NATIONALIZATION OF OIL AND GAS ENTERPRISES: NEW TRENDS AND STRATEGIES

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 13B
NATIONALIZATION OF OIL AND GAS ENTERPRISES: NEW TRENDS AND STRATEGIES
John Bowman
King & Spalding LLP
Houston

John Bowman, King & Spalding LLP, Houston John Bowman is a partner in King & Spalding's Houston office. Mr. Bowman is engaged in an arbitration and litigation practice representing primarily international oil companies and service companies in a wide range of commercial and investment disputes.

Introduction: "Nationalization" takes many forms

(1) Seizure of foreign-owned assets and facilities by force ["nationalization" strictu sensu]

(2) Change of law to increase State's participation share

(3) Changes of law to negate contract rights, especially stabilization provisions

(4) Forced contract renegotiation

(5) Other Forms - e.g., refusing to allow foreign investor to exit country except thru sale at "deep discount" price to State

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State Methods To Compel Contract Renegotiation

(1) New law requiring renegotiation of existing contracts

(2) Exercise of sovereign power to intimidate foreign investors and coerce contract changes

(3) State "invites" renegotiation by adopting new law changing fiscal terms of existing contracts

(4) Algerian "Two-Step": State imposes new taxes and royalties on NOC; NOC then...