Production sharing agreement, and its legal regulations
LEGAL ALERT: PRODUCTION SHARING AGREEMENT, AND ITS LEGAL REGULATIONS
Activities pertaining to petroleum within the territory of Mongolia are governed by the principle of a Production Sharing Agreement, in accordance with the “Law on Petroleum”, the “Procedures for Returning and Accepting Areas for Prospecting, Exploration, and Exploitation of Petroleum and Unconventional Oil” and other applicable legislation. The model for the Production Sharing Agreement, to be executed between the State administrative body and Contractors concerning oil exploration and exploitation activities (hereinafter “PSA model” or the “PSA”), was formally approved by Resolution No. 104 of the Government of Mongolia in 2015. PSA means an agreement signed between the state administrative body in charge of petroleum affairs and the Contractor for the exploration and exploitation of petroleum and unconventional petroleum within the framework stated under paragraph 14 of Article 4.1 of the Law on Petroleum of Mongolia.
The PSA shall be concluded by the following steps:
1. The Mineral Resources and Petroleum Authority of Mongolia (hereinafter the “MRPAM”) shall announce the order for conducting petroleum oil-related activities, and the deadline for the order on its official website and social media platforms.
2. Entities interested in conducting petroleum oil-related activities on the territory of Mongolia must submit their expression of interest to the MRPAM within the specified period.
3. The MRPAM shall notify the Contractor of the acceptance and rejection of their order within 45 days of the deadline for submissions.
4. The working group appointed by the Head of the MRPAM shall negotiate with the Contractor.
5. The working group shall compile and seal materials of the Contractor, and forward them with an Assessment committee.
6. The Assessment committee shall review the submitted proposals and provide a conclusion to the Selection Board, analyzing the proposal and relevant materials from the Contractor.
7. The Selection Board shall make a decision regarding the selection of the Contractor who meets the condition of the PSA by convening a meeting to discuss and review the Working Group's Report Sheet and the Assessment Committee’s opinions and conclusions. Based on the comprehensive review, the Selection Board shall introduce them to the Minister of the Ministry of Mining and Heavy Industry. Subsequently, the Minister of the Ministry of Mining and Heavy Industry shall issue an official Order confirming the decision of the Selection Board to authorize the granting of title to the selected Contractor.
8. The MRPAM shall notify the selected Contractor of their right title to conclude the PSA.
9. The representative of the MRPAM shall sign the PSA draft with the Contractor.
10. The PSA draft shall be reviewed and recommended by the National Security Council.
11. The PSA draft shall be discussed and signed by the Government based on the opinions of relevant ministries and departments.
12. The representative of the MRPAM shall sign the PSA following the Government resolution, and submit it to the Government for official approval.
13. The PSA shall come into effect from the date of approval by the Government.
