Business

Revenue sharing contract terms are relaxed for small sectors discovered to attract investors

The government has relaxed the terms of revenue sharing contract attract the investors to the latest round of tenders of discovered small fields, which has dragged on almost a year since its launch.

The government launched a third round of tenders for the discovered small fields last June but has postponed the bid window several times due to the appetite of indifferent investors. The latest bid submission deadline is April 20 to May 31.

The government made some changes to the sample revenue-sharing contract in the third round. The new contract cuts three-quarters of the penalty imposed on contractors for not completing the committed work program. For each well not drilled in deep water, the fine was reduced to $1.5 million from $6 million previously. Similar reductions have been made for dry well.

The contract has redefined ‘arm length sale’, describing it as a transaction between a buyer and a seller – both not the same legal entity – subject to a transparent and competitive bidding process . The previous definition of selling arm spans prohibited selling to an affiliated company.

Contractors can now extend the ‘development period’ up to a year by paying a fee.

The contract also adds the contractor’s obligation to own all the wells and structures within 12 months of the contract signing date.

The contractor will now have nine months, instead of the previous six, to submit to management a detailed field development plan.

If the contractor begins commercial production during the development phase, the government’s share of the revenue until the end of the development phase will be at $5 per barrel of oil and 20 cents per mmBtu of natural gas or part quoted by the contractor at the lower revenue point or whichever is lower.

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