Marginal Oil Fields - Incentives to Produce

The Minister of Energy and Mineral Resources issued Ministerial Regulation No. 0008 of 2005 on 25 April 2005 to facilitate the development of and production in marginal oil fields in currently producing work contract areas. The Regulation requires that the Contractor submit an application to the Implementing Agency for Oil and Gas (“BP Migas” or BP) based on the Terms and Conditions of a current Production Sharing Contract (“PSC”).

The incentive that is to be provided to Contractors is a 20% refund of any operating costs incurred in the establishment of a viable producing marginal oil field. The incentive is subject to annual review and is extendable based on calculated cumulative rates of return. Once an incentive has been granted, then a Contractor has 12 months to commence development of the marginal oil field. In the event that this development leads to cumulative rates of return exceeding 30% then the incentive will cease. Before an application can be submitted the Contractor must evidence that the current rate of return or projected rate of return is less than 15%. Once the application has been submitted the BP has 30 days to either approve or reject the application.