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Executing projects on schedule is particularly important in the Deepwater, where massive capital investment coupled with first oil delays has a pernicious impact on project NPV. Oil companies, nevertheless, routinely farm-out equity in order to reduce investment risk, hoping partners will not increase development timing risk. This paper addresses the implications of partner selection on project execution time, thus providing firms a rigorous foundation of knowledge upon which to formulate partnering and portfolio management strategy. This study is the result of both qualitative and quantitative analysis. The quantitative analysis is presented here, including the design and confirmative testing of a predictive causal model incorporating empirical deepwater joint venture (JV) field data and structural equation modeling (SEM) methods. The database used in this paper included all Deepwater JVs globally. A number of findings emerged from the statistical analysis, highlighting the impact of partner selection on project delivery time. I found that neither the number of partners within a JV, nor the operator's equity ownership above a controlling interest had a significant effect on first oil timing. Operator experience, however, had a significant beneficial impact on development time, whereas non-operator experience within the JV had no impact. While non-operators may have limited impact on a JV's development speed, the experience non-operators gain within a JV is critical to their effectiveness as future operators. Remarkably, an operator's past non-operational experience is more beneficial to JV project delivery time than their past operational experience. Thus, the best operators have been (and continue to be) active non-operators. These results suggest that the benefits of a diversified holding of operated and non-operated projects include not only fiscal portfolio risk reduction but also enhanced project management. This study presents quantitative evidence that portfolio risk reduction through equity diversification (i.e., farm-out strategies) does not reduce project value via revenue delays. Furthermore, this research quantifies the benefits of nonoperator ownership. Practitioners may find this research useful to optimize their JV portfolios and develop strategies for partner selection. Governments can use these findings to help construct natural resource development policy (lease sale guidelines). Introduction What is the impact of control on alliance success? Does the distribution of control within joint ventures (JVs) impact results? Does it matter which partner within a JV controls operations? Economic governance researchers approach this topic from a number of different avenues. Transaction cost economists suggest that alliances are optimized through the reduction of transaction costs (Williamson, 1975, 1985, 1991, 1996). Property rights advocates note that control rights need to be optimally distributed to ensure success (Grossman and Hart, 1986; Hart and Moore, 1990; Hart, 1995; Gibbons, 2004). Both transaction economics and property rights theories provide a foundation upon which to address ongoing JV governance questions within the oil industry. It is possible to recast this economic debate within the construct of oil and gas development to gain insight into JV partner selection and project management optimization. We should note that these economic theories may be particularly applicable to our query, for our industry employs a somewhat unique alliance structure formed under a joint operating agreement (JOA) in which operational control is separated from ownership. This allows us to independently observe the impact of control rights and ownership on a single measure of alliance success (i.e., development timing).
Executing projects on schedule is particularly important in the Deepwater, where massive capital investment coupled with first oil delays has a pernicious impact on project NPV. Oil companies, nevertheless, routinely farm-out equity in order to reduce investment risk, hoping partners will not increase development timing risk. This paper addresses the implications of partner selection on project execution time, thus providing firms a rigorous foundation of knowledge upon which to formulate partnering and portfolio management strategy. This study is the result of both qualitative and quantitative analysis. The quantitative analysis is presented here, including the design and confirmative testing of a predictive causal model incorporating empirical deepwater joint venture (JV) field data and structural equation modeling (SEM) methods. The database used in this paper included all Deepwater JVs globally. A number of findings emerged from the statistical analysis, highlighting the impact of partner selection on project delivery time. I found that neither the number of partners within a JV, nor the operator's equity ownership above a controlling interest had a significant effect on first oil timing. Operator experience, however, had a significant beneficial impact on development time, whereas non-operator experience within the JV had no impact. While non-operators may have limited impact on a JV's development speed, the experience non-operators gain within a JV is critical to their effectiveness as future operators. Remarkably, an operator's past non-operational experience is more beneficial to JV project delivery time than their past operational experience. Thus, the best operators have been (and continue to be) active non-operators. These results suggest that the benefits of a diversified holding of operated and non-operated projects include not only fiscal portfolio risk reduction but also enhanced project management. This study presents quantitative evidence that portfolio risk reduction through equity diversification (i.e., farm-out strategies) does not reduce project value via revenue delays. Furthermore, this research quantifies the benefits of nonoperator ownership. Practitioners may find this research useful to optimize their JV portfolios and develop strategies for partner selection. Governments can use these findings to help construct natural resource development policy (lease sale guidelines). Introduction What is the impact of control on alliance success? Does the distribution of control within joint ventures (JVs) impact results? Does it matter which partner within a JV controls operations? Economic governance researchers approach this topic from a number of different avenues. Transaction cost economists suggest that alliances are optimized through the reduction of transaction costs (Williamson, 1975, 1985, 1991, 1996). Property rights advocates note that control rights need to be optimally distributed to ensure success (Grossman and Hart, 1986; Hart and Moore, 1990; Hart, 1995; Gibbons, 2004). Both transaction economics and property rights theories provide a foundation upon which to address ongoing JV governance questions within the oil industry. It is possible to recast this economic debate within the construct of oil and gas development to gain insight into JV partner selection and project management optimization. We should note that these economic theories may be particularly applicable to our query, for our industry employs a somewhat unique alliance structure formed under a joint operating agreement (JOA) in which operational control is separated from ownership. This allows us to independently observe the impact of control rights and ownership on a single measure of alliance success (i.e., development timing).
The petroleum industry is one of the largest, significant, and most complicated global industries in the world. Despite the numerous crises experienced in the oil and gas industry, companies continue to invest money in new projects for the development of hydrocarbon resources. The industry has incredible opportunities yet untapped. However, several factors such as a lack of investment resources hamper the dynamic development of the industry. Sources of financing are needed to solve this problem. Sourcing for funds could be very frustrating, and time-consuming, especially in times of economic recession where bank loans could be at a provocative interest rate. Several studies have explored and recommended conventional and alternative funding options for oil and gas companies in Nigeria, however, no study has comprehensively presented the various alternative funding options with practical examples as applicable in the Nigerian oil and gas industry. This paper conducted a comprehensive review of various funding options available for projects in the hydrocarbon industry with mentions of successful project funding case studies from the Nigerian landscape. By examining case studies of successful funding initiatives by certain oil and gas companies in Nigeria, in-depth studies could be done to identify the key factors contributing to their success. This would serve as a roadmap for other companies, specifically indigenous marginal field operators.
The Organisation of Petroleum Exporting Countries (OPEC) is a permanent inter -governmental organisation composed of member states whose economies mostly rely on revenues from oil export. The OPEC's twelve members work together to coordinate the overall oil price in the world market. So far, there have been numerous studies on OPEC's influence on the world petroleum market. Current study mainly looks at the role of OPEC in development of the member countries. Investigates what kind of benefits does the member countries get from being member of the Organisation of Petroleum Exporting Countries and its influence on the economic development of the member countries.
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