The General Licence and the Issuing Authority
The Law of Georgia on Oil and Gas regulates oil and gas operations through a system of licences, and the central figure of that system is the Agency. Under Article 15-1 of the law, the general licence for the use of oil and gas resources is issued by the Agency. The same principle is repeated at the level of activity licences: under Article 25-5, the activity licence is likewise issued by the Agency. For an investor this means that every administrative door is connected to a single authority, and it is the Agency’s decision that determines whether the project enters the implementation phase.
The general licence is not granted arbitrarily but on the basis of a contract: under Article 19, the Agency issues the general licence on the basis of the contract, within one month of its signature, and the conditions of the licence must be identical to the conditions of the contract. From this follows a practical rule: the text of the contract is not merely a commercial document — it is directly transformed into the conditions of the licence, which is why each of its provisions must be drafted with legal scrutiny. The investor pays a licence fee, and to participate in a tender or auction the applicant reimburses the costs of holding it in the manner established by the Agency. The licence fee is not compensated with compensation oil and gas.
The Duration of the Contract and the Licence
Article 16 defines the time frame: the maximum duration of the contract and the corresponding licence for the use of oil and gas resources is 25 years. The parties determine the periods of exploration and production operations within the duration of the contract, so the schedule of the concrete stages is laid down by the contract but cannot exceed its frame.
An extension is allowed at the initiative of the investor, for the period necessary and sufficient to ensure the economic and rational extraction, use and protection of oil and gas. Where the extension is necessary before the expiry of the 25-year period, it may be extended temporarily, but by not more than five years. When the duration of the contract is extended, the duration of the licence is extended automatically. Force majeure is provided for separately: the conditions of the contract and the licence do not operate where force majeure occurs, and the period of the existence of the force majeure, together with the period necessary to compensate the damage caused by delayed performance, is added to the duration of the contract. This means that an irresistible force in effect freezes and then restores the time resource, which the investor must take into account when planning the project.
The Activity Licence and the Application File
The procedures for issuing an activity licence are determined by Article 25-6. The Agency approves, by normative acts, the form of the application, the content of the licence and the general conditions of the activity; to obtain the licence an application must be submitted to the Agency in the approved form, to which must be attached: for a resident — an extract from the entrepreneurial register; for an enterprise of a foreign country — founding documentation certified or legalised in accordance with its legislation, a document confirming registration, and a document confirming the registration of a representation in Georgia.
The application must further be accompanied by a detailed description of the activity to be carried out; a detailed description of the technologies and methodological processes to be used by the applicant in the plant or means of transport; a detailed description of the raw material or oil and gas products to be used; an audit conclusion on the applicant’s financial condition; where available — a document on the applicant’s experience (qualification) and a list of the countries where it carried on its activity during the last 5 years; and a written guarantee that, if the licence is granted, complete information about the activity will be submitted to the Agency. Where the activity concerns the land of a private owner, the prior written consent of the landowner and the terms of the lease must be submitted; otherwise — information on the location and parameters of the land, the difficulties arising during negotiations and the details of the contract proposed to the landowner. Importantly: disagreement with the private landowner is a ground for the Agency to refuse to issue the activity licence.