Free transcript, for Legal purposes please refer to original Spanish version
Regulations for the Implementation of the Royalty and Retribution in Oil Contracts
SUPREME DECREE Nº 049-93-EM
THE PRESIDENT OF THE REPUBLIC
CONSIDERING:
That, the Article 47 of Law Nº 26221, Organic Hydrocarbon Law, promulgated on
August 19 and published on 20, 1993 provides that by Supreme Decree endorsed by the
Ministers of Economy and Finance and of Energy and Mines, will be issued the rules governing
the implementation of the Royalty and Retribution, based on a sliding scale which will depend
on technical and economic factors that will allow the percentages of the Royalty and Retribution
in the whole national territory;
That, the aforementioned Article 47 notes further, that each Contract, shall apply the
Royalty and Retribution percentage that corresponds.
In exercise of the powers conferred in subsection 11) of Article 211 of the Political
Constitution of Peru;
DECREES:
Article 1.- To approve the Royalty and Retribution Regulation, it contains four (4) Titles,
fifteen (15) Articles and five (5) Final Provisions and forms an integral part of this Supreme
Decree.
Article 2.- This Supreme Decree may only be repealed, amended or interpreted by
another Supreme Decree expressly refers to this legal device.
Article 3.- This Supreme Decree shall be countersigned by the Ministers of Economy
and Finance and of Energy and Minesand shall enter into force the day following its publication
in the Official Gazette El Peruano.
Issued at Government House, in Lima, on the twelfth day, of the month of November, of
the year one thousand nine hundred and ninenty-three.
ALBERTO FUJIMORI FUJIMORI.
Constitutional President of the Republic
JORGE CAMET DICKMANN.
Minister of Economy and Finance
DANIEL HOKAMA TOKASHIKI.
Minister of Energy and Mines
REGULATION FOR THE IMPLEMENTATION OF THE ROYALTY AND RETRIBUTION IN OIL
CONTRACTS
TITLE I
DEFINITIONS AND GENERALITIES
CHAPTER I
DEFINITIONS
Article 1.- For purposes of this Regulation is defined as:
a.- License Contract.
Is entered by PERUPETRO S.A. with the Contractor and for which the Contractor
obtains authorization to explore and exploit or exploit hydrocarbons in the Contract area, in
which merit PERUPETRO S.A. transferred to the Contractor the right to ownership of
Hydrocarbons extracted, who in turn must pay a cash Royalty to the State.
b.- Services Contract
Is entered by PERUPETRO S.A. with the Contractor, for it to exercise the right to carry
out Hydrocarbons exploration and exploitation or exploitation activities in the Contract Area, the
Contractor shall receive a Retribution according to the Hydrocarbons Fiscalized Production.
c.- Hydrocarbons Fiscalized Production
Are the Hydrocarbons produced in the Fiscalization Site, in particular Contract Area,
and measured under agreed terms and conditions in each Contract.
CHAPTER II
GENERALITIES
Article 2.- Hydrocarbons Fiscalized Production, both License and Services Contracts,
shall be determined in one or more Fiscalized Site as agreed by the Parties in each Contract.
Article 3.- The Royaltie is a porcentaje of the valoration of the Hydrocarbons Fiscalized
Production.
The value of the Hydrocarbons Fiscalized Production will be done at international prices
based on a Hydrocarbons basket agreed by the Parties in each Contract. This basket will
reflect the international price of Hydrocarbons Produced and Fiscalized that being valued, and
will be the one that appears published in "Platt's Oilgram Price Report" or other sources
recognized by the oil industry, modifying it according to the adjustments agreed by the parties
and are necessary for reasons of quality, transportation or other, with respect to the Production
Fiscalization Site.
The corresponding percentage is determined in accordance with the methodology
developed in the TITLE II of this Regulation.
Article 4.- In the Services Contracts, the Contractor is responsible for the transport of
the Hydrocarbons produced, from the Contract Area to the place that the parties agree.
TITLE II
OF THE DETERMINATION OF THE ROYALTY AND RETRIBUTION
CHAPTER I
METHODOLOGY
Article 5.- The determination Contracts’ Royalty and Compensation, shall be conducted
under the following methodologies:
a) "R" Factor Methodology: The "R" Factor has been established in order to compensate for
possible deviations in the case of production, investment, operating costs, uncertainty about
hydrocarbons prices in the international market, Natural Gas domestic market growth potential
and possibilities of the latter in the international market.
"R" Factor will be determined by the following relation:
X
R = ------------y
Where:
X: Accumulated income
Y: Accumulated expenditure
Accumulated Income will result from the valuation of Hydrocarbons Fiscalized
Production, that corresponds to the Contractor in the License Contracts, as well as Service
Contracts with Retribution in kind, for a given month, plus Accumulated Income from the
previous month.
In services contracts with Retribution in cash, accumulated income will be given by the
Retribution of each month plus the accumulated income to the previous month.
Other income will be detailed in the Accounting Procedure of each Contract.
The opportunity of record that valoration, as web as the frequency of calculating the "R"
factor and its corresponding implementation, will be established in the Contract and its
respective Accounting Procedure.
Accumulative Expenditure will be made up for Investments and Expenses actually
incurred in the corresponding Month, plus accumulated expenditure to the previous month. For
that will take into account the existing accounting standards and practices in the country, except
for the following items, which are not included in the calculation of the "R" factor:
-
Investments and Expenses in Pipelines after the Fiscalization Site.
-
Income Tax.
-
Depreciation and amortization.
-
Financial expenses in general.
Amounts to be paid for breach of Contract or tax obligations.
Other investments and expenses not related to the Contract operations, which
detail will be incorporated in the Accounting Procedure of each Contract.
Income and expenditure to be considered will be made after the Date of Signing the the
Contract and shall be recorded in dollars.
b) Methodology of Accumulative Production for Field with adjustment for Price: Royalty
and Retribution shall be determined for each field based on the cumulative production of each
of them, being subject such Royalty and Retribution to a price adjustment according to the
weighted average price per barrel, corresponding to the production of such Field, as the
following formula:
F = 1 - (P1 - Pb)*K2
Where:
F=
Percentage adjustment factor of the base Royalty or Retribution, which allows
the Royalty and Compensation for certain weighted average price.
P1 =
Cumulative Weighted Average Price per barrel.
Pb = Base Price established for the Royalty percentage and base Retribution.
K2 = Constant that determines the slope of variation of the royalty percentage and
base Retribution with respect to higher and lower prices than the base price.
In Contracts may establish different degrees of variation for different sections that are
below or above the established base price.
a) Methodology for Production Scales: Be applied according to the Hydrocarbons
Fiscalized Production in a particular Contract Area, according to the levels and percentages set
forth in Article 3 of this Supreme Decree.
b) Methodology for Economic Results - RRE: Be applied according to the following
relation:
RRE = Fixed Royalty + Variable Royalty
Variable Royalty %t = ((Xt-1 - Yt-1) / Xt-1)*(1-(1/(1+(Factor Rt-1 - Factor R Base)))) *
100
Where:
X
: Accumulated Income
Y
: Accumulated Expenditure
Xt-1
: Income corresponding to the information for previous annual
period at the moment of calculating “Variable Royalty %t”
Yt-1
: Expenditure corresponding to the information for previous
annual period at the moment in which calculating the “Variable Royalty %t”
R Factor
: Is X/Y
Rt-1Factor
: Is the R Factor, that is calculating considering accumulated
Income and Expenditure to include the corresponding Xt-1, Yt-1
"a) Methodology for Production Scales: Be applied according to the Hydrocarbons
Fiscalized Production in a particular Contract Area, according to the levels and percentages set
forth in Article 3 of this Supreme Decree.
b) Methodology for Economic Result - RRE: Be applied according the following relation:
RRE = Fixed Royalty + Variable Royalty
Variable Royalty %t = ((Xt-1 - Yt-1) / Xt-1)*(1-(1/(1+(Factor Rt-1 - Factor R Base)))) *
100
Where:
X
: Accumulated Income
Y
: Accumulated Expenditure
Xt-1
: Income corresponding to the information for previous annual
period at the moment in which is made the calculation of the “Variable Royalty %t”
Yt-1
: Expenditure corresponding to the information for previous
annual period at the moment in which is made the calculation of the “Variable Royalty %t”
Factor R
: Is X/Y
Factor Rt-1
: Is the R Factor, that is calculating considering accumulated
Income and Expenditure to include the corresponding Xt-1, Yt-1
Accumulated Income will result from the valuation of Hydrocarbons Fiscalized
Production that corresponds to the Contractor in License Contracts, accumulated until the
period in which it performs the calculation of R Factor.
Other income will be detailed in the Accounting Procedure of each Contract.
The opportunity to record such valuation and the implementation of other income shall
be specified in the Contract and its respective Accounting Procedures.
Accumulated Expenditures are comprised of Investments and Expenses actually
incurred and accumulated until the period in which performs the calculation of the R factor, for
that, will take into account the existing accounting standards and practices in the country,
except for the items not be included in the calculation of Rt-1 Factor following:
- Investments and Expenses in Pipelines after the Fiscalization Site.
- Income Tax.
- Depreciation and amortization.
- Financial expenses in general.
- Amounts to be paid for breach of Contract or tax obligations.
- Other investments and expenses do not related with the Contract operations, which
detail will be incorporated in the Accounting Procedure of the Contract.
The Income and Expenditure to consider will be incurred from the Date of Signing the
Contract and recorded in Dollars of the United States of America.
The Fixed Royalty and the “R” Factor Base, are established in Article 4 of this Supreme
Decree."(*)
(*) Methodologies added by Article 1 of the Supreme Decree N° 017-2003-EM, published on 2905-2003.
CHAPTER II
DETERMINATON OF ROYALTY PERCENTAGES IN LICENSE CONTRACTS
Article 6.- For Exploration and Exploitation Contracts under “R” Factor methodology, will
be applied the following minimun percentages of Royalty:
"R" Factor
From 0.0 to less than 1.0
From 1.0 to less than 1.5
From l.5 to less than 2.0
To 2.0 or more
Minimum
Royalty
Percentage (%)
15
20
25
35
The definitive percentage will be negotiated and set in each Contract.
Article 7.- For Exploration and Exploitation Contracts under the methodology for Field
Accumulated Production with adjustment for Price, minimum Royalty porcentages should reflect
economic results equivalent to those obtained with the application of "R" factor in accordance
with the provisions of Article 6.
Article 8.- For Exploitation Contracts, Royalty percentages will be established in its
opportunity.
CHAPTER III
DETERMINATION OF RETRIBUTION PERCENTAGES IN SERVICES CONTRACTS
Article 9.- The Services Contracts Retribution will be:
c) Cash, by a fee expressed in dollars per hydrocarbons unit (US$/B1 or US$/MPC),
calculated based on a percentage (%) of the basket price of hydrocarbons agreed in the
Contract;
d) In kind, by a percentage (%) of the Hydrocarbons Fiscalized Production.
Article 10.- For Exploration and exploitation Contracts under the “R” Factor
methodology, will be applied the following maximum Retribution percentages:
"R" Factor
From 0.0 to less than 1.0
From1.0 to less than 1.5
From 1.5 to less than 2.0
Maximum
83
79
76
Retribution
Percentage (%)
To 2.0 or more
66
The definitive percentages will be negotiated and fixed in each Contract.
Article 11.- For Exploration and Exploitation Contracts under methodology for Field
Accumulated Production with adjustment for Price, the maximum Retribution percentages
should reflect economic results equivalent to those obtained with the applicatoin of “R” Factor,
in accordance with the provisions of Article 10.
Article 12.- For Exploitation Contracts, Retribution percentages, will be establisehd in its
opportunity.
TITLE III
PROCEDURE FOR THE ROYALTY AND RETRIBUTION PAYMENT
Article 13.- The amount of the Royalty is calculated for each fortnight of a given month.
The respective payment will be made later than the second business day after the end of the
corresponding fortnight.
Article 14.- For payment of the Royalty, PERUPETRO S.A. shall give to the Contractor
the relevant documents. Other conditions related to payment of the Royalty shall be agreed in
the respective License Contract.
The Royalty payment will result in the issuance by PERUPETRO S.A., of the
corresponding certificate on behalf of the Contractor, for purposes of the deduction to be made
by the Contractor in determining its Income Tax.
Article 15.- The conditions and terms for the payment of Retribution to the Contractor,
shall be agreed in the respective Contracts.
TITLE IV
FINAL PROVISIONS
First.- If, due to lack of infrastructure for Hydrocarbons transportation, or when it is
required for unconventional operations at the discretion of PERUPETRO S.A., a Contract for
Hydrocarbons is not feasible with the application of the percentages (%) minimum Royalty set
forth in Article 6 or the percentage (%) maximum Retribution listed in Article 10 of this
Regulation, by Supreme Decree different percentages may be set in the respective Contract.
“In the case of hydrocarbons exploitation operations in production areas reduced or
markedly declining and that require new and significant investments to increase production in
the opinion of Perupetro S.A., the royalty may be reduced or agreed in function to the increased
production that is obtained.” (1)(2)
(1) Paragraph added by Article 1 of Supreme Decree N º 021-2001-EM published on 25-052001.
(2) To confront with the Single Final Provision of the Law N ° 28109, published on 23-11-2003.
Second.- Contracts in force on the date of publication of this Regulation, shall maintain
the methodology established in these Contracts, for purposes of its Retribution.