Why do we need an established and clear legislative climate?
Exploration for offshore oil and gas resources in the deep waters of the Black Sea requires upfront investments of several hundred million of dollars. If successful, potential subsequent field developments typically require additional billions of dollars to drill production wells and build the required infrastructure.
Offshore resource developments have much longer project lead times from the start of seismic activities until the start of production, typically require complex commercial arrangements and are thus more exposed to changes in the business environment.
The fiscal terms, including the royalty rates on produced volumes and the corporate tax regime, have a crucial impact on the economic viability of such investments. Oil and gas resource development projects compete for capital funding on a global scale. A country’s fiscal terms can attract these investments or discourage them.
Balance of risks and rewards
The government take (royalties, taxes, etc.) from the fiscal terms should reflect the risks oil and gas companies take to explore, develop, and produce the resources and appropriately balance such risks with potential rewards for those companies. The significant investments require multiple partners to manage the financial risk to explore and produce the resources. International oil companies’ involvement is critical to project success as they typically have the financial strength and project expertise to successfully oversee such large projects.
Sanctity of contracts
Investors make decisions to explore for oil and gas resources and potentially proceed with a development project based on the country’s existing fiscal terms in the law at that time, and based on the terms of the concession or equivalent agreements with the government. Investors then expect that the government will not unilaterally alter the law or fiscal terms that adversely impacts their projects and that the all terms of the agreements will be honored.
Empowered and skilled regulators
Oil and gas resource development projects and the local communities benefit from a stable regulatory environment that is practical, efficiently managed, and effectively coordinated between government authorities. It is important that regulators are empowered and skilled in their subject areas to fairly oversee projects and hold the industry to high safety and environmental practices.
What do we do for environmental safety?
Companies that will be developing offshore resources in the Black Sea are committed to safe and environmentally responsible operations.
Developing a culture of safety
Oil and gas producers in the Black Sea design, operate and maintain facilities to prevent incidents and are committed to continuously improving environmental performance throughout their operations. Producers have respect for the environment and foster appropriate operating practices and training. To keep safety a priority, oil and gas producers in the Black Sea:
- Design and maintain facilities, provide training and conduct operations in a manner that safeguards people and property;
- Have systems and procedures in place, which are designed to protect the physical security of people and property, control access to facilities and protect data and operations control systems; and
- Are committed to ongoing efforts to identify and eliminate or manage safety risks associated with their activities. They undertake reviews and evaluations of operations to continuously improve safety performance and impose responsibility and accountability for safe performance on the job.
Environmental stewardship through regulatory compliance
Producers in the Black Sea comply with all applicable environmental laws and regulations, and apply responsible standards where laws and regulations do not exist. Producers are also committed to conducting their business in a safe and secure manner that protects the safety of employees, others involved in operations, customers and communities.
- Efficient environmental regime: Oil and gas producers in the Black Sea work with the government, regulators and industry groups to support and encourage the timely development of effective environmental laws and regulations that consider the risks, costs and benefits, including effects on energy and product supply.
- Environmental management: Producers in the Black Sea design, operate, and maintain facilities to prevent incidents and are committed to continuously improving environmental performance throughout their operations. They encourage concern and respect for the environment and foster appropriate operating practices and training.