Joint Ventures and PSA’s in the Caspian Opportunities, Challenges, ….and improvements
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Joint Ventures and PSA’s in the Caspian
Opportunities, Challenges,
….and improvements
Joint Ventures..... From Good Intentions to Joint Operating Success.
Opportunities….and challenges
■ The Caspian Corridor is extremely rich in opportunities:
■ Some of the largest oil & gas discoveries of the last 30 years,
■ Major Capital Investment programmes are ongoing (exploration, development, export pipelines).
■ Intense activity from the IOC’s, and Service Companies.
■ Large number of JV’s formed between IOC’s and NOC’s to deliver a project under a PSA or PSC.
■ Growing number of joint ventures between international (UK) service companies, OEMs and local enterprises – recognising the need and commercial benefits to be gained from local content.
■ Expected trend to see more interest from mid -size IOCs to partner as the region matures.
Joint Ventures..... From Good Intentions to Joint Operating Success.
Opportunities….and challenges
■ But also rich in challenges:
■ Projects are frequently delayed.
■ Several large developments are declared un-economical.
■ Relationships can be challenging.
■ Relationships with regulators can be a ‘cottage industry’.
■ Joint Venture structures are not always fit-for-purpose to deal with such set-backs.
Joint Ventures..... From Good Intentions to Joint Operating Success.
Typical Joint Venture Lifecycle“Key Performance Points”
■ There are numerous points for value creation and destruction
throughout the Joint Venture Lifecycle.
Joint Ventures..... From Good Intentions to Joint Operating Success.
Opportunities to improve....
Some classic issues
■ Heavy focus on the legalities of the deal (i.e. voting rights, equity, ownership, board positions etc.)
■ Quick to choose renegotiation if there is under-delivery.
■ This not always helped by legalistic, rigid PSA’s, PSC’s and JVA’s.
■ Limited focus on enabling delivery and smooth implementation.
■ Costly, complex, time-consuming governance.
■ Permits- and-Regulatory Compliance slow and time consuming .
■ Complex, but ineffective JOA’s (‘ lots of committees’, slow decisions’).
■ Cost recovery delays and disputes.
■ Bringing in new parties to solve delivery issues – ‘transacting improvements,’.
Joint Ventures..... From Good Intentions to Joint Operating Success.
Some options....but every JV is different
Opportunities to enhance NEW ventures
■ Flexible PSA’s and PSC’s ….. allowing gentle adjustments.
■ Greater emphasis on practical implementation.
■ Review barriers to implementation shortly after starting the project, and adjust
Opportunities to enhance EXISTING ventures
■ Implementation ‘blocker’ identification, enabling removal.
■ Fine-tuning a PSA or PSC - ‘small side-letter adjustment.’
■ Cost recovery optimisation exercise.
■ Exercise to streamline decision making,and formalise in a workable ‘side letter’, or a ‘governance refresh’.
…….delivered by a neutral party.
© 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).
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