Terms and Conditions of Production Sharing Agreements of Albania Free Exploration Blocks, Lorenc Gordani | Thursday, June 26, 2015AEI Updates June 2015Posted by Adv. Lorenc Gordani, PhD Fri, June 26, 2015 16:37:48
The Albania Ministry of Energy and Industry, has announced the open of available Areas 4, 5 and Dumre, C and Panaja with deadline of application 15.07.2015. Meanwhile for the onshore and other offshore Areas, due to the consolidation of seismic data, to a postponed period. The "Petroleum Law", No. 7746, date 28.07.1993, authorizes the Ministry to enter into a Production Sharing Agreement (PSA), for exploration, development PSA based on the following Terms and Conditions of Production Sharing Agreements.
According to "Petroleum Law", "Petroleum Operations" means all or any of the operations related to the exploration for development, extraction, production, separation and treatment, storage and transportation and sale or disposal of petroleum up to the point of export, or to the agreed delivery point in Albania or the point of entry into a refinery and includes natural gas processing operations but does not include petroleum refining operations.
Hydrocarbons existing in their natural state are the property of the Albanian State. The Government represented by the National Agency of Natural Resources (Decision No. 445 dated 03.09.2006) authorizes the performance of petroleum operations by the National Oil Company (Albpetrol) in its exclusive areas, or a Contractor in remainder of the territory of Albania.
The National Agency of Natural Resources is authorized to make available to interested oil companies the existing geological and geophysical data on the free areas in order to give oil companies the opportunity to evaluate the data before submitting applications. The contract type is the Production Sharing Contract (PSC) between National Agency of Natural Resources, acting on behalf of the Albanian Government, and the Contractor.
According to the "Petroleum Law", "Production Sharing Agreement" means a Petroleum Agreement which provides for the recovery of Contract Costs from Petroleum produced in the Contract Area or from a proportionate part thereof, and for the division between the State and the Contractor of the balance of petroleum remaining after the recovery of Contract Costs in accordance with a scale or formula specified in the Petroleum Agreement.
The Production Sharing Agreement includes provisions such as: The performance of a minimum work program, backed by a performance guarantee; The presentation of an annual work program and budget; Preference given to local employment and supplies during petroleum operations, where these are competitive in terms of quality, availability and cost; The opportunity for local service companies to bid and preference given to them when the offer is comparable or better than other third parties. Indemnify the State or the Ministry against all claims made by third parties in respect of injury, loss or damage resulting from the conduct of any operation carried out by the Contractor or by any subcontractor.
"The Petroleum Law" deals with access to private land after giving the occupier and the owner a minimum time notice. However, the Contractor must pay fair, just and equitable compensation with regard to any disturbance or damage caused during the conduct of petroleum operations. The P.S.C. provides for the establishment of a training and administration fund, which is used for the training of National Agency of Natural Resources employees, and for administrative purposes.
The Contractor shall conduct petroleum operations in a safe and proper manner in accordance with generally accepted international petroleum 7 industry practice and shall cause as less damage as is reasonably practicable to the general environment including (inter alias) the surface, air, seas, lakes, rivers, marine life, animal life, plant life, crops, other natural resources and property, and shall forthwith repair any damage caused to the extent reparable, and shall pay reasonable compensation for all damage which is beyond repair.