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Drafting and Negotiating Petroleum Royalty Agreements

Drafting and Negotiating Petroleum Royalty Agreements

Author: Peter Roberts
Publisher: Globe Law and Business
ISBN: 9781787427983
Published In: September 2021
Format: Paperback , 120 pages
Jurisdiction: International ? Disclaimer:
Countri(es) stated herein are used as reference only

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Contents

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Petroleum royalty agreements are well understood and widely used in several jurisdictions worldwide, and are increasingly being used in many new jurisdictions as a tool for petroleum project development, financing and divestment. However, they are not always drafted with the necessary rigour, and deficiencies are commonplace.

This Special Report provides an overview of the key issues relating to petroleum royalty agreements (with drafting examples), including:

key forms of royalty agreement (including gross overriding royalties, net profit interests, cash and in-kind royalties);
an explanation of the economic underpinning of royalty agreements;
the content and effect of key royalty agreement provisions; and
additional provisions which can be found in royalty agreements.

It will be an invaluable guide to legal, commercial and financial professionals engaged in petroleum project financing, development and divestment.

Part I. Introduction to royalty interests

1. The essential elements of a royalty interest

2. The characterisation of a royalty interest

3. How a royalty interest comes into existence

4. The concessionary interests

5. The produced petroleum

6. The subject interest

7. The royalty rate

8. The economic balance of the royalty interest

9. The form of execution of a royalty agreement

10. Mineral interest royalties

Part II. The economic underpinning of royalty interests

1. The royalty in kind

2. The cash royalty

3. The gross overriding royalty (GOR)

4. The net profit interest (NPI)

5. Upstream petroleum granting instrument royalties

Part III. Basic elements of a royalty agreement

1. Ambit

2. Audit and inspection

3. Boilerplate provisions

4. Duration

5. Information provision

6. Governing law and dispute resolution

7. Performance, breach and liability

8. Production covenants

9. Production indemnities

10. Relationship with the JOA

11. Statements and payment mechanics

12. Taxation allocation

13. Transfers

14. Warranties

Part IV. Additional provisions in a royalty agreement

1. Collateral support

2. Conversion rights

3. Expropriation protection

4. Fiduciary duties

5. Force majeure

6. Insurance

7. Management of competing interests

8. Pooling and unitisation

9. Redemption rights

10. Registration

11. Replacement upstream petroleum granting instruments

12. Suspension rights

Part V: Related arrangements

1. Royalty-repaid carry costs

2. Payout arrangements

3. Volumetric production payments

4. Illustrative agreement participation

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