Petroleum Licensing and Contracting

12. Criteria for awards

Once the credentials of potential investors have been established, good practice favours setting a limited number of clearly specified criteria for the award of a license. Arguably, the most important of these is the investor’s work commitment which should be specified in both physical terms and financial (or minimum) expenditure terms.

In the past awards were granted as a result of direct negotiations but fortunately practice has evolved to the point that it is more competitive and transparent today. The exclusive rights to explore and exploit any commercial discovery in the oil and gas sector are typically awarded by a government authority on behalf of the state, after the decision whether to explore and develop pre-defined areas of the petroleum sector is made.

In some cases, a contract may still be awarded following direct negotiations if this is provided for in legislation or if there is not enough competition in the bidding area. These contracts should be based on the model exploration and production contract or license elaborated by the country before the tender or the negotiation.