Risk of expropriation reduces investors’ expected profit from overseas oil ventures, but possible compensation has little effect. In the event of expropriation, however, the quantum of compensation is intensely contested.

The wide disparity between valuations claimed by governments (net book value) and companies (DCF valuation) can be significantly reconciled. Book value requires certain adjustments, and the "Cinderella effect", the systematic overstatement of value, must be offset.

Indeed, except for windfall profits, net book value and DCF value in general will not differ greatly.

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