A Review Paper on Upstream Petroleum Fiscal Systems

The petroleum industry is the industry of wealth and power. In many countries, whether petroleum is exported or imported, it dominates the economy. For any country, natural resources are the crown jewels. Few industries combine such a dramatic contrast between risk and reward so that countries with petroleum resources carefully guard this wealth . A petroleum fiscal system includes all the contractual and fiscal aspects that determine the relationship between the host government and the foreign oil companies [1] . This term defines the right and obligations of both the host government and the oil companies. The essence of these systems is how the oil wealth is shared between the investors and the host government or how costs are recovered and profit is shared . Upstream petroleum agreements are often called Exploration and Production (E&P) contracts. Exploration and production contracts and the associated fiscal systems may be of several types depending on the legal framework of the government and its adopted fiscal policy. Although the main types of E&P contracts and fiscal regimes were established a long time ago, the economic parameters of each type of upstream petroleum contract and fiscal system have considerably changed in the last decades. Upstream agreements in different countries do not have the same nature because each producing country adopts its particular agreements for petroleum exploration and production according to its economic and political situations. This chapter will present a general overview of the petroleum fiscal systems and their types, the historical development of petroleum agreements, the fiscal terms of each system, and the economic framework of each system.