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Accessing Petroleum:
Granting of Licenses
Dr Tina Hunter
Reader in Energy Law, University of Aberdeen; and
Associate, Aberdeen University Centre for Energy Law
Overview of Lecture
Upstream petroleum explained
Access regimes
Production Sharing Contracts
Licensing and Concession Systems
Comparison
jurisdictions
STAGES OF PRODUCTION
ACCESS
PETROLEUM EXPLOITATION
LCS
or
PSC
(L1)
PRODUCTION:ENVIRONMENTAL REGULATION
IN EXPLORATION, PRODUCTION
DECOMMISSIONING (L5)
Outline of PSCs
Company assumes risk, and provides the labour, capital, and risk
Features of PSC
host State not required to invest any capital into the E&P.
investment
Philosophy of PSCs
Stans,
some Middle Eastern areas (Iraq?)
some African and Asian countries.
Negotiation of PSCs
sets
contracts
Economics of PSCs:
dividing oil between IOC and State
Ownership
The oil and gas discovered will be divided into cost oil and
profit oil.
The IOCs capital costs are either expensed in the current year of
depreciated over a number of years.
This ensures the State receives profit when field production commences,
even if no royalty payment.
After the costs have been recovered, the remaining oil in the field is
known as Profit Oil.
The IOC usually pays a profit tax, which may or may not be
equal to the rate applying to other commercial activities in
the host State
Sakhalin II PSC
Royalty is 6%
Licensing
Important
Regulatory
parts
Features of LCS
License is for a specific area (the license area), for a specific period.
Exclusivity
non exclusive licenses are conferred for geological and geophysical prospecting,
compare Australia and Norway for exploration licenses
exclusive license is usually conferred for exploration work that involves drilling,
as well as for production operations
Types of licences
Exploration
Norway
non exclusive
UK Exploration License Seaward Exclusive
Australia exclusive leads to production licence (or
retention licence see lecture TH2)
Production Licence
Norway
Licence (Seaward) UK
Promote Licence (Seaward) UK
Special Prospecting Authority - Australia
Relevant Law
Norway
Program
Contribution of Data
Mandatory Drilling in lesser Explored areas
exclusive)
Exclusive right
Production Licences
Relevant Law
Norway
Award
of license
Rights, area and Duration
Fees charged
Who appoints the Operator?
Production Licences
13 April
1965
first
licences
granted
Blocks/
Acreage
Hydrocarbon Directive
http://eur-lex.europa.eu/lega
l-content/EN/TXT/PDF/?uri=CEL
EX:31994L0022&rid=
2
Process Australia
Licence
Iceland
Terms/JOA
Not required in all jurisdictions
JOA in Norway
Model Clauses in UK
Ernst to discuss JOA in detail
NORWAY
Licensing
Round
announced
UK
Licensing
Round
announced
JV contract formed by
participants and
operator decided
Parties make
application to
MPD
JV formed by
participants and
operator decided
Work Bid by
Joint Venture
Award of
Licence
Exploitation
commences under the
Offshore Petroleum and
Greenhouse Gas Storage Act
2006
Award of Licence
(discretionary)
(conditional on JOA) &
Operator
announced
Award of Licence
(discretionary
with work
program included)
Exploitation
commences
under the Petroleum
Activities Act 1996
Exploitation
commences
under the Petroleum
Act 1996
Cash bid
Discretionary Method
'Discretionary' discretion
(Pre 94/22/EC)
'Objective' discretion
(Post 94/22/EC)
Bidding
vs deepest pockets
Fairest?
Realise value of field? eg Ekofisk
Work program bidding can go wrong
Australia
Discretionary
Choose best
APA Norway
and Avaldsnes/Aldous
Must comply with Hydrocarbon Directive