Exploration and Production Sharing Agreement
The petroleum concession areas in Oman are offered to the global market by tender-based licensing rounds or via direct negotiation. The Exploration and Production Agreement (EPSA) is considered one type of various Petroleum Contracts that is recognized and implemented by many governments worldwide. The Government of Sultanate of Oman, through the Ministry of Energy and Minerals (MEM), use this type of agreement in all the concession acreages offered to the Contractors (E&P companies) for investment in Oman and it depends on an agreed cost recovery percentage (CR%) and a net profit split percentage (Government/Contractor Profit-Split%) upon successful commercial discovery of hydrocarbons. From the period between 2015 and 2020, a total of 19 EPSAs were signed between the Government of Sultanate of Oman and E&P companies.
The investment in the Sultanate of Oman differs from other countries and the reason behind that is (1) Oman is politically stable and its petroleum infrastructure is well established (2) the EPSA terms are flexible and negotiable and (3) no royalty on all oil and gas produced. In the EPSA, the tenure of the exploration duration is segmented into two phases (Initial and Second Phases). The Contractor will have the choice to relinquish its EPSA rights at any phase provided that Contractor has fulfilled all its work obligations for such phase. In the case of commercial discovery, the Contractor will be granted a period of 15 years, automatically, for the development of the contract area from the date of the Ministry’s approval towards the Declaration of Commerciality.
Process of awarding a concession acreage through direct-negotiation process
The E&P Company submits a letter of interest/ intent (LOI) to show its genuine interest to acquire a certain concession block.
- The E&P Company signs a Confidentiality Undertaken (CA) and makes data-package-fee payment for the desired concession block.
- The Ministry of Energy and Minerals (MEM) setup for a deadline towards the submission of the proposal.
- MEM receives the E&P company official proposal.
- MEM notification of acceptance towards the E&P company proposal.
- Commencement of the negotiation sessions on elements of the petroleum contract - Exploration and Production Sharing Agreement (EPSA).
- Signing ceremony of the Exploration and Production Sharing Agreement (EPSA).
- Royal decree ratifying the awarding process of the block.
The process of awarding a concession acreage through bid-round process is as the following:
- Official announcement of the Omani government bid round through the LDR website and appropriate social media channels or through international conferences.
- The Ministry of Energy and Minerals (MEM) setup of a deadline towards the submission of the proposals.
- The E&P companies register in the LDR website and provide letter of interest/ intent (LOI) for the desired block(s) to show their genuine interest to acquire concession blocks.
- The E&P companies sign the Confidentiality Undertaken (CA) and make data-package-fee payments for the desired concession blocks.
- MEM receives the E&P companies official proposals and evaluate them.
- MEM notification of acceptance towards the shortlisted proposals to acquire concession blocks.
- Commencement of the negotiation sessions for on elements of the petroleum contract - Exploration and Production Sharing Agreement (EPSA) for each block.
- Signing ceremony of the Exploration and Production Sharing Agreements (EPSAs).
- Royal decree ratifying the awarding process of the block.