Petroleum Licensing and Contracting

11. Award procedures

Transparency is at the core of good practice when it comes to award procedures. Whether acting individually or as participants in a competitive bidding round, all license applicants should be made fully aware of the procedures to be followed. They should also be provided access to all available data, whether on a free or on a purchase basis, and be informed of all applicable legal and fiscal regimes (including model contracts). Documentation should also provide assurances that areas offered for license are currently unlicensed and that proper authority exists for their licensing. With the possible exception of specific technical data, this information should be available in the public domain.

It is desirable, and now increasingly common practice, that applications for awards should be prequalified. Bidders are prequalified to ensure that that they have the financial and technical capacity to undertake a substantial exploration or mine development program. Where geological information is limited or not immediately encouraging governments may decide to adopt an open door, first-come-first-served licensing procedure or to enter into direct negotiations with a limited number of prequalified companies. Where significant geological data is available and investor interest is high, competitive auction is generally considered the best option.