Petroleum Exploration And Production Rights: Allocation Strategies And Design Issues

Business & Finance, Industries & Professions, Industries
Cover of the book Petroleum Exploration And Production Rights: Allocation Strategies And Design Issues by Silvana Tordo, World Bank
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Author: Silvana Tordo ISBN: 9780821381670
Publisher: World Bank Publication: November 23, 2009
Imprint: Language: English
Author: Silvana Tordo
ISBN: 9780821381670
Publisher: World Bank
Publication: November 23, 2009
Imprint:
Language: English
Governments often pursue a variety of economic, social and political objectives through their allocation policies that go beyond the maximization of the net present value of the economic rent. The optimal allocation policy depends on a range of country specific and exogenous factors. Despite the variety of factors influencing optimal design, most countries use similar solutions. In particular, when auctions or administrative procedures are used, most governments opt for simple simultaneous multi-object sealed-bid rounds. While this may appear to be paradoxical, there is a practical explanation. It is true that more complex bidding forms might increase rent capture at bidding. However, the potential marginal gain is often limited, owing to most E&P projects' high level of uncertainty and risk. In addition market mechanisms, such as joint bidding and secondary markets, and the fiscal regime are widely used in the petroleum sector to correct inefficiency at the time of allocation.
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Governments often pursue a variety of economic, social and political objectives through their allocation policies that go beyond the maximization of the net present value of the economic rent. The optimal allocation policy depends on a range of country specific and exogenous factors. Despite the variety of factors influencing optimal design, most countries use similar solutions. In particular, when auctions or administrative procedures are used, most governments opt for simple simultaneous multi-object sealed-bid rounds. While this may appear to be paradoxical, there is a practical explanation. It is true that more complex bidding forms might increase rent capture at bidding. However, the potential marginal gain is often limited, owing to most E&P projects' high level of uncertainty and risk. In addition market mechanisms, such as joint bidding and secondary markets, and the fiscal regime are widely used in the petroleum sector to correct inefficiency at the time of allocation.

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