Myth: oil companies own oil
Reality:
In a number of countries, including Saudi Arabia, Venezuela, Kuwait, Iran, Iraq, Peru, and Mexico, oil was originally discovered and developed by foreign companies with the expertise which the country itself did not have. Subsequently, with the rising tide of nationalism following the colonial period, oil company properties—oil fields, pipelines, shipping facilities—were taken over by the respective governments, at times with little or no compensation.
Most of the oil in foreign countries is owned by the governments, not the oil companies. Oil companies simply hold leases (abroad commonly called concessions) to develop the oil deposits. The companies are allowed to search for and produce what commercial oil may be found. Sometimes the oil companies can sell it themselves and sometimes they have to market it through state-owned companies. In a sense they own the oil they produce, but they never really own the oil in the ground. They only lease the right to produce it. This is an important point, because it means that U.S. companies or any other companies operating in a foreign country do not own an assured safe resource base.
In the United States, the mineral rights which include oil and gas usually belong to the owner of the land. The owner can sell these rights to a resource development company, so, in effect there can be more than one owner of a piece of land. The surface can be owned by one individual and the subsurface can be owned by someone else. Oil companies can buy the mineral rights to oil and therefore own the oil. However, even in the United States, more often than not, the oil companies have to lease the mineral rights. Offshore oil belongs either to the adjacent state, or beyond the state limits, to the federal government. Oil companies, for the most pen' do not own much oil. Many own no oil. On the oil they do produce, they pay a royalty to the private owner, or royalties and taxes to the government. These costs range from 12.5 percent to as much as 90 percent of the value of the oil.
In other countries, the government generally owns all the mineral resources which may be leased out to developers. But governments change their minds about lease terms or cancel them with or without any compensation. Quite a few have done so—another severe hazard of the mineral resource business.
The existence of OPEC is obvious proof that oil companies do not own or control most of the world's oil.
Copyright 1997, Walter L. Youngquist -- Posted with permissionfrom GeoDestinies, by Walter Youngquist PhD & Chair Emeritus,Department of Geology, University of Oregon;National Book Company, 1997; ISBN 0894202995
In a number of countries, including Saudi Arabia, Venezuela, Kuwait, Iran, Iraq, Peru, and Mexico, oil was originally discovered and developed by foreign companies with the expertise which the country itself did not have. Subsequently, with the rising tide of nationalism following the colonial period, oil company properties—oil fields, pipelines, shipping facilities—were taken over by the respective governments, at times with little or no compensation.
Most of the oil in foreign countries is owned by the governments, not the oil companies. Oil companies simply hold leases (abroad commonly called concessions) to develop the oil deposits. The companies are allowed to search for and produce what commercial oil may be found. Sometimes the oil companies can sell it themselves and sometimes they have to market it through state-owned companies. In a sense they own the oil they produce, but they never really own the oil in the ground. They only lease the right to produce it. This is an important point, because it means that U.S. companies or any other companies operating in a foreign country do not own an assured safe resource base.
In the United States, the mineral rights which include oil and gas usually belong to the owner of the land. The owner can sell these rights to a resource development company, so, in effect there can be more than one owner of a piece of land. The surface can be owned by one individual and the subsurface can be owned by someone else. Oil companies can buy the mineral rights to oil and therefore own the oil. However, even in the United States, more often than not, the oil companies have to lease the mineral rights. Offshore oil belongs either to the adjacent state, or beyond the state limits, to the federal government. Oil companies, for the most pen' do not own much oil. Many own no oil. On the oil they do produce, they pay a royalty to the private owner, or royalties and taxes to the government. These costs range from 12.5 percent to as much as 90 percent of the value of the oil.
In other countries, the government generally owns all the mineral resources which may be leased out to developers. But governments change their minds about lease terms or cancel them with or without any compensation. Quite a few have done so—another severe hazard of the mineral resource business.
The existence of OPEC is obvious proof that oil companies do not own or control most of the world's oil.
Copyright 1997, Walter L. Youngquist -- Posted with permissionfrom GeoDestinies, by Walter Youngquist PhD & Chair Emeritus,Department of Geology, University of Oregon;National Book Company, 1997; ISBN 0894202995
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