Evolving Oil and Gas Fiscal Systems: Where Are we Going?

Andrew B. Derman
Thompson & Knight, LLP, Houston, TX

Higher than expected oil and gas prices are impacting fiscal systems worldwide. This presentation will analyze how different fiscal regimes are being modified to reflect the reality of higher than expected oil and prices. Some legal and contractual systems contain fiscal terms that adjust with oil and gas prices so as to ensure investor returns or profits fall within a narrow range. Often, however, the legal and contractual systems do not restrain or limit the returns or profits of investors. We are witnessing a movement to deny investors returns or profits that are viewed as overly generous by host governments. This movement is especially prevalent in development countries, such as Bolivia and Venezuela, that are economically dependent on oil and gas, but this movement has even effected the United States where there are Congressional efforts to reimpose oil and gas windfall profit taxes. Host governments are considering and implementing legal and contractual initiatives that include: unilaterally revising fiscal terms, mandating contract renegotiations, requiring contract transformation or raising taxes. This presentation will review and analyze the fiscal changes that are being sought by host governments. Observations will be made as to the possible outcome of such initiatives and how oil and gas fiscal systems are likely to evolve.