|
Abstract:
|
The purpose of this paper is to understand why a host country (HC ) shows ex post opportunistic behaviors in E &P projects and frequently forces international oil companies (IOCs ) to renegotiate previously signed contracts . This research employs the concept of asset specificity and hold -up problem in transaction cost economics (TCE ) . It then examines the unique characteristics of E &P projects , HC’s opportunistic behaviors , and IOCs’ safeguards . For a case study analyzing the implications between the economic theory and HC’s ex post opportunism in oil E &P project , I have selected Kazakhstan . The result is that HC’s ex post opportunism can be explained by a hold -up problem resulting from IOCs’ sunk investments and the unique characteristics of the oil E &P industry . When IOCs’ important capital assets become sunk investments and the price of oil increases rapidly , HC has a strong incentive to appropriate IOCs’ profits through ex post opportunism . Yet at the same time , HC must consider the damage to its reputation when deciding the extent and ways of its ex post opportunistic behaviors in oil E &P projects . |