RE: GOGC 2018 results and forecast. Frr mention28 Dec 2019 23:37
For info PRODUCTION SHARING AGREEMENT
The Group has the exclusive right to explore for, develop and produce oil in Block 12 pursuant to a 25 year PSA entered into on 25 June 1997 with the Government of Georgia (the “State”) and GOGC’s predecessor,
Saknovtobi. The term of the Block 12 PSA comprises an exploration phase during which the Group’s
Georgia subsidiary, Frontera Georgia, will designate those areas of Block 12 from which it intends to
develop and produce oil. The exploration phase expires on 13 November 2017. Save for any areas within
Block 12 that Frontera Georgia has committed to develop and produce pursuant to the Block 12 PSA
(“Development Areas”), Frontera Georgia must relinquish its rights to Block 12 at the end of this exploration phase. The Block 12 PSA can be extended for the producing life of any Development Areas, up to a
maximum period of five years.
Under the Block 12 PSA, Frontera Georgia agrees to procure the financing required to conduct the
exploration and development operations and is entitled to recover its costs and expenses incurred in doing so
from the petroleum produced from Block 12. Subject to approval of those costs by GOGC, Frontera Georgia
is currently able to fully recover its cost and expenses from the oil produced from Block 12 (“Cost Recovery
Crude Oil”) prior to any share of the oil being given to GOGC.
The operational costs incurred by Frontera Georgia on a day-to-day basis, including costs relating to
production, processing, transportation, administration, finance and tax, are recoverable in full from oil
produced. The proportion of oil produced from Block 12 available for use as Cost Recovery Crude Oil
decreases to 80 per cent. in respect of costs benefiting Development Areas and further reduces to 60 per cent.
in respect of costs benefiting areas containing discoveries made prior to the grant of the Block 12 PSA.
Following recovery by Frontera Georgia of its costs and expenses from the Cost Recovery Crude Oil, the remaining oil, referred to as Profit Oil, is allocated between GOGC and Frontera Georgia in the proportion of 51 per cent. to GOGC and 49 per cent. to Frontera Georgia. With limited exceptions, taxes arising in respect of exploration and development operations are ultimately to be borne by GOGC from its share of the Profit Oil.
The State has agreed to provide extensive support and assistance to enable Frontera Georgia and the
Operating Company to properly carry out its exploration and development operations, including gaining or granting access to pipelines, infrastructure and export points situated in Georgia. The State has further agreed
to maintain the stability of the legal, tax, financial, mining and economic conditions affecting the Block 12 PSA and, if there is a change to the laws and regulations of Georgia which has a material adverse impact on the economic position of Frontera Georgia, to amend the terms of the Block 12 PSA to restore the status quo or indemnify
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