Tashkent, Uzbekistan (UzDaily.com) -- A mechanism for the production of hydrocarbons based on contracts with undistributed risks is being introduced in Uzbekistan. They are used as a contractual mechanism in cases of production in fields with hard-to-recover and small hydrocarbon reserves. This was reported by the press service of the Ministry of Energy.

The corresponding resolution of the Cabinet of Ministers of the Republic of Uzbekistan was adopted on 21 July 2020. The new mechanism is intended to become an incentive to increase the volume of hydrocarbon production from fields with hard-to-recover reserves.

The document was adopted in pursuance of the resolution of the President of the Republic of Uzbekistan No. PP-4388 from 9 July 2019 on improving the management system of the oil and gas industry.

In international practice, in order to minimize geological and financial risks in the production of hydrocarbons, including in fields with hard-to-recover and small reserves, subsoil users attract companies on terms with undistributed risks.

According to the adopted resolution, it is established that the mechanism of hydrocarbon production based on contracts with undistributed risks applies to state enterprises and legal entities with a state share in the authorized capital (capital) of 50 percent or more.

The list of fields for which contractors will be attracted on the basis of such contracts is formed by the Ministry of Energy based on proposals from subsoil users.

The contractor will be selected on a competitive basis. The new type of contract provides for the contractor to perform work to increase hydrocarbon production at his own expense and risk.

The share of oil and gas condensate due to the contractor under the contract can be sold on a contractual basis in the form of raw materials in the domestic market or processed in the territory of Uzbekistan for further sale in the domestic market or for export.

The share of natural gas attributable to the contractor is contracted domestically.

Contracts can be concluded in relation to one or several deposits for a period of up to 10 years with a possible extension of an additional up to 5 years by mutual agreement of the subsoil user and the contractor.

The resolution also contains the conditions for holding competitive tenders and the minimum requirements for contracts with undistributed risks to increase hydrocarbon production, a scheme for concluding such a contract between a subsoil user and a contractor.

Thus, these mechanisms will contribute to the development of services in the oil and gas industry of the republic, and will also allow the implementation of work to increase hydrocarbon production at the expense of contractors’ capital on mutually beneficial terms.

The adoption of this resolution will allow on a competitive basis to select potential interested investors, promote the development of the industry, introduce advanced technologies and increase hydrocarbon production.