ABSTRACT
This chapter explains why the internationally integrated companies may prefer to withdraw from their major concessions in the Middle East rather than concede ‘partnership’, or equity participation, to the governments of the exporting countries if their managerial prerogatives are threatened. It also explains certain relationships affecting the profitability of operations for international companies when there is a high degree of integration between crude oil production and downstream operations. The profitability of the integrated companies would depend entirely on the extent to which price competition could be prevented in product markets on the one hand, and their total costs on the other. It is in the light of the basic considerations characterizing the relationship between crude and product markets from the point of view of internationally integrated companies that we must examine the question of government equity participation in the major sources of crude oil production.
