Social investment in production sharing agreements

Any investor, considering the needs of local communities, may spend funds on social and industrial development of the region.

Financing the above-mentioned needs is considered social investment.

Social investments in production sharing agreements take the following forms:

1) a share of funds from extracted hydrocarbons.

2) co-financing of socio-economic development programs in accordance with decisions of local executive authorities and local governments.

3) financing of educational projects for geological personnel of drilling rigs (employees hired by the investor from among the residents of the country party to the production sharing agreement);

4) financing of educational projects for training and university research.

5) financing of social partnership projects.

Social investments in the form of a plan or agreed program may or may not be compensated according to the product sharing agreements.

Currently, there have been no arbitration disputes in production sharing agreements regarding investor claims or lawsuits against the state for reimbursement of costs incurred for social investments, similarly, there are no lawsuits by the state for termination or termination of production sharing agreements.

The stage-by-stage process of forming proposals for social investments looks like this.

The investor or his designated operator:

1) develop a social investment strategy (plan).

2) submits a social strategy (plan) for approval to the state party to the production sharing agreement for approval.

3) a special committee (commission) is formed from among the representatives of the investor (operator) and the state to create a list of social needs and provide consultations on the development of a strategy and social investment (strategy) plan.

4) after the development of strategies, the project is submitted for approval.

5) the investor (operator) manages the implementation of social investment activities envisaged by the social investment strategy (plan), including determining the limit of applicable funding for social investments.

Expenditures made on social investments reduce the investor's (operator's) income tax base.