RE: RE: Questionwes,
here is an excerpt of the cc link i posted where friedland explains it
hope it helps
"
Insofar as our agreement with the Ecuadorian government is concerned, this agreement has been structured as a specific services contract.
The basic terms are simple:
Ivanhoe Energy Ecuador is responsible for sourcing all of the capital for the project, and Ivanhoe Energy Ecuador is the operator.
In exchange, Ivanhoe Energy Ecuador is granted a payment per barrel of oil produced and delivered to a local pipeline terminal. The payment for Ivanhoe is $37 per barrel, adjusted by an inflation index which is based on a basket of three United States government producer price indices, related to refining equipment, steel products, and upstream equipment. This basket index averaged 12.2% per annum over the last five years and 6.5% per annum over the last 10 years. The adjustment process began the day the contract was signed. It's a basket we're running at 10% a year after the $37 number is over $40 for example.
Our payments will therefore go up over time in lockstep with the inflation of the critical cost components of the project, and we are not exposed to any declines in the value of oil.
The contract also allows Ivanhoe Energy Ecuador to take this payment in cash in United States dollars, or in the oil equivalent, delivered at the export terminal from where it can be sold and exported to world markets. "