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Why does the US sell off oil field reserves to international companies like BP and give them subsidies while countries like Kuwait keep the proceeds of domestic oil sales?
Wiki User
∙ 13y ago
BP obtained the rights through a lease bidding process to explore and produce oil in Mississippi Canyon block 252 (block where the oil spill occurred). The US does not "sell" blocks (permanent transfer of rights), but leases them and profits from their lease. If oil is discovered on the lease, BP must share the gross revenues (royalty) with the US government. I also note that with BP's interest in Block 252 is 65%, Andarko (US company) is 25% and Mitsui Oil Exploration, (Japanese co) is 10%.
Kuwait also has exploration areas both offshore and onshore, which it solicits international oil companies to bid on, similar to the US. In case of discovery, the Operator (commonly operator group) will produce the oil and the Kuwait government will share in a portion of the gross revenues.
We do not sell offshore oil reserves, only exploration blocks, which have an exploration risk of not discovering any oil. In the case of no discoveries, the US does make a profit and the exploration rights revert back to the US.
The US is different from Kuwait, in that the US has no national oil company.
Kuwait Oil Company can solicit international companies to participate in service contracts where the company is paid for operating an ongoing producing field or area and does not share in the gross revenues (royalty). Typically, this arrangement is used for more mature producing fields.
I have included a link on the offshore contract terms, which can become quite involved. The fiscal terms almost always result in a "regressive" form of taxation- the more oil is produced (or gross revenue), the higher the government's share of oil and or revenues.
I included a link to the Society of Petroleum Engineers, which sells technical books, and I would recommend strongly the book "International Petroleum Fiscal Systems and Production Sharing Contracts" by Daniel Johnston.
Wiki User
∙ 13y ago
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A government policy that protects domestic producers against international competition?
subsidies
What is the purpose of Subsidies?
To protect domestic producers against international competition
Which is an example of a government policy that protects domestic producers against international competition?
Subsidies
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