use a competitive bonus bidding system, and all have a royalty on production. The royalty varies from a low of 5 percent on discovery leases in Alaska to a high of 50 percent in the California sliding scale system. JPT P. 247