Drafting and Negotiating Petroleum Royalty Agreements (eBook)

Introduction 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