The Risk and Reward of Oil Exploration

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The Risk and Reward of Oil Exploration 1. How has this week's material (Attached in the uploaded files) affected your views on risk sharing between a foreign oil company and a host country? One of the biggest insights provided by this week's material would be its illumination of the incredible scale of the economic risk taken on by oil companies. In most cases, the risk undertaken by the oil company is far greater than one might assume. So to are the financial gains but these, the text reveals must often come after a great deal of risky investment is made. As the text outlines, the key risks connected to the process of prospecting and drilling for oil are assumed at the outset by private oil firms. The primary text helps to outline these risks, indicating that the geological challenges of drilling, the relative uncertainty related to the capital (i.e. machinery, manpower, etc), the often shifting operational costs and the fluctuating prices of oil on the world market all figure into the risk calculations for a drilling endeavor. (? 20?? p. 8) What I found most revealing as I came to better understand the risks that are part of seeking out and prospecting oil is that the barriers to entry for such an industry are considerable. Such is to say that a firm must possess the resources to sustain risk, the experience to minimize risk and the infrastructural stability to recover and even profit when risk becomes failure. (Sreekumar 2013) To this end, the text provides an

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