Abstract
Chapter 6 focused on making Giddens’ structuration theory accessible to a conceptualisation of organisational culture for empirical research. It explained how the structural properties of domination, signification and legitimation can be expected to provide an organisational cultural analysis for explaining the preference for joint venture agreements in the Qatari gas industry from a macro-level perspective. The purpose of this chapter is to initially explore the first and most obvious of Giddens’ structures, namely the domination structure, to explain why joint venture agreements rather than other co-operation agreements are used in the Qatari gas industry.
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Notes
- 1.
Giddens (1977: 348, 1976: 111).
- 2.
Craib (1992: 54).
- 3.
Giddens (1979: 83).
- 4.
Giddens (1979: 91).
- 5.
See Footnote 2.
- 6.
Giddens (1984: 33).
- 7.
OPEC was established in 1960 in Baghdad, Iraq, by the representatives of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela. Other countries joined at later dates in the following order: Qatar 1961 (left in 2018), Libya and Indonesia 1962, Abu Dhabi (later to become UAE) 1967, Algeria 1969, Nigeria 1971, Ecuador 1973 and Gabon 1975. Rouhani (1971: 77 and 80), Al-Otaiba (1975: 77) and Muslih (1979).
- 8.
Though the first concession agreements in the Middle East were granted in 1901 by the Persian Government to William Knox D’Arcy, the 1925 concession contract is of considerable significance for it is regarded as a reference model for other concession agreements in the Middle East. For further discussion on this subject, see Ely (1975: 4–46).
- 9.
Formerly known as the Turkish Petroleum Company.
- 10.
Suleiman (1988: 131, 137–138). In reference to Qatar, see generally Al-Emadi (2005, 2010).
- 11.
A national oil company is simply known as a company which does not usually have the full required technical and commercial skills and expertise but still has a knowledge which helps in creating and maintaining a business in the local market area.
- 12.
For example, the government of Saudi Arabia in 1933 granted a concession agreement to the Standard Oil Company of California to explore for and exploit petroleum in the eastern side of the Kingdom for a period of 60 years. See Al-Samaan (1994).
- 13.
Bindemann (1999: 9).
- 14.
For example, according to the first concession agreements in the Arabian Gulf, Bahrain was paid £2250 pa, Kuwait £38,000 pa and Qatar £30,000 pa. See Suleiman (1988: 131, 140).
- 15.
From 1967 until 1973, the idea of “participation” in the oil and gas industry had received considerable attention by OPEC and its member states supported by UN Resolution 2158 (XXI) concerning the principle of permanent sovereignty over natural resources.
- 16.
The increase in nation state’s bargaining position will be further comprehended in Sect. 4 based on the power resources of ownership, control and risk.
- 17.
See Blinn et al. (1986: 48), Suleiman (1988: 131, 158) and Stevens (1976: 28–31).
- 18.
The first national oil company in the Middle East was the National Iranian Oil Company (NIOC) in the aftermath of the nationalisation of the oil industry in 1951. See Stevens (1976: 26).
- 19.
Blinn et al. (1986: 47).
- 20.
Seymour (1980: 216).
- 21.
Blinn et al. note 19 at 46.
- 22.
The then President of ENI, commenting on the advantages offered by the New Entrants to the host states, said “in obtaining petroleum exploration rights abroad, ENI has not merely offered these countries better contractual terms than usual, but has also given them the chance of sharing on terms of full equality in the exploitation of their resources and hence in the development of their own economies”. See Rouhani (1971: 77 and 80) and Al-Otaiba (1975: 57).
- 23.
See Rouhani (1971: 77 and 80), Al-Otaiba (1975: 48), Stevens (1976: 27), Blinn et al. (1986: 48).
- 24.
For instance, international oil companies tried to create a shift between the Arabian Gulf States by making attractive offers to the Kingdom of Saudi Arabia alone in view of their knowledge that the Kingdom led the movement towards the participation agreements. See Al-Otaiba (1975: 165).
- 25.
Seymour (1980: 24–25).
- 26.
Venezuela, according to its concession agreements, was allowed to take such unilateral action. Zakariya (1978: 32) and Seymour (1980: 27).
- 27.
For example, Saudi Arabia increased its oil revenues when the Arabian American Oil Company (ARAMCO) on 31 December 1950, based on the principle of 50/50 sharing profit formula, paid a royalty amounting to 50% as a substitute for income tax. See Blinn et al. (1986: 47).
- 28.
Founding member of a local law firm in Qatar, interview 26.7.2010.
- 29.
An examination of the principle of “changing circumstances” as a ground for the revision of the terms of concession agreements is beyond the scope of this book. For a discussion of this principle and its counterpart, the principle of “sanctity of contracts”, see in general Bentham (1986, 1987) and Brownlie (2003).
- 30.
Seymour (1980: 218–219).
- 31.
According to the OPEC 1975 Declaratory Statement of Sovereigns and Chiefs of States in Algiers, “The Sovereigns and Heads of States reaffirm the solidarity which unites their countries in safeguarding the legitimate rights and interests of their people, reasserting the sovereign and inalienable right of their countries to the ownership, exploitation and pricing of their national resources and rejecting any idea or thought that challenges these fundamental rights and, thereby, the Sovereignty of their countries”. See Blinn et al. (1986: 50).
- 32.
Suleiman (1988: 131, 152).
- 33.
Hossain (1979: 18–19) and Suleiman (1988: 131, 156).
- 34.
In the Tehran Agreement signed in February 1971, international oil companies agreed to increase oil prices by about 46 cents per barrel, with additional increases of 20 cents scheduled to take place by 1975. In the Tripoli Agreement, which was signed in April 1971, Libya and Algeria were entitled to receive an increase of 80 cents over the same period. Danielsen (1982: 189).
- 35.
The progression to a majority share was to start in 1978 and last until 1982 at which time the host state ownership was to become 51%. It is worth mentioning that those countries, except for the UAE, which elected to adhere to the participation agreements, have subsequently acquired 100% of the equity. See Suleiman (1988: 131, 152–154).
- 36.
For example, the oil is owned by the host state which brings in an international oil company to explore and, in the event of a commercial discovery, develop the resource. The international oil company operates at its own risk and expense, and receives a specified share of production as a reward. See Bindemann (1999: 10).
- 37.
Though Kuwait signed the first draft of the agreement, it did not endorse it and sought an immediate ownership of majority shares. See Suleiman (1988: 131, 152).
- 38.
Ahmed Zaki Yamani, the then Saudi Arabia Oil Minister who was charged by the Arabian Gulf countries to negotiate on their behalf: “participation is the only substitute for nationalisation and that Saudi Arabia did not aim at obtaining more than 51% as it needed the oil companies to act as intermediaries between producers and consumers and that Saudi Arabia also needed their experience and investments … and that the new relationship between the governments and the companies would, like a Catholic marriage, be indissoluble”. See Al-Otaiba (1975: 164).
- 39.
As a matter of fact, joint venture agreements were utilised alongside PAs. For example, Saudi Arabia entered into joint venture agreements with New Entrants of international oil companies. See Blinn et al. (1986: 46–48).
- 40.
Suleiman (1988: 131, 198).
- 41.
Al-Samaan (1994).
- 42.
A number of writers claim that participation is no different from nationalisation, just a different reasoning to the same conclusion. Seymour (1980: 218).
- 43.
Muchlinski (2007: 45).
- 44.
As amended by Decree No. (39) of 1985, Law No. (15) of 1988, Law No. (36) of 1995, Decree No. (11) and Decree No. (14) of 1998 and Law No. (10) of 2007. See Qatar Ministry of Justice Official Gazettes of 1974, 1985, 1988, 1995, 1998 and 2007.
- 45.
Article 1 of this Decree reads as follows: “A public corporation of independent legal entity shall be established to be called “Qatar General Petroleum Corporation”. As for the meaning of the Amiri Decree, the 2003 Qatari Constitution and the laws issued as the Constitution mandates decide whether a certain matter is to be issued by way of an Amiri Decree (of any form) or by way of a law. The basis for the distinction between a law and an Amiri Decree (whether it is called “Amiri Marsoum be Kanoun”, “Amiri Amar” or “Amiri Karar”) can be found by examples in the Constitution. While the law has to be presented to the Advisory Council for discussion before it is presented to the Amir to effect it (ratify it), the Amiri Decree can be issued and will take effect without it being presented to the Advisory Council for ratification. The Constitution lists the matters that the Amir can regulate by issuing various decrees and the ones that can be regulated by issuing a law. For example, the Amir, in exceptional circumstances and when the Advisory Council is not in session, can, by virtue of Article (27) of the Constitution, issue Amiri Marsoum be Kanoun that is equivalent in power to a law and which will only be presented to the Advisory Council for consultation and not for ratification; the Amir can independently, according to Article (24) of the Constitution, conclude conventions by way of an Amiri Decree (Marsoum), notifying the Advisory Council of its conclusion at a later date. By virtue of Article (25) of the Constitution, the Amir can also declare a defence war by way of Decree (Marsoum) without reverting to the Advisory Council. By virtue of Article (29) of the Constitution, the Amir appoints the Council of Ministers by way of a Decree (Amiri Amar) and can, by virtue of Article (23)9 of the Constitution, regulate matters by way of an Amiri Karar should the relevant law grant him that right.
- 46.
Alexander (1997).
- 47.
Article 4 of Amiri Decree No. 10 enumerates the objectives (the responsibilities) of Qatar Petroleum as follows: “The objectives of this Corporation shall be to engage in all phases of oil industry in Qatar and abroad, including exploration and drilling for oil, natural gas and other hydrocarbon substances, production, refining, transport and storage of the aforementioned substances, and any of their derivatives and by-products, as well as the trading in, distribution, sale and export of these substances. The Corporation may undertake all operations that would lead to the achievement of its aforementioned objectives”.
- 48.
See Qatar Ministry of Justice Official Gazette of 2007.
- 49.
Petroleum Operator: Any natural or legal person is legally licensed to conduct any of the petroleum operations. See Article 3 Law Number 3 for 2007.
- 50.
Article 3 Law Number 3 for 2007.
- 51.
Article 4 Law Number 3 for 2007.
- 52.
Article 7 Law Number 3 for 2007.
- 53.
Article 18 Law Number 3 for 2007.
- 54.
See Amiri Karar 73, 2018, and Amiri Karar 68, 2018.
- 55.
As amended by Law No. (35) of the year 2002. See Qatar Ministry of Justice Official Gazettes of 1977 and 2002.
- 56.
The Minister of State for Energy Affairs and Industry sits on the Board of QP as Vice Chair, yet technically QP is the responsible body of developing the oil and gas industry.
- 57.
As amended by Law No. (1) of the year 2010. See Qatar Ministry of Justice Official Gazettes of 2000 and 2010.
- 58.
Article 2 of Law No. 13 reads as follows “foreign investors may invest in all sectors of national economy provided that they shall have Qatari partner(s) whose share in the capital shall not be less than 51% and the company is legally established in accordance with provisions of law”.
- 59.
Limiting foreign equity ownership to specific levels is one type of market access restriction. See Mukherjee and Patel (2005: 47).
- 60.
Natural gas has surpassed oil in creating commercial energy needed for modern developed countries. See Footnote 60, Solem and Scanlan (1986: 51) and Reed (2002: 199).
- 61.
In general, see Blinn et al. (1986).
- 62.
A group of officials in a Qatari gas company, interview 23.7.2010.
- 63.
Founding member of a local law firm in Qatar, interview 26.7.2010.
- 64.
A Former Minister of Energy in Qatar, interview 16.8.2015.
- 65.
Early examples of service contracts were created by Petroleos Mexicanos and Yacimientos Petroliferos Fiscales in the fifties and by Iran and Iraq contracts in the sixties. See Bindemann (1999: 10).
- 66.
With respect to the type of remuneration, the payment can be regarded as profit or fees. The method of the remuneration, on the other hand, is either a percentage of the production (in kind) or a fixed amount (cash). Johnston (1994: 1, 1–68).
- 67.
Reaching the production stage normally involves the so-called exploration risk. Exploration risk means that the foreign oil company will bear (either completely or partially, depending on the contract in question) the risk associated with the exploration activities until a commercial discovery of oil production occurs. If there is no commercial discovery of oil (i.e. no production), an exploration risk is said to occur. Hence, the association of production with exploration risk.
- 68.
Some researchers distinguish between risk service contracts and the pure service contracts on the basis of the type of received payment (i.e. profit or fees). See in general Johnston (1994: 1) and Blinn et al. (1986). The writer believes, however, that such distinction is irrelevant or of minor significance.
- 69.
Sá Riberio (2001: 143–165).
- 70.
Johnston (1994: 1, 14).
- 71.
Bindemann (1999: 11), for example, states that “oil exploration and development can only be conducted by virtue of one of several forms of contracts granted either by the government or its [national oil company]”.
- 72.
Exploration is the search for an undiscovered reservoir of oil and gas, while exploitation deals with the production/investment stage.
- 73.
Typical joint operating agreements cover the scope, purpose and duration of the joint operations, the type of assets contributed by the co-venturers, ownership percentage, management and control of operation, selection and appointment of the operator, the apportionment of liability, the consequences of default, assignment of interest and withdrawal, and the utilisation and disposal of the output of the joint venture. Daintith (2000), Merralls (1980), Blinn et al. (1986: 192–203), Wilkinson (1997: 39) and Sayer (1999: 5).
- 74.
This type of structure was introduced in the Middle East by the agreement between the NIOC and AGIP, Philips and the Oil and Natural Gas Commission of India in 1965. See Hossain (1979: 127).
- 75.
Blinn et al. (1986: 193) and Black and Dundas (1993: 1–2) (hereafter Black and Dundas).
- 76.
They are well established, for example, in the UK Continental Shelf. See Wilkinson (1997: 1) and Sayer (1999).
- 77.
Bean (1995), Merralls (1980) and Blinn et al. (1986: 193).
- 78.
A typical oil and gas joint venture usually involves the activities of exploration, exploitation, production, management, etc (technically known as downstream and upstream activities). Therefore, it is likely to have different joint operating agreements to reflect the differences in the nature and requirements of such activities. For example, Qatargas employs two different arrangements with respect to the percentage of ownership for its downstream and upstream activities: downstream—Qatar Petroleum 65%, ExxonMobil 10%, TotalFinaElf 10%, Marubeni 7.5% and Mitsui 7.5%; and upstream—Qatar Petroleum 65%, ExxonMobil 10%, TotalFinaElf 20%, Marubeni 2.5% and Mitsui 2.5%.
- 79.
The operator can be one of the co-venturers (usually the one with the largest participating interests), a stranger (a company not associated with the co-venturers) or an operating company established by the co-venturers. See Wilkinson (1997: 40), Merralls (1980: 8) and Hossain (1979: 128).
- 80.
Wilkinson (1997: 41).
- 81.
Sayer (1999).
- 82.
This is the most cited reason for distinguishing the contractual joint ventures from the partnership, which is an association of persons carrying on business with a view of profit. Therefore, the common goal of contractual joint ventures and partnership is to carry out particular operations together.
- 83.
Blinn et al. (1986: 194).
- 84.
Fong classifies the management and control structure of joint ventures into integrated and non-integrated structures. Under the former, the co-venturers jointly participate in the management and control of the joint venture affairs. In a non-integrated structure, on the other hand, management and control are divided between the co-venturers. Fong (1985: 25) and Bean (1995: 13–14).
- 85.
See Footnote 80.
- 86.
The reader is advised that the term reflecting this vehicle (i.e. the limited liability of joint venture) is not standardised. For instance, this vehicle is known as a “corporation” in the USA while it is a “limited liability company” in the UK. It is still referred to in the Gulf States as a “Joint Stock Company”. Also the term “limited liability company” in the UK is not equivalent to the term “limited liability company” in the Gulf, which to some extent is similar to the private companies in the UK, despite the fact that there is a closed joint stock company, equivalent to the private limited liability company in the UK. The writer has chosen the term “corporation” to reflect the “limited liability company” in the UK and “joint stock company” in the Gulf.
- 87.
Griffin (2005: 1).
- 88.
Griffin note 89 at 76.
- 89.
Davies (2002: 11).
- 90.
Dine and Koutsias (2005: 21).
- 91.
UK Companies Act 1985 and USA Model Business Corporation Act 1984 as adopted by most states.
- 92.
The Commercial Companies Law No 5 of 2002 supersedes the Commercial Companies Act No 11 of 1981, which is considered outdated given the economic and legal development in Qatar. In 2006, some provisions of the Commercial Companies Law No 5 of 2002 were amended by Law No 16 of 2006. In this book, the new Commercial Law as amended in 2006 will be referred to as the Commercial Companies Act.
- 93.
Qatar Exchange (formerly the Doha Securities Market) is the only stock market in Qatar. Since its establishment in 1997, the number of listed companies and equity investors has increased considerably. By the end of 2011, the number of listed companies reached forty-two companies and the market capitalisation was over QR457 million. See Qatar (2011).
- 94.
See Footnote 90.
- 95.
According to Qatari Law No. 25 of 1990, foreign investors entering into a joint venture with Qatari partners are allowed to have only up to 49% of the business. The Qatari partners should have no less than 51%.
- 96.
Gower and Pettet (1992: 91).
- 97.
This point is also stressed by Shishido (1987: 63–123), 63, stating, “because a joint venture may bring together companies with different interests, management styles and goals, it creates a potential risk that the parent companies will not be able to corporate on a practical level as business partners”.
- 98.
Gower and Pettet (1992: 89).
- 99.
Griffin (2005: 72).
- 100.
UK Partnership Act 1890, Limited Partnership Act 1907 and the new Limited Liability Partnership (LLP) Act 2000 which came into effect on 6 April 2001. Armour (2001); USA Uniform Partnership Act 1914 (Revised 1994 and 1997) and Uniform Limited Partnership Act 1976 with 1985 Amendments.
- 101.
According to Black’s Law Dictionary, the ownership of property is qualified when it is shared with one or more persons as opposed to absolute ownership where a single person has the absolute dominion over the property (6th edn West Publishing Co. USA 1991).
- 102.
Sayer (1999: 9).
- 103.
Sayer note 104 at 5 CEPMLP 9.
- 104.
Further, the determination of what constitutes “becoming involved in the management” is not easy. Herzfeld and Wilson (1996: 33–47). Consequently, the adherence to the requirements of a limited partnership is a time-consuming and expensive process. Lower (1996: 53).
- 105.
This supposed relationship is debatable. In essence, it is related to the question of whether the implied agency relationship found in the partnerships can or should be applied or extended to joint ventures. Miller comments on such a question by saying, “it is commonly said that absent an agreement to the contrary the acts of a partner in carrying out partnership business bind the firm, while the acts of a joint venturer in similar circumstances do not”. He refutes such a contention based on the fact that in the absence of an expressed agreement, the limited scope of a joint venture’s commercial operation should nullify the authority of one party to represent the others. The existence of the implied agency relationship in the context of joint venture depends, Miller argues, on the nature of the business association (i.e. trading vs. non-trading venture) and not the scope of such a business. So, in his opinion, the agency relationship is not infinite and has its own sensible limits: “from the mere formation of a non-trading venture, without other agreements, it can hardly be implied that the parties contemplate a mutual principal–agent relationship, for there is in no sense a manifestation of consent that any of the parties may act on behalf of the organisation”. In short, except for the non-trading “restrictions”, according to Miller, the principles of agency apply equally to both partnerships and joint ventures. Miller (1950: 38).
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Al-Emadi, T.A. (2019). An Analysis of the Organisational Culture of the Qatari Gas Industry in Terms of Giddens’ Domination Structure: The Case of Interactive Positions of Power. In: Joint Venture Agreements in the Qatari Gas Industry. Advances in Science, Technology & Innovation. Springer, Cham. https://doi.org/10.1007/978-3-030-12623-0_7
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