Verification of the joint account of production sharing agreements by authorities

The state, as a party to the production sharing agreement, monitors the correctness of the investor's allocation of costs to the compensation account (joint account) in terms of the investor's level of implementation of the geological study program, experimental industrial development, distribution of hydrocarbons, and production.

State control is ensured through inspections of such an account by authorized bodies responsible for monitoring and controlling the implementation of production sharing agreements.

In countries with a stable mechanism for attracting investment, there are no problems with state control, since the authorized body for support and control is one or more bodies (for support, some type of agency for attracting investment, or for the non-state sector of the economy - a gas producers' union or an association of geologists), etc.

However, in countries where production sharing agreements have just been concluded or are in the process of being implemented, the function of controlling (supervising) joint accounts under production sharing agreements is entrusted to a single government authority.

Therefore, the investor has many questions:

1) how to distinguish the function of the authorized body for monitoring and controlling production sharing agreements in terms of the correctness of the allocation of expenses to the joint account and the function of this state authority, which is vested with the authority of state control in the field of economic activity, geology, natural environment, oil and gas sector, energy efficiency, etc.?;

2) why are specialists from a significant number of state authorities involved in the verification of a joint account, if only one authority is the authorized body for monitoring and controlling production sharing agreements;

3) how to appeal the actions or inaction of officials of the authorized body for monitoring and controlling agreements? According to the law or under the regulation on production sharing agreements? We explain this as follows. Due to the fact that the joint investor account in production sharing agreements is not a regulatory, but a contractual sub-account, the provisions of the law on the procedure for conducting an inspection in the field of economic activity cannot apply to the commission of the authorized body for monitoring and control of production sharing agreements.

The subject of the audit of a joint account carries a significant ramification on the primary accounting documents, therefore the issue of the audit covers tax, environmental, mining, labor law, and labor safety and health law.

The inspection cannot take place within the approved forms of acts on departmental inspections of various authorities.

The verification of the joint account is based on the correctness of the accrual and reflection in the investor's reporting of expenses that will be reimbursed in the future, therefore the procedure and method of verification should be determined exclusively by the provisions of the production sharing agreement.