which may be termed 'political. risks'-may be important deter- minants
of investment. After taking such risks into consideration in the
exploration and development stage, a firm computing the pres- ent value
of its probable income stream must consider several other factors. In
addition to the current rate of production, it must con- sider these:
(I) engineering limits to the rate of extraction in any given period,
(2) physical limits to the total amount of the resource that can be
produced within a given location, and (3) limits to the availability of
new petroleum sources at the same costs as at the present location. It
might be useful at this point to note that the firm as an explo- ration
agent in South-East Asia operates largely as a contractor to the host
government who has ownership and final control over the petroleum
resources. The group of suppliers of petroleum reserves in the region is
characterized by the presence of the major com- panies, directly or
through subsidiaries, as well as by many small- er, and even
independent, companies. Three major companies currently dominate
exploration and producing operations in two countries-Exxon and Shell in
Malaysia, Shell in Brunei. In Indonesia, Caltex and Stanvac dominate
production. Outside Malaysia and Brunei the bulk of new exploration is
conducted by relatively smaller companies side-by-side with the major
companies like Exxon, Gulf, Mobil, Shell, and Texaco.