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A supply chain approach to enhancing return in upstream offshore oil and gas finance: a legal perspective

Tang, M. (2020). A supply chain approach to enhancing return in upstream offshore oil and gas finance: a legal perspective. (Unpublished Doctoral thesis, City, University of London)

Abstract

This thesis explores how returns to upstream offshore financing in oil and gas projects could be better enhanced through law and contracts. It investigates the matter from the lenses of the entire supply chain, an approach which is different from the other perspectives on achieving and preserving value. Conventional methods of inquiry have focused on the bilateral contractual relationship between financier and the oil and gas company, or on the wider question of risk-reward management, or variants of the two. The proposed supply chain perspective is not intended to replace the other methods of inquiry but offers up, in a modest way, a different perspective which can help with better contract design to enable a more stable return to the financing. The thesis will show how the upstream financing would be better buttressed from instability if the downstream revenues are properly protected contractually. While an oil and gas company has a direct contractual relationship with its financiers to secure funding for the project, the oil and gas company also has other direct relationship with third parties in the whole supply chain to secure a smooth operation of the project. An oil and gas company under a financing arrangement of an upstream offshore oil and gas project should be able to rely on some contractual mechanisms to transfer risks via contract chains, thus largely secure its repayment obligation under the financing arrangement.

The thesis in the main uses English law as the legal backdrop; however, where appropriate different legal systems would be alluded to, not only for comparison purposes, but to show how different legal principles affect the matter of contract design in oil and gas financing arrangements.

Downstream sales is the economic core of upstream offshore oil and gas projects. An oil and gas company needs sufficient revenue to fulfil its repayment obligation to its financier. When exploring the contribution of downstream sales, the emphasis of this thesis is on how contract design could be better utilised to secure revenue from downstream sales. A well-designed contract is one that set up a clear and confirmed contractual framework for parties to minimize costs and execute their rights and obligations, so that the original goal can be achieved, and business value can be maximized. In this connection, the thesis tests the function of renegotiation mechanism and pricing provisions under downstream sales contracts between private commercial parties in helping parties to secure sales even in a fluctuated market.

The author posits that although parties cannot change the external social or legal framework, they can still utilize their contracts as a private preventive and protective mechanism. By carefully drafting terms and conditions in those contracts, more capital resources can be utilized, cost can be saved, and risks can be better allocated, while execution and performance of the contracts can run more smoothly, preferably, against the backdrop of a supportive legal system such as English law

Publication Type: Thesis (Doctoral)
Subjects: K Law
Departments: Doctoral Theses
Doctoral Theses > The City Law School Doctoral Theses
The City Law School
Date available in CRO: 29 Apr 2021 15:52
Date deposited: 29 April 2021
URI: https://openaccess.city.ac.uk/id/eprint/26076
[img] Text - Accepted Version
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