Petroleum Licensing and Contracting

Overview of Petroleum Licensing and Contracting

• A robust licensing or contracting system is important for providing clarity to investors on their specific rights, procedures for exploration and production work, risk and benefit division, and eligibility and qualifications.
• A considered and proactive policy on exploration and production licensing is necessary for a country to reap substantive benefits from its natural resources.
• The policy can be based on rounds of competitive bidding or an open door/direct negotiation approach and requires actions by the government.
• Actions include adopting an up-to-date exploration and production policy, deciding on an exploration strategy and related plan, reviewing the comparative attractiveness of terms, adjusting legal, regulatory, contractual, and fiscal regimes, and developing a plan of action for international promotion.
• Careful attention should be given to the preparation of the Licensing Terms of Reference, data packages, and organizing road shows to promote opportunities.
• The text covers topics such as encouraging exploration and production, confidentiality of data, potential conflicts between national and international law, model clauses, and standardization.
• It also provides an overview of types of upstream petroleum contracts with the state, agreements between petroleum companies, contracts versus licenses, and data ownership and confidentiality.
• GEODATA, award procedures, criteria for awards, prioritization and timing of awards, and the procedure for allocating awards are discussed.
• Success criteria, industry views, and conclusions for policy makers, mitigating risks in the licensing process, and essential tools in the policy process are also included.
• The elements of a robust and proactive licensing policy include adopting an exploration and production policy, deciding on an exploration strategy and plan, reviewing comparative attractiveness, adjusting legal and regulatory regimes, and developing an international promotion plan.
• Key questions and considerations related to these steps are discussed in the text.
• Recent awards and good practice examples are also provided.