An exploration-exploitation contract enables the Contractor to exclusively carry out all activities related to Petroleum Operations within the contract area.
The maximum total term of an exploration-exploitation contract, including all Exploration and Exploitation periods, will be thirty (30) years computable from its subscription date. The contractor may request an extension of 10 additional years for justified reasons, which must be authorized (or not) by the Executive Branch.
The Exploration period is divided into 3 sub-periods: basic, supplementary and extension. In the Basic sub-period, the Contractor must carry out the exploratory work committed at the time of making the offer. The supplementary and extension subperiods are optional for the Contractor.
The contract to be subscribed is a "Production Sharing Agreement" (PSA), which places the risk on the Contractor, who is compensated with part of the production, if any.
The Contractor assumes all risks, costs and responsibilities inherent to the exploration-exploitation of hydrocarbons, providing at its own charge the technology, personnel, capital, equipment, machinery and other investments that may be necessary for the exploration of the area covered by the Contract, as well as for the subsequent development and production of the reservoirs that may be discovered and declared commercially exploitable.
The Contractor will not acquire any mining rights on the reservoirs that are discovered within the contract area, nor on the hydrocarbons extracted. The income obtained is divided into 3 portions: Cost Oil, Profit Oil for the Contractor, and Profit Oil for the Uruguayan State. The Contractor is allowed to recover investments and operating costs through Cost Oil. The difference between income and Cost Oil is Profit Oil. This Profit Oil is shared between the Contractor and the Uruguayan State according to percentages established in the Contract, which arise from the offer.
ANCAP has the right (not the obligation) to associate and join the project up to a maximum percentage offered by the Contractor in the proposal, if a commercially exploitable discovery is declared.
Therefore, the Uruguayan State would capture rent in Production Sharing Contracts through three channels: ANCAP's association, the % of Profit Oil for the Uruguayan State, and the Income Tax on the Contractor's profits.
Hydrocarbon exploration and production operations are subject to national environmental regulations and require authorization from the Ministry of Environment to be carried out. ANCAP promotes the adoption of the best practices and industry technologies aligned with these regulations and with the aim of developing sustainable activities. The Ministry of Environment has developed specific regulations and guidelines for these activities, to which all exploration, development, and production operations carried out by oil companies will be subject, including environmental authorizations for marine seismic projects and offshore exploration wells. Furthermore, these contracts signed between ANCAP and oil companies do not allow the venting or burning of natural gas, so it is expected that the carbon intensity of the barrels eventually produced in Uruguay in case of a commercial discovery would be among the lowest worldwide.
You can access the main data of the current hydrocarbon exploration and exploitation contracts by clicking here.
