Petroleum Licensing and Contracting


Topic content

A robust licensing or contracting system is important for the following reasons:

  • It provides investors with clarity on their specific rights;

  • Clarifies procedures for performing exploration and production work;

  • Sets out how the risks and benefits relating to extractives projects are divided between the host government and the investor; and

  • Ensures that investors are eligible and fully qualified, both technically and financially, to undertake exploration and production activity in a timely and environmentally responsible, and socially acceptable manner. 

To reap substantive benefits from its natural resources, a country needs to have a considered and pro-active policy on exploration and production licencing. This can be based on ‘rounds’ of competitive bidding or an open door/direct negotiation approach. Either will require several actions by government.

  • Adoption of an up to date exploration and production policy for the petroleum sector, setting priorities at a country level.

  • Based on the policy, decide on an exploration strategy and a related plan of action for selected exploration areas within the country licensing regime.

  • Review the comparative attractiveness of the terms under which exploration and production is offered to the private sector, including the fiscal and contractual conditions applicable to new awards.

  • Based on the review outcomes, adjust the legal, regulatory, contractual and fiscal regimes in force.

  • Develop a plan of action for the international promotion of exploration and production opportunities and prospects to attract qualified companies and/or foster additional investment by companies already active in the country. Careful attention should be given to the preparation of the Licensing Terms of Reference (TOR) to be used for submitting applications, ensuring availability of relevant “data packages” for each opened area and organizing “road shows” in the country and abroad for promoting the opportunities in the petroleum industry.

Key questions and considerations relating to these steps are discussed under this topic. 

Elements of a robust and proactive licencing policy

This can be based on ‘rounds’ of competitive bidding or an open door/direct negotiation approach. Either will require several actions by government.

  • Adoption of an up to date exploration and production policy for the petroleum sector, setting priorities at a country level.

  • Based on the policy, decide on an exploration strategy and a related plan of action for selected exploration areas within the country licensing regime.

  • Review the comparative attractiveness of the terms under which exploration and production is offered to the private sector, including the fiscal and contractual conditions applicable to new awards.

  • Based on the review outcomes, adjust the legal, regulatory, contractual and fiscal regimes in force.

  • Develop a plan of action for the international promotion of exploration and production opportunities and prospects to attract qualified companies and/or foster additional investment by companies already active in the country. Careful attention should be given to the preparation of the Licensing Terms of Reference (TOR) to be used for submitting applications, ensuring availability of relevant “data packages” for each opened area and organizing “road shows” in the country and abroad for promoting the opportunities in the petroleum industry.

Key questions and considerations relating to these steps are discussed under this topic.