Petroleum Contract Compliance and Inspection

1.    The objectives and scope of petroleum compliance activity

The objectives of periodic audits and the regular public reporting of those audits are to ensure that investors:

  • Comply with applicable measures and undertakings throughout the project life;
  • Implement a well-defined and comprehensive monitoring program to identify and mitigate serious or potentially serious health, safety and environmental (HSE) risks, such as water quality degradation and water security, protection of biodiversity and natural habitats, safe handling and storage of hazardous materials;
  • Maintain accounts that conform with national or international norms and allow host governments the right to conduct audits of accounts;
  • Provide tax authorities with robust data for the calculation of taxes and verification of transfer pricing (see also the Fiscal Regimes Overview); and
  • Comply with the restrictions stipulated in leases or contracts.

National regulations on petroleum sector contract compliance vary considerably across different countries. The scope of compliance activity covers a wide range of issues including resource management, health, safety and environmental regulations, drilling and production guidelines, trade, taxation, transfer of rights, decommissioning, maintenance and industry standards. Compliance monitoring activities may also require inspection of restrictions such as horizontal and vertical drilling exclusions, geographical limitations, use of hazardous materials, locations for constructions of pads, and operations to be performed in the field.

Typical action points to manage compliance processes are illustrated in the diagram below:

Source: Governance Risk and Compliance Management System (360 factors, 2017)