MPRA KEY HIGHLIGHTS

Model Petroleum Resources Agreement (PRA) Key Highlights

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Disclaimer: This is a summary of selected provisions of the Model Petroleum Resources Agreement. Applicants should refer to the full Model Petroleum Resources Agreement for the complete terms and conditions.

The Model Petroleum Resources Agreement (PRA) sets out the terms governing Petroleum Operations within the Agreement Area.

Exploration Period

The Exploration Period shall begin on the Effective Date and shall not exceed a total of eight (8) consecutive Agreement Years, consisting of three consecutive Exploration Phases:

  • First Exploration Phase: not exceeding three (3) consecutive Agreement Years.

  • Second Exploration Phase: not exceeding two (2) consecutive Agreement Years from the end of the First Exploration Phase.

  • Third Exploration Phase: not exceeding three (3) consecutive Agreement Years from the end of the Second Exploration Phase.

The Contractor shall commence Petroleum Operations not later than six (6) Months from the Effective Date.

Minimum Work Programme

During each Exploration Phase, the Contractor shall complete the applicable Minimum Work Programme.

The Model PRA provides for work programme items including 3-D and 2-D seismic, reprocessing, gravity and magnetic surveys, other surveys, environmental baseline survey and environmental impact assessment, and exploratory drilling.

The likely monetary spend (“LMS”) in respect of each applicable item is to be detailed in the PRA.

Performance Bank Guarantee

The amount of the bank guarantee shall be equal to twenty-five percent (25%) of the total LMS in respect of the entire Minimum Work Programme to be undertaken by the Contractor in the Agreement Area.

Petroleum Resource Royalty

The Contractor shall pay Petroleum Resource Royalty from the date of commencement of Commercial Production from the area covered by a Development License, on the basis of the percentages set out in the PRA and calculated using the Step Rate Method.

Petroleum Resource Royalty payments shall be non-cost recoverable. Petroleum Resources Royalties are charged on the gross market value of oil/gas at the Wellhead and are calculated separately for oil and Gas based on the agreed upon rates.

The Model PRA sets out minimum Petroleum Resource Royalty rates from 1.0% to 10.0%, according to average daily production rates for oil and Gas.

Production Sharing of Petroleum

The Parties shall share in the Profit Petroleum in each Financial Year in accordance with the provisions of the PRA.

A Party’s share of Profit Petroleum in any Financial Year is calculated on the basis of average daily production from the Agreement Area. The profit share shall be calculated using the Step Rate Method.

The Government shall have the option to take its entitlement to Profit Petroleum either in cash or in kind in any Financial Year.

Signature Bonus

The Contractor shall make a non-cost recoverable payment to the Authority of a Signature Bonus for each PRA within thirty (30) Business Days from the date of signing of the PRA.

The minimum Signature Bonus is US$500,000.00.

Production Bonus

The Contractor shall make a non-cost recoverable Production Bonus payment to the Authority for each producing Field within thirty (30) Business Days from the date of first Commercial Production.

Currency and Exchange Control

Subject to the provisions of the PRA and the laws of general application in Sri Lanka governing taxation, currency and foreign exchange, the Contractor shall have the right to:

  • repatriate abroad the net proceeds of sales of Petroleum in Sri Lanka;

  • receive, retain and use abroad the proceeds of export sales of Petroleum;

  • open, maintain and operate bank accounts inside and outside Sri Lanka;

  • remit funds necessary for carrying out Petroleum Operations;

  • convert into foreign exchange and repatriate sums imported in excess of its requirements; and

  • make payments outside Sri Lanka for purchases, services and loans obtained abroad, subject to the provisions stated in the PRA.

Information and Data

The Contractor shall provide the Authority, free of cost, all data obtained as a result of Petroleum Operations within the Agreement Area, including the categories of Data specified in the PRA.

Data shall vest in and be the property of the Government of Sri Lanka (GoSL), and the Contractor shall have the right to make use of such Data free of cost for the purpose of carrying out Petroleum Operations within the Agreement Area.

Environmental Requirements

The Contractor and Sub-contractors shall be subject to all environmental legislation in Sri Lanka.

The Contractor shall conduct its Petroleum Operations with due regard to the protection of the environment and conservation of natural resources and shall employ modern global Oil Field/Gas Field and Petroleum industry practices and standards for the prevention of environmental damage.

An environmental impact assessment study shall be completed pursuant to prevailing laws and regulations before commencement of Development Operations and submitted by the Contractor as part of the Field Development Plan, with specific approval of the PDASL obtained before commencement of Development Operations.

Local Content

Sri Lanka Upstream Petroleum Local Content Guidelines have been published by the Authority.

The Contractor’s commitment to local content development shall not, under any circumstance, be lesser than that submitted with the Contractor’s bid and stated in Appendix C.