Tag Archive for: oilandgas

Trump's first-day executive order aimed to boost US energy by easing oil and gas restrictions and revoking Biden's climate policies.

American energy – Trump signs executive order to unleash it

U.S. President Donald Trump signed on his first day in office an executive order to unleash American energy by easing the barriers to oil and gas extraction and production and revoking a series of climate orders by President Biden.

As pledged in the campaign and widely expected to take place on President Trump’s first day in office, the executive order follows the declaration of a national energy emergency.

The declaration includes measures to expedite the delivery of energy infrastructure, emergency approvals by agencies “to facilitate the identification, leasing, siting, production, transportation, refining, and generation of domestic energy resources, including, but not limited to, on Federal lands.”

In the executive order, the President’s sweeping new energy policy is to “encourage energy exploration and production on Federal lands and waters, including on the Outer Continental Shelf, in order to meet the needs of our citizens and solidify the United States as a global energy leader long into the future.”

The Executive Order

The President’s executive order also aims to establish the U.S. position as the leading producer and processor of non-fuel minerals, including rare earth minerals, “which will create jobs and prosperity at home, strengthen supply chains for the United States and its allies, and reduce the global influence of malign and adversarial states.”

The new policy also includes the elimination of the “electric vehicle (EV) mandate” and the promotion of true consumer choice, which is essential for economic growth and innovation, by removing regulatory barriers to motor vehicle access. The measure would ensure a level regulatory playing field for consumer choice in vehicles, the Trump White House said.

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Source: Oil Price

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Learn how small landowners can navigate oil and gas leasing with this beginner's guide, covering key terms, benefits, risks, and tips for protecting your interests.

Oil and gas leasing for small landowners: A beginner’s Guide

DISCLAIMER: We are not financial advisors. The content on this website related to Oil and gas leasing for small landowners is for educational purposes only. We merely cite our own opinions. To make the best financial decision that suits your own needs, you must conduct your own research. Seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

For many small landowners, the prospect of oil and gas leasing can feel both exciting and daunting.

Energy companies often approach small landowners with offers to lease their land for mineral extraction as they explore new reserves. These leases can present a significant financial opportunity, but understanding the ins and outs of the leasing process is crucial to making informed decisions. For those new to the world of oil and gas leasing, the process can seem complex and overwhelming, especially when it comes to negotiating terms, understanding legal aspects, and knowing how to protect your interests.

This beginner’s guide will take small landowners step-by-step through the process of oil and gas leasing, highlighting the key elements, common practices, and potential pitfalls. By the end, you will be better equipped to navigate the world of oil and gas leasing and decide whether it’s a worthwhile venture for your land.

Understanding Oil and Gas Leasing

At its core, oil and gas leasing is a legal arrangement in which a landowner grants an oil or gas company the right to explore, extract, and produce minerals from beneath the land. The landowner typically receives payment in the form of an upfront bonus payment and a percentage of the revenues derived from the oil and gas extracted, known as royalties. This lease is typically for a set period, often ranging from a few years to decades, and may be subject to renewal or renegotiation.

Leasing your land for oil and gas extraction offers potential financial rewards, but it also comes with risks and responsibilities. Before diving into a lease agreement, it is crucial to understand the factors that affect the terms of the lease, how to negotiate favorable conditions, and how to protect your interests in this potentially lucrative venture.

What You Need to Know Before Leasing

Before signing any lease agreement, it’s important to gain a solid understanding of what leasing your land for oil and gas extraction entails. Below are the key points every small landowner should consider.

Understanding the Types of Mineral Rights

The first step in the leasing process is understanding the different types of rights you may own as a landowner. There are two primary types of mineral rights involved in oil and gas leases: surface rights and subsurface (mineral) rights.

  • Surface Rights: These rights give you ownership and control of the land’s surface, such as the land where your house or farm sits. However, owning surface rights does not necessarily mean you own the minerals beneath the land.
  • Subsurface Rights: These rights pertain to the minerals below the surface of the land, including oil, gas, coal, and other valuable resources. If you own subsurface rights, you have the ability to lease those rights to an oil or gas company for exploration and extraction.

It’s important to note that not all landowners own both surface and subsurface rights. In many cases, mineral rights may have been sold or leased to another party prior to your ownership. Therefore, before you enter into any lease agreement, you’ll need to determine whether you hold the subsurface rights to the land.

The Benefits of Oil and Gas Leasing

Leasing your land for oil and gas extraction can bring numerous benefits. Below are some of the most compelling reasons small landowners may choose to lease their property:

  • Upfront Payment: Many oil and gas companies offer an initial bonus payment when leasing land. This payment is typically paid as a lump sum, which can provide immediate financial relief or serve as a source of extra income.
  • Royalties: In addition to the upfront bonus, landowners typically receive a percentage of the revenue generated by the sale of the oil or gas extracted from the land. This ongoing income stream is known as royalties and can continue for many years, depending on the length of the lease.
  • Increased Land Value: If oil or gas reserves are discovered on your land, it can dramatically increase the value of your property. Even if extraction doesn’t happen immediately, leasing may raise the perceived value of your land for future transactions.
  • Negotiation Leverage: Small landowners may have leverage in negotiating better terms for their lease agreement, especially in areas with high demand for oil and gas exploration. By entering into a well-negotiated lease, you can maximize the financial potential of your land.

Potential Risks of Leasing Oil and Gas Rights

While there are clear financial benefits to leasing your land, there are also risks that must be weighed carefully. Some of the key risks associated with oil and gas leasing include:

  • Environmental Impact: Oil and gas extraction can lead to environmental damage, including contamination of soil, water, and air. The risk of spills, leaks, and other environmental hazards is something to carefully consider before signing any lease agreement.
  • Land Use Restrictions: Once you lease your land for oil and gas production, the company may have the right to access and alter the surface of your property. This can affect your ability to use the land for other purposes, such as farming, construction, or recreation.
  • Long-Term Commitment: Oil and gas leases often span many years, sometimes decades. This long-term commitment can be challenging if your circumstances or priorities change. Additionally, the extraction process may take several years before it becomes financially lucrative.
  • Market Fluctuations: The value of oil and gas is subject to fluctuating market prices, meaning that royalties could vary over time. If market conditions deteriorate, you may receive less revenue than expected.

How to Start the Leasing Process

Once you have a clear understanding of the potential benefits and risks, you can begin the process of leasing your land for oil and gas exploration. Below are the general steps that small landowners can follow to begin the leasing process.

Research and Consult Experts

Leasing oil and gas rights is a complex process that requires a strong understanding of the legal, financial, and environmental implications. It’s highly advisable to consult with professionals, such as a landman, attorney, or mineral rights specialist, who can help guide you through the process. A landman is a professional who negotiates oil and gas leases on behalf of landowners and can help you understand your options.

Your attorney can review any lease agreements to ensure they’re in your best interest, and mineral rights specialists can provide insights into current market conditions, ensuring you’re not undervaluing your land.

Understand Your Property’s Potential

Before negotiating a lease, it’s essential to evaluate your property’s potential for oil and gas extraction. Research local geology and drilling activity to get a sense of the region’s potential reserves. You may also want to reach out to local oil and gas companies or landmen to get an appraisal or estimate of the value of your land’s mineral rights.

Negotiating Lease Terms

Once you’re ready to move forward, you’ll need to negotiate the terms of the lease. A well-negotiated lease is crucial to maximizing the benefits of leasing your land while protecting your interests. Below are the key terms that should be addressed in the lease:

  • Bonus Payment: The bonus is an upfront payment made by the oil and gas company to secure the lease. The landlord typically bases this payment on the size of the land they lease and the perceived potential for resource extraction.
  • Royalty Rate: This is the percentage of the revenue you will receive from the oil and gas extracted from your land. Royalty rates generally range between 12.5% and 25%, but this can vary depending on the market conditions and your negotiating power.
  • Lease Duration: Oil and gas leases are usually for a specific term, often lasting 3 to 5 years, with an option for the company to extend. In some cases, oil and gas companies can keep the lease active as long as they are producing the reserves.
  • Surface Use Rights: While the oil company may need to access your land to drill or build infrastructure, the lease should specify how they can use your surface. The team specifies where drilling can take place, where it can install equipment, and how it should restore the land once extraction is complete.
  • Termination Clauses: It’s essential to understand how the lease can be terminated if the oil or gas company fails to meet their obligations or if production is not profitable. You should also address how you will resolve disputes.

Protecting Your Interests as a Landowner

When leasing your land for oil and gas extraction, it’s essential to protect your interests. Some strategies to consider include:

  • Environmental Protection Clauses: Ensure that the lease includes provisions that protect the environment and require the oil company to follow all environmental regulations. This might include measures for spill prevention, waste management, and land restoration.
  • Monitoring: You may want to include terms that allow you to monitor the activity on your land. This could involve regular inspections or access to reports on drilling progress, production, and environmental impact.
  • Right of First Refusal: If you decide to sell your mineral rights or enter into a new lease agreement, include a clause giving you the right of first refusal. This allows you to be the first to negotiate with a potential lessee before you offer the property to others.
  • Legal Representation: Always have a qualified attorney review the lease agreement to ensure your rights are protected. The legal language in these contracts can be dense, and a professional can help you navigate complex clauses.

In Conclusion

Leasing your land for oil and gas production can be a lucrative opportunity. It’s essential to approach the process with caution and knowledge. As a small landowner, understanding the basics of oil and gas leasing, including the types of rights you own, the benefits and risks of leasing, and the key elements of a lease agreement, will empower you to make informed decisions.

By consulting with experts, conducting thorough research, and negotiating favorable lease terms, you can maximize the financial benefits of leasing while protecting your land and long-term interests. With careful planning and consideration, oil and gas leasing can be a rewarding venture for small landowners seeking to capitalize on their property’s mineral potential.

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President-elect Donald Trump plans to reverse Biden's offshore drilling ban; however, it requires congressional approval to do so.

Trump plans to ‘immediately’ reverse Biden’s ‘ridiculous’ ban on new oil and gas drilling along US coast

President-elect Donald Trump said he plans to immediately reverse President Biden’s new ban on oil and gas drilling. This is along most of the U.S. coastline. He faces major roadblocks under a 70-year, irrevocable law.

Throughout his 2024 presidential campaign, Trump vowed that, if elected, he would expand oil and gas drilling. This is an effort to bolster American-made energy.

However, Biden issued an 11th-hour executive order Monday morning to forestall such actions. This is exactly two weeks before his term ends, announcing a permanent stop to most new oil and gas drilling across U.S. coastal and offshore waters in an area that spans about 625 million acres.

“It’s ridiculous. I’ll unban it immediately,” Trump said on “The Hugh Hewitt Show” on Monday. “What’s he doing?”

“We can’t let that happen to our country,” Trump added. “It’s really our greatest economic asset.”

The executive order, issued under the Outer Continental Shelf Lands Act (OCSLA), seeks to block future oil and natural gas leasing along the East and West coasts, the eastern Gulf of Mexico and portions of Alaska’s Northern Bering Sea.

Trump said that he “has the right” to reverse such an action, but given that Biden issued the order under a 1953 law that allows the president to enact bans on oil and gas development, he would not be able to simply reverse it.

In 2019, during Trump’s first term, a federal judge ruled that OCSLA does not permit presidents to overturn bans established by previous administrations. This means Trump would need congressional approval to reverse Biden’s decision.

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Source: Fox News

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Oil and gas execs

Oil and gas execs optimistic as Trump returns, Dallas Fed says

In the aftermath of President-elect Donald Trump’s victory in November, executives within the oil and gas execs and sector have expressed a renewed sense of optimism. This is regarding their companies’ future prospects. This sentiment shift is a highlight in the latest energy survey by the Federal Reserve Bank of Dallas. It says that 57 percent of industry leaders anticipate an increase in capital spending for 2025 compared to the previous year. This positive outlook reflects a broader confidence in the regulatory and economic environment that the incoming administration may create, suggesting that executives feel more empowered to invest in growth and development initiatives that could enhance operational efficiency and expand production capabilities.
However, the survey results also indicate a contrasting perspective among larger producers in the industry. Notably, 50 percent of executives from these major companies, which are defined as those producing 10,000 barrels or more per day, projected a decline in spending for the current year. Conversely, only 36 percent indicated that their capital expenditures might see a slight uptick. This divergence is particularly significant, as large producers are responsible for approximately 80 percent of the United States’ total oil and gas output, meaning their investment decisions have far-reaching implications for the overall health of the industry. The cautious stance among these larger firms could signal a careful approach to navigating potential market fluctuations, regulatory changes, and evolving demand dynamics in a post-election landscape.

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Source: E&E News

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Streamlining Oil and Gas Royalty Payments

Streamlining Oil and Gas Royalty Payments Tech Role

DISCLAIMER: We are not financial advisors. The content on this website related to Streamlining Oil and Gas Royalty Payments is for educational purposes only. It merely cites our own opinions. Make the best financial decision that suits your own needs. Conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk. There is no guarantee that you will be successful in making, saving, or investing money. There are no guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

The oil and gas industry is one of the largest and most complex industries globally, involving an extensive supply chain, multiple stakeholders, and an intricate web of regulatory frameworks. One of the critical aspects of this industry that often goes unnoticed is the management of royalty payments. Royalty payments are a significant part of the financial ecosystem within the oil and gas industry, where producers pay landowners, governments, and other stakeholders for the extraction of natural resources from their land or property. These payments are often complex, time-sensitive, and essential for maintaining good relationships between the involved parties.

In recent years, the role of technology has become increasingly important in enhancing the efficiency, accuracy, and transparency of oil and gas royalty payments. The advent of advanced software systems, automation, data analytics, blockchain, and cloud-based solutions has brought profound changes to how these payments are managed. With the constant pressure on the oil and gas industry to improve operational efficiencies and reduce costs, technology has emerged as a key enabler of streamlined royalty payment processes. This article delves into the various ways in which technology is transforming the management of oil and gas royalty payments.

Understanding the Complexity of Oil and Gas Royalty Payments

Before exploring the role of technology in royalty payments, it’s important to understand the complexities involved in the process itself. Royalty payments are calculated based on various factors such as production volumes, pricing, costs, and contractual agreements between the involved parties. Typically, these payments are made to landowners (mineral rights holders), governmental bodies, and other stakeholders based on the amount of oil or gas extracted from a specific area.

The complexity arises from several variables, including the different methods of calculating royalties (e.g., percentage of production value, fixed rates, or sliding scales), the involvement of numerous stakeholders, and the need to comply with local and international regulations. Further complicating matters, oil and gas operations often span vast geographical areas with multiple extraction points, each subject to unique royalty agreements.

Additionally, reconciling production data with financial records, ensuring timely payments, and maintaining transparency between stakeholders are vital elements in the royalty payment process. Traditionally, these processes were carried out manually or through inefficient legacy systems, leading to delays, errors, and disputes.

The Impact of Technology on Efficiency | Streamlining Oil and Gas Royalty Payments

One of the main benefits of technology in oil and gas royalty payments is its ability to enhance efficiency. Automation of tasks such as data entry, calculations, and reporting has drastically reduced the manual effort required for processing royalties. Modern software platforms allow for the seamless collection of data from production sites, providing real-time insights into oil and gas production volumes, pricing, and other key metrics. This data can then be automatically fed into royalty calculation models, reducing the chances of errors and ensuring accurate calculations.

Automation has also improved the speed of processing royalty payments.

Rather than relying on manual reconciliation, companies can make payments quickly and accurately, reducing the likelihood of delays and fostering stronger relationships with stakeholders. This is particularly important in the oil and gas industry, where timely payments often contribute to the continued success of operations and help maintain positive relationships with landowners, governments, and other parties.

Advanced Software for Data Integration and Royalty Management

As the oil and gas industry moves toward digitalization, advanced software solutions have become a vital tool in managing royalty payments. These software platforms integrate data from various sources, such as production monitoring systems, accounting software, and legal documentation, allowing stakeholders to access comprehensive and up-to-date information.

For example, some software solutions enable real-time tracking of oil and gas production, as well as tracking contractual agreements with multiple parties. This level of integration ensures that all relevant data is considered when calculating royalty payments, improving accuracy and eliminating discrepancies that could arise from manually entered data. Furthermore, these platforms typically offer customizable reporting capabilities, allowing companies to generate detailed reports on production and payments for internal audits or external stakeholders.

Data analytics is another powerful feature of modern royalty management software. By using predictive analytics, companies can anticipate changes in production, pricing, or market conditions that could affect royalty payments. For example, predictive models can forecast when production will ramp up or decline, allowing companies to plan accordingly and avoid delays or overpayments. This proactive approach not only saves money but also enhances overall operational efficiency.

Blockchain for Transparency and Security

The adoption of blockchain technology has had a significant impact on various industries, and the oil and gas sector is no exception. Blockchain offers a decentralized, tamper-proof ledger system that can enhance transparency and security in the royalty payment process. By using blockchain, every transaction—whether it’s a payment or a contractual agreement—can be recorded in an immutable ledger, which is accessible to all authorized parties in real-time.

For royalty payments, blockchain offers several advantages. First and foremost, it provides a transparent record of all transactions, ensuring that there is no ambiguity or dispute over the amounts paid or owed. This is particularly important when dealing with multiple stakeholders who may have different interpretations of contractual terms or calculations. Blockchain’s transparency also minimizes the risk of fraud or mismanagement of funds, as all parties can trace and verify the legitimacy of each transaction.

Another significant benefit of blockchain is its ability to automate and streamline the reconciliation process. Through the use of smart contracts, royalty payments can be triggered automatically when specific conditions are met, such as a certain production volume or pricing threshold. This eliminates the need for intermediaries and manual processing, speeding up the payment cycle and reducing administrative costs.

Cloud-Based Solutions for Scalability and Accessibility

Cloud technology has become a cornerstone for many industries, offering scalable solutions that are accessible from anywhere with an internet connection. In the context of oil and gas royalty payments, cloud-based platforms provide a flexible and cost-effective solution for managing large amounts of data and facilitating cross-organizational collaboration.

One of the key benefits of cloud-based royalty management platforms is their scalability. As oil and gas operations expand, the volume of data associated with production, royalties, and payments increases. Cloud solutions are designed to handle this growth, allowing companies to scale their systems without the need for expensive infrastructure investments. Additionally, cloud-based solutions ensure that all relevant parties—such as operators, landowners, regulators, and accountants—can access the necessary data in real-time, regardless of location.

The ease of access and collaboration that cloud-based solutions offer also improves communication and transparency. Stakeholders can track payments, review contracts, and access production data at any time, reducing the risk of miscommunication and fostering trust. Furthermore, businesses can integrate cloud systems with other enterprise resource planning (ERP) systems, accounting software, and legal databases, providing a unified approach to royalty management.

Big Data and AI for Predictive Insights

The emergence of big data and artificial intelligence (AI) has further revolutionized the way oil and gas companies manage royalty payments. Big data analytics allows companies to process vast amounts of information, including geological data, production history, and market trends, to gain valuable insights into future production forecasts and pricing trends. These insights can, in turn, inform royalty payment calculations, helping companies prepare for fluctuations in production or pricing.

AI-powered solutions take this a step further by automating decision-making processes based on historical data. For instance, AI models can analyze past royalty payments, identify patterns, and predict future payment scenarios. This allows companies to optimize their payment schedules, avoid overpayments, and ensure they are paying the correct amounts in real-time.

Moreover, businesses can use AI to detect anomalies in payment data, flagging potential discrepancies or errors before they become major issues. By incorporating AI into royalty payment management, companies can reduce the risk of errors, streamline the reconciliation process, and enhance the overall accuracy and timeliness of payments.

Regulatory Compliance and Risk Mitigation | Streamlining Oil and Gas Royalty Payments

The oil and gas industry is subject to stringent regulations, particularly when it comes to royalty payments. Governments often impose complex tax laws, royalty schemes, and reporting requirements that individuals and businesses must adhere to. Technology plays a crucial role in ensuring compliance with these regulations by automating the reporting process and ensuring that individuals and businesses make payments in accordance with local and international standards.

For example, regulatory compliance software can automatically update royalty payment systems with the latest tax codes, royalty rates, and legal requirements. This reduces the risk of non-compliance and the associated penalties.

Automated audit trails ensure that the system properly documents all transactions and makes them easy to review in the event of an audit.

Technology also helps mitigate financial and legal risks associated with royalty payments. By improving the accuracy of calculations and the transparency of transactions, companies can minimize the likelihood of disputes with stakeholders. Additionally, technologies like blockchain ensure that all parties meet the contractual terms and conditions, further reducing the risk of legal challenges.

The Integration of Tech | Streamlining Oil and Gas Royalty Payments

The integration of technology into the oil and gas royalty payment process has had a transformative impact on the industry. By enhancing efficiency, improving transparency, and ensuring compliance, technology has streamlined what was once a cumbersome and error-prone process. From automation and data integration to blockchain and AI, technology is enabling oil and gas companies to manage royalty payments more effectively, saving time, reducing costs, and building stronger relationships with stakeholders.

As the oil and gas industry continues to evolve, the role of technology in royalty payment management will only become more pronounced. With further advancements in AI, big data, and blockchain, the potential for even greater improvements in efficiency, accuracy, and security is vast.</span>

By embracing these technological innovations, oil and gas companies can position themselves to thrive in an increasingly complex and competitive marketplace while ensuring that they handle royalty payments in a timely, transparent, and cost-effective manner.

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Eni launched a $100M supercomputer to enhance oil/gas exploration, clean energy, CO2 storage, batteries, biofuels, and biochemistry.

Eni launches supercomputer to improve oil and gas exploration

Italy’s supermajor Eni launches supercomputer that is the world’s most powerful supercomputer outside the United States in a bid to boost its oil and gas exploration results, the Financial Times reported, adding that the company will also use the supercomputer “to perform calculations to advance clean energy.”

Eni itself said back in November, when it introduced the supercomputer to the world, that the supercomputer will help it “optimize industrial plant operations, enhance the accuracy of geological and fluid dynamics studies for CO2 storage, develop more efficient batteries, optimize the biofuel supply chain, and develop innovative materials for applications in biochemistry.”

The machine costs more than $100 million and ranks fifth among the world’s biggest and most powerful supercomputers, Eni said back in November.

“A lot of the other companies realised it would be more efficient to rent time on someone else’s supercomputer,” Thunder Said Energy analyst Rob West told the Financial Times in comments on the Eni news. This even includes the U.S. supermajors, Exxon and Chevron, which have been using the supercomputers at the U.S. National Center for Supercomputing Applications.

Eni, however, has decided to stick with proprietary technology driving both its core oil and gas business and, apparently, its expansion into energy transition technology.

Approach to conventional and green energy development

For years, Eni has been taking a different approach to conventional and green energy development, unlike any of the other major international oil and gas firms. The Italian major is divesting or creating joint ventures to operate oil and gas assets internationally while grouping some low-carbon initiatives and projects into separate firms.

Key to these spin-offs and the so-called ‘satellite strategy’ are the separate balance sheets of the companies.

“The satellite model is an approach we have built to have additional funding sources to keep together the need to meet demand for traditional products, while also developing new, greener products,” Eni’s chief financial officer Francesco Gattei told Reuters.

By Irina Slav for Oilprice.com

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Source: Oil Price

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President-elect Trump warned the EU that US tariffs will target exports if its member states don't buy more American oil and gas.

Trump threatens tariffs if EU doesn’t buy more US oil and gas

President-elect Donald Trump threatens tariffs on the European Union. Its exports will get hit with US tariffs if its member states don’t buy more American oil and gas.

“I told the European Union that they must make up their tremendous deficit with the United States. This is by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!,”. he said on Truth Social.

The US is the world’s largest producer of crude oil and the biggest exporter of liquefied natural gas. LNG buyers — including the EU and Vietnam — have already talked about purchasing more fuel. They are planning to get it from the US as part to deter the threat of tariffs.

The euro traded 0.3% stronger at $1.0398 Friday in a sign investors believe the bloc will be able to meet its demands and avoid punitive measures.

The US goods and services trade

The US goods and services trade deficit with the EU was $131.3 billion in 2022, according to the office of the US Trade Representative, and the EU has been bracing for a trade offensive ever since Trump’s election victory last month.

The bloc was largely caught off-guard in 2017 when Trump, citing national security concerns in his previous term as president, levied tariffs on European steel and aluminum. Since then, the EU has reinvented its trade doctrine and expanded its toolbox, giving it a range of options to counter coercive practices.

“We are well-prepared for the possibility that things will become different with a new US administration. German Foreign Minister Annalena Baerbock said after a Group of Seven meeting in Italy in late November. “If the new US administration pursues an ‘America first’ policy in the sectors of climate or trade, then our response will be ‘Europe united.’”

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Source: Bloomberg

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Trump Is Ready ‘Within Seconds’ to Issue Orders Spurring Drilling

US President-elect Donald Trump is poising to order changes. It is to encourage spurring drilling domestic oil and gas development immediately after his Jan. 20 inauguration.

“President Trump is going to get to work on day one. This is within seconds of his arrival at the Oval Office.” Karoline Leavitt, a spokeswoman for the Trump-Vance transition team, told Fox News Tuesday. She said that includes executive orders “to drill, baby, drill,”.  Moreover “to expedite permits for drilling and for fracking all over this country so we can immediately bring down the cost of living.”

Leavitt’s comments offer a glimpse at administrative actions Trump could set in motion his first day as the nation’s 47th president, including policy changes that would be executed by federal agencies over months or years to come.

Trump telegraphed similar ambitions on the campaign trail, vowing to “unleash domestic energy production like never before”. This is by ending “delays in federal drilling permits and leases,” freeing up “vast stores of liquid gold. These are all on America’s public land for energy development.” He will also be removing “all red tape that is leaving oil and natural gas projects stranded.”
Trump followed a similar path during his first term in officel. This is with a day-one directive meant to advance the construction of two oil pipelines and a separate executive order tasking federal agencies with scouring regulations for any that burden the development or use of domestically produced energy resources.

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Source: Bloomberg

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Influence of International Law

The Influence of International Law on Oil and Gas Royalties

DISCLAIMER: We are not financial advisors. The content on this website related to the influence of international low is for educational purposes only. We merely cite our own opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!

Oil and gas royalties represent a crucial financial mechanism in the global energy sector. These royalties, paid by companies involved in the exploration and extraction of hydrocarbons, ensure that resource-rich nations or landowners receive compensation for the use of their natural resources. While these agreements are often shaped by domestic law, international law plays a significant role in influencing how oil and gas royalties are structured, implemented, and enforced. International legal frameworks provide the regulatory guidelines that help standardize practices across borders, promote fairness, and address global challenges such as environmental protection and human rights.

Understanding the influence of international law on oil and gas royalties is essential for governments, companies, legal practitioners, and stakeholders involved in the industry. This article explores the role that international law plays in shaping oil and gas royalty agreements, with a focus on treaties, conventions, regulations, and principles that influence the negotiation, payment, and enforcement of royalties in the energy sector.

The Role of International Law in Regulating Natural Resources

International law encompasses a vast body of legal rules and principles that govern relations between sovereign states and other international actors. In the context of oil and gas royalties, international law provides a framework for managing natural resources in a manner that is both equitable and sustainable. Several key areas of international law influence the way oil and gas royalties are structured:

  • Sovereignty over Natural Resources

    • According to international law, states have sovereign rights over the natural resources located within their borders. This principle is enshrined in the United Nations Convention on the Law of the Sea (UNCLOS) and various multilateral treaties, which affirm the right of nations to exploit and manage their resources. Sovereignty, however, does not mean absolute freedom; international obligations must be considered when developing natural resources.

  • International Trade Law:

    • International trade agreements and laws, such as those governed by the World Trade Organization (WTO) and various bilateral and multilateral trade treaties, can affect how oil and gas royalties are negotiated, particularly in relation to foreign investment and cross-border transactions.

  • Environmental and Human Rights Law:

    • International law plays a role in protecting the environment and human rights. Treaties like the Paris Agreement on climate change or conventions on the protection of biodiversity impose obligations on states and companies to consider environmental and social factors when managing oil and gas resources. These laws influence royalty agreements by encouraging practices that mitigate environmental degradation and respect the rights of local communities affected by resource extraction.

  • Investment and Arbitration Law:

    • International investment law, including treaties that protect foreign investments and the rules governing international arbitration, has an impact on how oil and gas royalties are handled in cross-border contracts. These agreements often involve multinational companies, and when disputes arise, international arbitration provides a forum for resolving conflicts, including those related to royalty payments.

International Treaties and Conventions Affecting Oil and Gas Royalties

Several international treaties and conventions have specific provisions that influence how oil and gas royalties are negotiated and implemented. These instruments set the groundwork for harmonizing practices and addressing global challenges in the oil and gas sector.

The United Nations Convention on the Law of the Sea

One of the most significant international treaties influencing oil and gas royalties is the United Nations Convention on the Law of the Sea (UNCLOS), which governs the use of the world’s oceans. UNCLOS has direct implications for the exploration and extraction of oil and gas resources in marine environments.

UNCLOS establishes the legal framework for defining territorial waters, exclusive economic zones (EEZs), and the continental shelf, all of which are relevant to oil and gas exploration and exploitation. For instance, states have sovereign rights to explore and exploit oil and gas within their EEZs (up to 200 nautical miles from their coastline) and continental shelves, subject to certain environmental and safety regulations.

In terms of royalties, UNCLOS encourages states to establish transparent and fair terms for revenue sharing when oil and gas resources lie in areas subject to overlapping claims, such as disputed maritime boundaries. International law under UNCLOS helps create a structured framework for the negotiation of royalties, ensuring that coastal states are fairly compensated for the extraction of resources from their maritime zones.

Bilateral and Multilateral Investment Treaties

Bilateral Investment Treaties (BITs) and multilateral investment treaties are critical in shaping the landscape for foreign direct investment (FDI) in the oil and gas industry. These treaties are designed to protect investors from unfair treatment and ensure that foreign companies can operate in host countries with legal certainty.

Typically, BITs outline the terms under which royalties are paid, including protection against expropriation, guaranteeing free transfer of payments, and ensuring fair and equitable treatment for foreign investors. These agreements also provide avenues for resolving disputes through arbitration if issues arise related to royalty payments or the interpretation of contractual terms.

The provisions in BITs often include language requiring the host state to uphold a stable regulatory environment. This means that royalty rates, once agreed upon, cannot be arbitrarily changed by the host country, providing investors with a level of legal certainty regarding the stability of the royalty arrangements. In the context of oil and gas royalties, these treaties foster an environment of trust and predictability, facilitating investment in the energy sector.

The Paris Agreement and Climate Change Regulations

The Paris Agreement, adopted under the United Nations Framework Convention on Climate Change (UNFCCC), is another significant influence on oil and gas royalty agreements, though indirectly. The Agreement’s goal to limit global warming to below 2°C (and preferably to 1.5°C) has major implications for the fossil fuel sector.

As countries begin to implement climate policies that align with their commitments under the Paris Agreement, there is a growing shift toward renewable energy sources and a reduction in the use of fossil fuels. This is starting to affect the way oil and gas royalties are structured. For example, some countries may be inclined to increase royalty rates for fossil fuel extraction in order to offset environmental and social costs or to fund renewable energy initiatives. In contrast, others may offer tax incentives or reduced royalties to encourage the exploration of renewable energy resources.

The pressure from international climate agreements may also lead to stricter environmental regulations, which in turn influence royalty terms. For example, oil companies may be required to pay higher royalties or invest in environmental remediation efforts as part of their exploration agreements. These changes are reflective of the broader global trend toward decarbonization and the growing importance of environmental sustainability in international law.

International Human Rights Law

Oil and gas extraction often occurs in areas where indigenous populations or vulnerable communities reside. International human rights law plays a crucial role in shaping the obligations of states and corporations in these contexts. Treaties such as the International Covenant on Economic, Social, and Cultural Rights (ICESCR) and the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) outline the rights of individuals and communities impacted by natural resource extraction, including the right to free, prior, and informed consent (FPIC).

In the context of oil and gas royalties, international human rights law influences the negotiation process by emphasizing the need for transparency and community engagement. Resource-rich nations must ensure that their royalty agreements respect the rights of indigenous peoples, who may be directly affected by oil and gas development. Additionally, international human rights law may require that royalties be used to benefit local communities, not just national governments or foreign companies.

The Influence of International Arbitration on Royalty Disputes

When disputes arise over the terms or payment of royalties, international arbitration plays a key role in resolving such conflicts. The ability to resolve disputes in a neutral and binding manner is a critical feature of many international contracts, particularly in the oil and gas sector, where parties often come from different legal jurisdictions.

International arbitration bodies such as the International Chamber of Commerce (ICC) and the International Centre for Settlement of Investment Disputes (ICSID) provide mechanisms for resolving disputes over royalty agreements. These arbitration institutions are essential in cases where there is a disagreement about the interpretation of royalty payment structures, the impact of regulatory changes, or allegations of non-compliance with the terms of the contract.

The use of international arbitration to resolve royalty-related disputes ensures that companies and states have a fair and impartial process for settling conflicts, reducing the potential for prolonged legal battles and preserving business relationships. Arbitration helps enforce the terms of international law in the context of oil and gas royalties, creating a more predictable and secure environment for international investment.

Environmental Considerations in Oil and Gas Royalties |Influence of International Law

Environmental law, particularly international environmental agreements, increasingly influences how oil and gas royalties are structured. As global environmental concerns grow, international legal frameworks are pushing governments and companies to adopt sustainable practices in resource extraction. The influence of international law can be seen in several ways:

  • Environmental Protection: International treaties and conventions, such as the Convention on Biological Diversity (CBD) and the Convention on International Trade in Endangered Species (CITES), require states to take measures to prevent environmental degradation. These agreements can shape royalty agreements by imposing additional fees or taxes to fund conservation efforts or by requiring companies to include environmental remediation clauses in their contracts.
  • Carbon Pricing and Emissions: As countries implement carbon pricing mechanisms under international climate agreements, oil and gas companies may face additional costs for carbon emissions. These costs can influence the royalty structure, as governments may require higher royalties or taxes to offset the carbon impact of extraction activities.
  • Sustainable Development Goals (SDGs): The United Nations’ SDGs, which include objectives related to environmental protection, poverty alleviation, and economic development, are increasingly being integrated into national laws and policies. States may factor SDG-related requirements into oil and gas royalty agreements, particularly in terms of how the revenue generated from royalties is used to fund sustainable development initiatives.

The influence of international law on oil and gas royalties is profound and multifaceted. The principles of sovereign resource rights to international treaties are important. Conventions governing trade, investment, environmental protection, and human rights, international law plays a central role in shaping how royalties are negotiated, structured, and enforced.

The global energy landscape evolves with growing environmental concerns and the transition to renewable energy. With that, the legal frameworks governing oil and gas royalties will continue to adapt. International law will remain a key player in balancing the needs of resource-rich countries. It will also impact multinational companies, and global citizens, ensuring that oil and gas royalties contribute to both economic development and sustainable practices. Understanding the intricate relationship between international law and oil and gas royalties is crucial. Moreover for stakeholders who seek to navigate the complex legal and financial terrain of the energy sector.

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US oil and gas producers

US oil and gas producers pressure House to pass pivotal permitting bill and get America ‘back on track’

A group of U.S. oil and gas producers is upping the pressure on House Speaker Mike Johnson. It is for him to push through a major permitting reform bill. They are stressing in a letter Wednesday the urgency for the chamber to move swiftly on approving the legislation. They see this as crucial for attracting new investments in domestic oil and gas projects. It will bolster national energy security and breathe new life into other long-stalled energy infrastructure projects.

The letter was by a coalition of U.S. oil and gas groups who represent 80% of domestic fossil fuel production. They stressed the need for House Republicans to swiftly and “immediately” pass the Energy Permitting Reform Act. It is the 2024 bill by Sens. Joe Manchin, I-W.Va., and John Barrasso, R-Wyo. They describe that legislation as crucial to helping expedite actions for producers under the second Trump administration.

Comprehensive Permit

“This bill is merely the first step towards comprehensive permitting reform in this country. We believe that passing the package now, at the end of the 118th, and then earnestly advancing additional National Environmental Policy Act reforms such as those being drafted by Chairman Westerman in the Natural Resources Committee, will ensure that America can get back on track as quickly as possible,” the letter said.

Pressure on Johnson and House Republicans has mounted in recent days as lawmakers prepare for a final sprint before the end of the 118th session of Congress. Some have suggested the bill’s best chances of passage are by paring it with NEPA reform — likely efforts championed by House Natural Resources Committee Chairman Bruce Westerman, R-Ark., which could earn the permitting reform bill more buy-in from House Republicans.

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Source: Fox News

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