Production sharing agreements concluded for the search, exploration and production of hydrocarbon raw materials, as well as for the use of deposits with significant reserves of minerals, must also provide for the following essential conditions:
- annual declaration of production characteristics.
- procedure for using geological, geophysical and other information.
- procedure and features of accounting for costs for industrial and technological needs.
- the procedure and terms for assessing the level of environmental pollution around exploitation of the subsoil area (a land plot provided for needs related to the use of subsoil) at the time of conclusion of the agreement.
- the scope and terms of implementation of environmental protection measures.
- the procedure for coordinating and approving work programs, in particular oil operations programs.
- the conditions for responsible storage of the state share of extracted minerals before their transfer to the state.
- conditions for insurance of property risks, including loss of extracted minerals due to spillage, flood, fire.
- conditions of exceptional risk during the development of deposits.
If a foreign investor is a party to a production sharing agreement, he is obliged to register his representative office within three months from the date of conclusion of the production sharing agreement.
This period is optimal for the investor to start the implementation of the «start date» of the production sharing agreement.
The operator of a production sharing agreement shall organize the proper performance of the work provided for in such agreement and shall, inter alia, for this purpose:
1) carry out current operational activities stipulated by the agreement (personally or by involving contractors, subcontractors or other organizations (persons).
2) distribute compensatory and profitable products.
3) accept and use the investors' property necessary to fulfill the terms of the agreement.
4) calculate and pay taxes and fees (mandatory payments).
5) maintain separate accounting and tax records of transactions carried out under the agreement.
6) provide all parties to the agreement with sufficient access to full information regarding all activities carried out under the concluded production sharing agreement, including any confidential information of commercial value;
7) sell (realize) profitable, compensatory products of investors and the state part of the products, if this is provided for by the terms of the production sharing agreement.
A multilateral production sharing agreement must grant the operator of the agreement the right to make independent decisions regarding the ongoing activities necessary to fulfill the tasks (plans, programs, etc.) stipulated in the production sharing agreement.
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