Oil Royalty Research Articles

The Politics of Federalism: Oil Royalty Claim of Sabah

The close relationship between the federal government and the state government of Sabah under the leadership of Barisan Nasional (BN) is considered to give the latter an advantage to claim oil royalty higher than five percent. The concept of federalism implemented in this country is the core of the agreement signed between the federal government, Petronas, and the state government of Sabah. This study used primary data obtained through interviews with two politicians and information from the Sabah State Legislative Assembly Statement. It also gathered secondary data from relevant articles and local newspapers pertaining to the issue. The findings revealed that despite the close relationship between the federal government and the Sabah state government, it did not give an advantage for the latter to claim for higher oil royalty.

Assessing Literatures on the Dependence of Stock Market Development on Upstream Oil Royalty Revenue and Systematic Risk Factors: Highlighting the Relevance of Dutch Disease Theory and Capital Asset Pricing Model

The paper assessed past literatures on the dependence of stock market financial development on upstream oil royalty revenue account and systematic risk factors and evaluating the relevance of Dutch Disease theory and capital asset pricing model. Theoretical approach supports the role of oil royalty revenue vis-à-vis oil price volatility, foreign exchange rate risk, financial liquidity risk and interest rate risk in determining the performance and financial development of stock market. It is well documented in research that stock prices react to information on oil revenue, crude oil production, monetary policy interest rate, foreign exchange rate uncertainty and diaspora cash remittances. Traditional valuation of stock is based on capital asset pricing model but the modern relevance is in doubt due to anomalous performance of investors and behavioural sentiments. Stock markets of emerging economies over the past few decades have witnessed remarkable growth as indicated by the value and volume of trade in the markets along with the level of capital inflows from developed markets, thereby providing numerous opportunities for investments. The development of the stock market is vital as it provides more opportunities for greater mobilization of funds from with and diaspora remittances and better efficiency in resource allocation. Nevertheless, investment returns in the stock market of developing economies continue to be more reactive to changes in economic fundamentals due to their fragile and volatile nature. This makes them even more unpredictable and unstable unlike the stock markets of developed economies, which are known to be more stable. Stock market financial development is not symptomatic of Dutch Diseases based on the fact that Oil-induced Dutch Disease assumes an oil sector which largely contributes to the economy while so many vital systematic risk factors affects stock market development. Optimistically this study along with other previous and future studies will increase the knowledge about Dutch Disease and will contribute to lessen the harmful effects that Dutch Disease causes. In spite of the common perception that oil is extremely important for financial and economic dynamics, there is, unexpectedly, a dearth of research on how oil revenue and prices influence stock market financial development.

DOES OIL DEPENDENCE AFFECT REGIONAL WEALTH? A REGIONAL STUDY FOR THE MUNICIPALITIES OF THE STATE OF RIO DE JANEIRO

The aim of this study is to analyze the regional effects of oil royalty dependence on the local economic development of municipalities of the Rio de Janeiro state. To do so, we used spatial econometric models to estimate the local and spillover effects of royalty dependence on the economic local product. The main results were derived based on the Spatial Autoregressive Combined model (SAC) estimated by Generalized Moments (GM). The study's contribution is to address the natural resource curse debate through its regional perspective by estimating the direct, spillover, and total effects of oil royalty dependence on economic product, which is a groundbreaking approach for the natural resource curse debate. The results show that both the direct and spillover effects are negative and significant, indicating that there is evidence of the presence of a regional natural resource curse in the municipalities of the Rio de Janeiro state.Keywords: Spatial Econometrics; Natural Resource Curse; Econometrics; Spillover effects; Spatial Panel Data Models; Method of Generalized MomentsJEL Classifications: C33, E69, N56.DOI: https://doi.org/10.32479/ijeep.11737

Eficiência na aplicação de recursos de royalties de petróleo: identificação dos municípios brasileiros de referência

Em um contexto que apresenta a oportunidade de discussão acadêmica sobre a qualidade do recebimento das receitas de royalties de petróleo e sobre a eficiência na aplicação desses recursos, esta investigação teve como objetivo identificar os municípios brasileiros receptores de royalties de petróleo que podem ser considerados referência na aplicação dos recursos orçamentários. A relevância do estudo reside nas discussões acadêmicas e políticas sobre o tema geradas a partir da descoberta de grandes reservas de petróleo no território brasileiro e as consequentes alterações na legislação sobre o modelo de partilha desses recursos. Utilizou-se o instrumento Data Envelopment Analysis, modelo CCR, para verificação da eficiência na alocação dos recursos públicos de 115 municípios localizados em toda a extensão territorial brasileira, considerando como variáveis-insumo as receitas tributárias e as receitas de transferências correntes, e como variável-produto o Índice de Desenvolvimento Humano Municipal, o que foi precedido por uma análise de clusters. Os resultados indicaram que mais de 70% dos municípios estudados possuem escore de eficiência abaixo de 0,4, sugerindo acentuada diferença entre os resultados alcançados pelos municípios benchmark e os demais municípios não localizados na fronteira de eficiência, o que coaduna com estudos anteriores que apontam indícios de que os recursos destinados para a minimização dos efeitos das externalidades negativas provenientes das atividades de extração de petróleo possam não estar gerando os resultados desejados quanto à melhoria no desenvolvimento humano de seus receptores.

The Implications of Petroleum Conflict in the Context of the Federal Government and the Kelantan State Government Relations

Malaysia is one of those countries that rely on petroleum-based revenues as one of its main sources of national income. The majority of its oil fields are found in the coasts of Kelantan, Terengganu, Sabah and Sarawak. Upon the discovery of these, Malaysia had incorporated a national petroleum company named “Petronas” on 17th August 1974 to manage all related matters to exploration and exploitation of petroleum in the country. Subsequently, on 1st October 1974, the Parliament had passed Petroleum Development Act 1974 that, inter alia, gives the power and right for exploration and exploitation of petroleum to Petronas and to pay 5% of oil royalty to the petroleum-producing states. However, due to ideological differences between the federal government and the state government of Kelantan, this lucrative natural source has found itself at the center of conflict between the two. The study analyzes the implication of such a petroleum-based conflict against the federal-state relations within a context of a democratic Malaysia. In order to so, as far as oil royalty payment arrangement is concerned, the concept of federalism was applied as a tool of analysis to evaluate the extent of the effectiveness of the relations between the federal government and the state government of Kelantan. Pursuant to that, the discussion of this study revolves around qualitative data approach based on documents related to the oil royalty agreement between the federal government and state government of Kelantan. The analysis has indicated that Malaysia, as a federalist country, has failed to put into practice the true concept of federalism. One of the major reasons behind this was conflicting political interests. The impacts of such could be seen from the distinctive way the federal government treated the state governments, in this case Kelantan, whose state government was formed by the opposition political party. The Malaysian federal government's extensive power and the different constitutional interpretation also contributes to the conflict especially in the context of the federal legislative policies that often being perceived as discriminating against the state government.

An analysis of compensation collected for the depletion of Angola’s oil resources

The African continent contributes approximately 12% of the world’s oil production. Despite this wealth, many citizens of oil-rich African countries live in poverty, often because their governments do not collect sufficient compensation for the depletion of oil resources to fund national development or do not utilise compensation collected for the benefit of the people. In this article the extraction tax regime to collect compensation on Angola’s oil resources is compared to the regimes in other oil-rich countries to identify aspects from which Angola can learn with regard to the compensation systems of those countries. It is concluded that Angola may be able to improve its extraction tax regime by learning from governance measures over natural resource funds in Norway and Canada, by implementing measures to increase its oil royalty income in times of economic prosperity and by defining deductible costs more specifically in its production-sharing agreements.

No One Will Scratch My Back: Iranian Security Perceptions in Historical Context

Iranians support a policy of deterrence because their perception of Iran's security is colored by historical experiences. For Iranians, geopolitical realities together with national psychology define national security. This article attempts to explain the national psychology, and in doing so point to a path of US-Iranian policy convergence. The United States should avoid making the mistake Britain made in 1951, making an oil royalty issue a matter of national pride for Iranians. The current nuclear dispute could turn into an object of Iranian national pride, liberty, and independence. The question whether a nation without access to a nuclear fuel cycle could be anything other than a dependent consumer, has already been posed.

99/03047 Resolving the federal oil and gas royalty valuation dispute: a free market approach

99/03047 Resolving the federal oil and gas royalty valuation dispute: a free market approach

The Missing Link in Royalty Analysis: An Essay on Resolving Value-Based Royalty Disputes

The oil and gas lease is intended to document a business transaction between the landowner and oil and gas developer. The developer obtains the right to enter the landowner's property to search for, develop, produce, and take title to oil and gas. The landowner is compensated with a royalty on oil and gas produced from the land. The royalty may be an actual share of the oil and gas produced, or it may be a payment of money. A combination of the two occurs frequently: a share of oil production for oil royalty and a payment of money for gas royalty. In most cases, if production is obtained from the leased land, the royalty will become the primary source of landowner compensation under the leasing transaction. Once the oil and gas lease is entered into, and production has been obtained, there are only two ways a lessor can maximize his royalty income: (1) increase the volume of production; (2) increase the value of production. The situs of the lessor's volume- and value-enhancing efforts is often a courthouse. This article focuses on the value-enhancing issues associated with the oil and gas lease and offers what the author believes is a frequently applied, but previously unarticulated analysis for resolving value-based royalty disputes. This "missing link" analysis focuses on a fundamental issue courts must address to properly resolve lessor/lessee value disputes. When does the lease relationship come to an end? The analysis is neutral as to which party should prevail. The analysis merely asks the critical question that should assist in resolving many collateral royalty value disputes when answered.

Effects of N, P, and K Fertilization on Barley Grown in a Newly Cleared Subarctic Soil1

AbstractAlaska has vast areas of undeveloped land with the potential for agricultural expansion. To develop renewable resources from oil royalty monies, the state has initiated a 24,000 ha agricultural demonstration project near Delta Junction, Alaska. Little is currently known, however, concerning the natural fertility of these virgin soils. A 43 factorial experiment was established, with barley (Hordeum vulgare L. var. ‘Otra’) as the test crop, to determine responses to fertilization the first 2 years after clearing on a Typic Cryopsamment soil. Fertilizer was applied before seeding each year at 0, 45, 90, and 135 kg N/ha; 0, 34, 68, and 102 kg P/ha; and 0, 34, 68, and 102 kg K/ha. Grain yields, protein contents, and subsequent soil‐test levels were measured.Nitrogen increased grain yields from 2 quintal/ha with no applied N in 1979 to 25 quintal/ha with 135 kg N/ha and from 4 quintal/ha with no applied N in 1980 to 31 quintal/ha with 135 kg N/ha. The yield response to N was linear throughout the 0 to 135 kg N/ha range in 1979, and both the linear and quadratic regression terms were significant in 1980. Cooler initial soil temperatures, lack of native residual nutrients, or N immobilization may have contributed to lower overall yields in 1979. Grain protein increased linearly with added N both years. Phosphorus increased yield up to 34 kg P/ha, with little response beyond that in either year. In 1979, both P and K were significant in increasing the yield response to N. In 1980, only K increased the yield response to N. Neither P nor K fertilization significantly increased grain protein contents.Multiple‐regression equations were developed to predict grain yields and protein contents with rates of fertilizer applied. When considering only N, P, and K fertilizer additions, equations with relatively high coefficients of determination were obtained for the first 2 years of production (Yield: R2 = 0.929,0.937 for 1979 and 1980; and protein: R2 = 0.684, 0.842 for 1979 and 1980, respectively). Thus, the application of fertilizer accounted for much of the variation in yield and protein contents.

U.S. Offshore Oil and Gas Lease Royalty Bidding

U.S. offshore oil and gas lease royalty bids were analyzed. Bids appear to be normally distributed. Using a simple investment model, the trade-off between bonus and royalty bids for an investor was examined. Higher royalties can result in lost recovery when (1) marginal deposits are not developed and (2) productive leases are shut in earlier. Introduction U.S. offshore oil and gas leases were issued exclusively as a result of bonus bids from 1954 to 1974. Since then, leases have been offered and issued to royalty bidders in two sales, although bonus bidding has remained the predominant system. With the emergence of royalty bidding, we undertook to examine the character of the royalty bids that have been submitted and to assess the impact of royalty bidding on subsequent production. In this study, we examined the statistical distribution of royalty bids. Government presale estimates of royalty bid leases were compared with royalty bids received; the results of this comparison are contrasted to the corresponding finding with bonus bids. We used a simple investment model to predict the trade-off between royalty and bonus that predict the trade-off between royalty and bonus that a bidder would bid. Finally, we examined how royalty affects recovery in two ways:decisions not to initiate production anddecisions to cease production that would continue if the royalty were production that would continue if the royalty were lower. Statistical Analyses of Royalty Bids The two sales in which leases were offered by royalty bidding were held Oct. 15, 1974, in Louisiana and Oct. 27, 1977, in Alaska. Of the 10 such leases offered in the Louisiana sale, eight received a total of 57 bids and all were issued. Through 1979, six of the eight leases were relinquished. Of the two leases still active, one had production starting in 1979. In the Alaska sale, 46 leases were offered to royalty bids. Of these, 30 received a total of 98 bids, and all leases receiving bids were issued. Through 1979, none of these Alaska royally bid leases were relinquished or had any production. Detailed data about these leases, the bids, and bidders are available. Fig. 1 is a plot shown on normal probability graph paper of the bids received for lease OCS No. G2905 paper of the bids received for lease OCS No. G2905 (Oct. 15, 1974, Louisiana sale). Thirteen bids were received for this lease, the largest number of bids for any of the royalty bid leases. The linearity of the plotted points in Fig. 1 is typical and suggested the plotted points in Fig. 1 is typical and suggested the hypothesis that royalty bids for leases may be normally distributed. Analogously, bonus bids have been treated as log-normally distributed. Taking the royalty bids as normally distributed, the pooled standard deviation of the bids on the 32 leases with two or more bids in both sales was 13%. Detailed statistical results have been given elsewhere. That result provides a crude but pragmatic measure of the disagreement between bidders' royalty bids.