Description
Book SynopsisPetroleum royalty agreements are well understood and widely used in several jurisdictions worldwide, and are increasingly being used in many new jurisdictions as a tool for petroleum project development, financing and divestment. However, they are not always drafted with the necessary rigour, and deficiencies are commonplace. This Special Report provides an overview of the key issues relating to petroleum royalty agreements (with drafting examples), including: •key forms of royalty agreement (including gross overriding royalties, net profit interests, cash and in-kind royalties); •an explanation of the economic underpinning of royalty agreements; •the content and effect of key royalty agreement provisions; and •additional provisions which can be found in royalty agreements. It will be an invaluable guide to legal, commercial and financial professionals engaged in petroleum project financing, development and divestment.
Trade ReviewThe latest book by Peter Roberts, Drafting and Negotiating Petroleum Royalty Agreements, is a timely examination of one of the key project contracts that underpin such exploration and production… Points made throughout the book are often accompanied by drafting or worked economic examples. While the author notes these ‘represent the counsel of perfection’, they do provide an extremely useful reference to better illustrate the points being made… Overall, this book is likely to be a valuable resource for legal practitioners, energy industry professionals and students who are interested in learning or refreshing their knowledge of petroleum royalty agreements. -- Jared Franicevic
Table of ContentsIntroduction 7 Part A: Introduction to royalty interests 9 A1 The essential elements of a royalty interest 9 A2 The characterisation of a royalty interest 10 A3 How a royalty interest comes into existence 12 A3.1 A royalty interest as a vehicle to facilitate a financial investment 12 A3.2 A royalty interest as part of the sale consideration on a transfer of interests 15 A3.3 The US model for petroleum exploitation 15 A4 The concessionary interests 17 A5 The produced petroleum 19 A6 The subject interest 21 A7 The royalty rate 23 A8 The economic balance of the royalty interest 24 A9 The form of execution of a royalty agreement 27 A10 Mineral interest royalties 28 Part B: The economic underpinning of royalty interests 29 B1 The royalty in kind 30 B2 The cash royalty 31 B3 The gross overriding royalty 36 B4 The net profit interest 36 B5 Upstream petroleum granting instrument royalties 43 Part C: Basic elements of a royalty agreement 45 C1 Ambit 45 C2 Audit and inspection 47 C3 Boilerplate provisions 50 C3.1 Confidentiality and announcements 50 C3.2 Conflicts management 50 C3.3 Entire agreement 51 C4 Duration 51 C4.1 Commencement 51 C4.2 Term 52 C4.3 Termination 54 C5 Information provision 55 C6 Governing law and dispute resolution 57 C6.1 Governing law 57 C6.2 Dispute resolution 58 C6.3 Custom and practice 58 C7 Performance, breach and liability 59 C8 Production covenants 61 C9 Production indemnities 65 C10 Relationship with the JOA 68 C11 Statements and payment mechanics 69 C12 Taxation allocation 71 C12.1 The royalty holder’s liability 71 C12.2 The producer’s liability 71 C12.3 Taxation allocation 72 C13 Transfers 73 C13.1 Transfers by the producer 73 C13.2 Transfers by the royalty holder 77 C13.3 General 77 C14 Warranties 78 Part D: Additional provisions in a royalty agreement 81 D1 Collateral support 81 D2 Conversion rights 84 D3 Expropriation protection 86 D4 Fiduciary duties 87 D5 Force majeure 88 D6 Insurance 90 D7 Management of competing interests 90 D8 Pooling and unitisation 91 D9 Redemption rights 93 D10 Registration 95 D11 Replacement upstream petroleum granting instruments 96 D12 Suspension rights 97 Part E: Related arrangements 101 E1 Royalty-repaid carry costs 101 E2 Payout arrangements 102 E3 Volumetric production payments 105 E4 Illustrative agreement participation 109 Notes 109 Index 113 About the author 117 About Globe Law and Business 119
