RESOLUTION OF THE CABINET OF MINISTERS OF THE REPUBLIC OF UZBEKISTAN

of July 21, 2020 No. 448

About implementation of the mechanism of hydrocarbon production on the basis of contracts with retained risks

In pursuance of the resolution of the President of the Republic of Uzbekistan of July 9, 2019 No. PP-4388 "About measures for stable providing economy and the population with energy resources, financial improvement and enhancement of management system with oil and gas industry", for the purpose of implementation of measures for stable providing economy and the population with energy resources by hydrocarbon production growth in volumes from fields with hardly removable and small inventories the Cabinet of Ministers decides:

1. Take into consideration that according to the international practice in oil-and-gas sector hydrocarbon production on fields with hardly removable or small inventories and high cost of mining works is performed on the basis of contracts with retained risks between subsoil users and the companies specializing, as a rule, in rendering services in the field of hydrocarbon production (further - the contractor).

2. Determine that:

the hydrocarbon production mechanism on the basis of contracts with retained risks provided by this resolution extends to the state companies and legal entities from shares of the state in authorized fund (capital) in the amount of 50 and more percent, and also legal entities, in authorized fund (capital) of which of 50 and more percent also more percent belong to the legal entity from shares of the state 50 (further - the subsoil user);

the list of fields on which increase in hydrocarbon production with involvement of contractors on the basis of contracts with retained risks is provided (further - the contract), on regular basis is created by the Department of Energy of the Republic of Uzbekistan according to proposals of subsoil users and approved with the Cabinet of Ministers of the Republic of Uzbekistan;

the contract represents the works agreement providing accomplishment by the contractor, determined on the basis of the competitive biddings, at own expense and on the risk of works (services) in increase in hydrocarbon production with acquisition of rights part of share from the developped amounts of hydrocarbons as compensation of costs of the contractor and the remuneration which is due to it;

the developped amount of hydrocarbons is calculated as difference between the actual amount of production and settlement amount of basic production;

the settlement amount of basic production for establishment of technical requirements to the tender documentation is determined by the subsoil user as starting conditions of increase in hydrocarbon production, based on the developed technical and economic calculations for the respective fields, with evaluating by each well;

the size of share of the contractor in the developped amount of hydrocarbon production is determined by technical and economic calculations taking into account covering of the costs of the subsoil user concerning such share including connected with the taxation and it is specified in the contract;

the share of oil and gas condensate which is due to the contractor under the contract can be realized on contractual basis in the form of raw materials in the domestic market or is processed in the territory of the Republic of Uzbekistan on basis to be provided for further sales of products of their conversion in the domestic market or for export;

the share of natural gas which is due to the contractor under the contract on contractual basis is implemented on the domestic market, and also can partially be used for own needs of the contractor;

the cost of services in oil refining, gas condensate and natural gas on refinery capacities, transportation of natural gas is determined by gas-transport system of the republic on contractual basis between the oil and gas processing, gas transmission organizations and the contractor;

the foreign contractor has the right to use revenue in national currency arriving from realization of hydrocarbons, and in cases of their conversion in the territory of the Republic of Uzbekistan - conversion products, on purchase of foreign currency in the domestic foreign exchange market for further transfer of the acquired funds in foreign currency into the account abroad;

the contractor performs actions for production based on the licenses for right to use by subsoil plots which are available for the subsoil user, implementation of activities for production, conversion and oil sale, natural gas and gas condensate, and also land and mountain branches;

all geological information obtained by the contractor during the course of performance of works on the contract is subject to voluntary conveyance in accordance with the established procedure to the subsoil user;

all geological, technological, technical and financial hazards in case of implementation of the contract are born by the contractor, without obligations of compensation of the costs incured by it from the subsoil user and the state;

contracts can be signed concerning one or several fields for a period of up to 10 years with possible prolongation in addition to 5 years by mutual consent of the subsoil user and contractor.

3. Determine that:

the subsoil user performs functions of the corporate customer on carrying out the competitive biddings for the choice of the contractor;

the competitive biddings appear on each field separately;

terms of carrying out the competitive biddings are established at least two months from the date of the announcement and determined proceeding from time necessary for obtaining and the analysis by participants of tender of geological specifications by fields, and also preparation of offers;

the minimum requirements according to appendix No. 1 are imposed to the contract;

carrying out the competitive biddings, including assessment of proposals of participants of the competitive biddings and determination of the winner, are made by tender committee which structure joins also representatives of the Department of Energy of the Republic of Uzbekistan, according to the procedure, established by the legislation;

the bidding winner - the contractor shall form the affiliated legal entity with 100 percent equity and make its state registration according to the legislation of the Republic of Uzbekistan, except for residents - the legal entities created according to the legislation of the Republic of Uzbekistan;

the subsoil user signs the contract with the contractor by results of the competitive biddings;

the conclusion of the contract with retained risks between the subsoil user and the contractor is performed according to the scheme according to appendix No. 2.

4. Permit the subsoil user to transfer to contractors information on the basis of confidentiality agreements concerning fields on which the competitive biddings on involvement of contractors for performance of works on increase in hydrocarbon production on the basis of contracts with retained risks are announced.

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