Mongolian petroleum law passage aims to boost foreign investment

Wolf Petroleum Ltd., Perth, reported the passing of a new petroleum law in Mongolia designed to boost foreign investment in the country.

Wolf has exploration licences in the country’s Baruun Urt and Jinst blocks and is planning to apply for a production-sharing contract this year.

The new law, made effective on July 1, provides a number of incentives available to petroleum explorers, but will not apply to previously signed PSCs.

New exploration licences will be valid for 8 years, with the option of two 2-year extensions. The production period of 25 years will have two possible extensions of 5 years each.

Wolf says the PSCs themselves will carry the option to be signed and approved by the Mongolian government within 180 days, by company request. The PSCs must meet exploration contract commitments and outline production-sharing terms.

Royalty payments to the government will be at least 5%, but companies will be exempt from customs duty, value-added tax in the first 5 years, and income taxes from oil sales.

Also included in the PSC is a cost recovery program under which 100% of exploration, operation, development, and production costs can be recovered.

Companies also may apply for permission to build pipelines for transport of produced hydrocarbons.

Wolf says the government’s objective has been to minimize bureaucracy and create competitive market conditions in relation to other petroleum provinces around the world.

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