Machine Translated by Google -36- _________________________________________________________________________ Dec. No. 83-16 establishing the Hydrocarbons Exploration and Production Regulation. OG No. 10832 of March 7, 2016. DANILO MEDINA President of the Dominican Republic NUMBER: 83-16 Machine Translated by Google -37- _________________________________________________________________________ WHEREAS: That the non-renewable natural resources found in the territory and in maritime spaces under national jurisdiction, genetic resources, biodiversity and the radio spectrum are the Nation's heritage. WHEREAS: That mining and hydrocarbon deposits and, in general, non-renewable natural resources, can only be explored and exploited by individuals, under sustainable environmental criteria, by virtue of concessions, contracts, licenses, permits or quotas, in the conditions determined by law. Individuals can take advantage of renewable natural resources in a rational manner with the conditions, obligations and limitations provided by law. WHEREAS: The Dominican Constitution declares the exploration and exploitation of hydrocarbons in the national territory and in areas of high public interest. maritime under national jurisdiction. CONSIDERING: That the Mining Law No.146, of June 4, 1971, in its Article 4 exempts oil and other hydrocarbons from its provisions. WHEREAS: The Ministry of Energy and Mines is competent to order and/or carry out the necessary studies to evaluate the potential of fossil hydrocarbons, and grant exploration permits and concessions for the exploitation of fossil hydrocarbons in the Dominican Republic. CONSIDERING: That the exploitation and economic recovery of hydrocarbon reserves will be carried out in accordance with the technical and economic principles generally accepted and in use by the International Hydrocarbons Industry, without prejudice to compliance with environmental protection regulations. . WHEREAS: It is necessary to dictate the rules that guarantee the efficient exploitation of our hydrocarbon reserves, the integrity of the human person, as well as the preservation of the environment in which they are developed. SEEN : Law No.4532, of August 31, 1956, which regulates the exploitation of oil fields and other fuels. SEEN : The Mining Law No.146, of June 4, 1971 and its Application Regulation, No. 207-98, of June 3, 1998. SEEN : Law No.100-13, of July 30, 2013, which creates the Ministry of Energy and Mines. SEEN : Law No.64-00, of August 18, 2000, which creates the Ministry of the Environment and Natural Resources. SEEN : The Hydrocarbons Law No.112-00, of March 29, 2000. Machine Translated by Google -38- _________________________________________________________________________ In exercise of the powers conferred on me by Article 128 of the Constitution of the Republic, I dictate the following: REGULATION OF EXPLORATION AND PRODUCTION OF HYDROCARBONS CHAPTER I GENERAL DISPOSITION ARTICLE 1. The Dominican State has absolute, inalienable and imprescriptible control over hydrocarbon deposits and any other existing hydrocarbon substances in the soil or subsoil of the national territory, including the exclusive economic zone and the continental shelf, in accordance with what established in Article 9 of the Constitution of the Dominican Republic. ARTICLE 2. The purpose of this Regulation is to promote, develop, regulate, regulate and control the exploration and exploitation of hydrocarbon deposits and any other hydrocarbon substances, regardless of their physical state, preserving and protecting the environment. environment, guaranteeing the interests of the State and the Dominican Nation. PARAGRAPH: The exploration and exploitation of mineral coal are excepted from the provisions of this Regulation. If during the exploration and exploitation of hydrocarbons other substances associated with them are found, the Dominican State may exploit them. Otherwise, the contractor will have the preferential option to exploit them, under the regulations that will be established for that purpose. ARTICLE 3. For the purposes of this Regulation, it will be understood as: a. Technical Evaluation Activities: Those exploration activities, which by the characteristics of the geographical area in question, by provision of the State, or by geological or environmental conditions are not necessarily related, in said moment, to the subsequent right to execute a exploitation. this last always subject to the terms in which said activities were carried out and the state provisions. b. Contracted Area and/or Contract Area: The geographical area of the territory of the Dominican Republic object of a contract that grants the right of exploration, exploitation and/or technical evaluation. c. Crude Oil and/or Crude Oil: The oil that is produced at the head of the well and that is found in a liquid state at atmospheric pressure, including asphalt and ozokerites (fossil waxes), and liquid hydrocarbons known as condensates and/or Machine Translated by Google -39- _________________________________________________________________________ natural gas liquids obtained from natural gas by condensation or extraction through separation units in the field. d. Exploration: The set of geological, geophysical, seismic, petroleum and drilling works, or other similar mechanism or equipment, aimed at determining whether or not there are hydrocarbon deposits in commercially exploitable quantities in the areas covered by the contract. and. Exploitation: The drilling of development wells, the laying of collection lines and/or pipelines, the construction of storage plants, processing plants and fluid separation facilities, and any other activity on the ground or in the subsoil, within a Specific geographic area dedicated to the production, recovery, enhanced recovery, collection, separation, processing, compression and storage of hydrocarbons and/or hydrocarbon-bearing substances. F. Natural Gas: Those hydrocarbons that, under atmospheric conditions of pressure and temperature, are in a gaseous state, including dry gas, wet gas and residual gas left over after extraction, treatment, processing or separation of liquid hydrocarbons from the gas. wet gas, as well as gas or gases produced in association with liquid or gaseous hydrocarbons. g. Hydrocarbons: All organic compounds made up mainly of carbon and hydrogen, which have been formed by natural processes due to the decomposition of organic matter, the passage of time and the pressure and temperature to which they have been exposed. These will include the so-called asphalts when said compounds are in the solid state, the oils when they are in the liquid state, and the so-called natural gas when they are in the gaseous state. h. Oil: The mixture of hydrocarbons existing in the liquid phase at reservoir conditions and which remains liquid under normal conditions of pressure and temperature on the surface, as well as the impurities contained in it and the liquid hydrocarbons known as condensates and/or natural gas liquids. obtained from natural gas by condensation or extraction through separation units. Yo. Well: The specialized work of petroleum engineering consisting of a hole drilled through the subsoil, in order to lead the fluids of a reservoir to the surface. It differs from the civil works carried out for the construction of the well, such as access roads, locations and/or buildings. J. Hydrocarbon Substances: Those substances referred to as hydrocarbons for the purposes of this Regulation, as well as any by-products of exploitation and all those substances, products, minerals or natural elements Machine Translated by Google -40- _________________________________________________________________________ of a certain commercial value that, not having been the object of the contract that gives rise to said exploitation, have to be removed from the deposit during the extraction operation and whose separate exploitation is not economically justified. This will also include any by-product of the exploitation that is necessarily extracted together with the one that is the object of the contract in question and that due to its quality or quantity would not be economically exploitable independently. k. Deposit: Any subsoil formation in which they are accumulated naturally hydrocarbons and that are characterized by a system of pressures, so that the production of hydrocarbons from a part of said formation or Reservoir affects reservoir pressure throughout its length. PARAGRAPH. The use in singular or plural of any of the elements, words or expressions defined above, will be indifferent for purposes of interpretation of this Decree. CHAPTER II OF THE ORGANIZATION AND COMPETENCE ARTICLE 4. The Ministry of Energy and Mines, on behalf of the Dominican State, will be the institution that will promote and foster the exploration and exploitation of hydrocarbons; and may carry out these activities, directly or through technical evaluation contracts, and hydrocarbon exploration and exploitation contracts in accordance with this Regulation. ARTICLE 5. The Ministry of Energy and Mines, in exercise of the powers assigned by Law No.100-13, which creates said Ministry, as a body dependent on the Executive Branch, is in charge of formulating and administering energy policy. The Ministry of Energy and Mines will establish through this Regulation and subsequent regulations, the necessary regulations for the effective use of hydrocarbons and the protection of the interests of the State. PARAGRAPH I: Within a term of six (6) months, counted from the entry into force of this decree, the Ministry of Energy and Mines, in accordance with its powers, will issue the standards, regulations, protocols and procedures regarding the exploration and exploitation of unconventional deposits, to advance hydrocarbon exploration and exploitation activities in the aforementioned deposits. PARAGRAPH II: Unconventional deposits include natural gas and oil in sands and tight carbonates, methane gas associated with coal seams, natural gas and oil from shale (shale), methane hydrates and bituminous sands. ARTICLE 6. The Ministry of Energy and Mines shall be competent to establish the formalities, procedures and represent the State in the mechanisms of public bidding, contracting and efficient execution of the contracts for the granting of rights to explore and exploit oil fields and of any other substance Machine Translated by Google -41- _________________________________________________________________________ hydrocarbons, regardless of their physical state. Without prejudice to other tasks assigned to it, the following specific functions will therefore correspond to it: a) Hold public tenders in accordance with the provisions of the current law that governs The matter. b) Prepare the notices of the tenders, using the greatest participation. c) Analyze the offers for the exploration and exploitation of hydrocarbons, deposits of oil and other hydrocarbon substances. d) Prepare the specifications with the technical requirements. e) Supervise the activities carried out by the contractors, or beneficiaries of the contracts granting exploration or exploitation rights. f) Sign, on behalf of the Dominican State, the contracts granting rights to explore and exploit hydrocarbons, oil deposits and other hydrocarbon substances, for which it must have a Special Power of the President of the Republic, as established the law on the matter. g) Declare the nullity, expiration and authorize the waiver of contracts for the granting of rights to explore and exploit hydrocarbons, oil deposits and other hydrocarbon substances, by resolution. h) Authorize or reject, by means of a resolution, the admissibility or inadmissibility of assignment, lease, transfer or legal continuity of the contracts for the granting of rights to explore and exploit hydrocarbons, oil deposits and other hydrocarbon substances; i) Authorize or reject, by means of a resolution, the extensions requested by the beneficiary contractors of the contracts for the granting of rights to explore and exploit hydrocarbons, oil deposits and other hydrocarbon substances. j) Determine the maximum rate of productive efficiency in accordance with the provisions of Article 15 of these Regulations. k) Guarantee that the contracts granting exploration and exploitation rights for hydrocarbons, oil deposits and other hydrocarbon substances, contemplate the minimum provisions established in Art. 31, and that the subjection to this Regulation and the norms that dictated in relation to the matter. Machine Translated by Google -42- _________________________________________________________________________ CHAPTER III OF THE AUTHORITY AND JURISDICTION ARTICLE 7. The Executive Power, through the Ministry of Energy and Mines, will dictate the policies regarding the exploration and exploitation of hydrocarbons, within the guidelines of the energy policy drawn up by the Dominican State. Likewise, this Ministry will be responsible for the administration, regulation and supervision of the activities of its competence related to the subject matter of this Regulation, without prejudice to the competences that the legislation confers on other Public Administration bodies. ARTICLE 8. The Ministry of Energy and Mines delegates to its Vice Ministry of Hydrocarbons, some powers and competencies, based on the principles of rationality and efficiency, in order to ensure compliance and achieve the purposes of this Regulation. Consequently, the Vice Ministry of Hydrocarbons will keep a special registry, in which contracts, reductions, extensions, resignations, nullities, expirations, cancellations, expropriations and easements, among others, and all other acts related to exploration activities will be registered. and exploitation of hydrocarbons. PARAGRAPH I: The hydrocarbon registry will be public and any person may examine and request authorized copies and certifications. The interested party will pay its cost. PARAGRAPH II: In subsequent regulations, the Ministry of Energy and Mines will determine the form, the solemnities and the requirements of the inscriptions and registries. ARTICLE 9. All contractors under this Regulation and with the signing of the contract for the granting of rights to explore and exploit hydrocarbons, oil deposits and other hydrocarbon substances, declare themselves subject to national legislation and the jurisdiction of the contentious jurisdiction. -administrative of the Dominican courts, unless expressly agreed otherwise. PARAGRAPH: Commercial companies incorporated abroad must comply with the requirements established in the current legal framework on Commercial Companies and Individual Limited Liability Companies, for their recognition as full rights in the country, which implies submitting their operation and local activity subject to Dominican law and the obligation to establish domicile in the country. CHAPTER IV OF EXPLORATION AND EXPLOITATION ARTICLE 10. The period of exploration of the contracted area may be up to six (6) years counted from the signing of the contract granting rights to explore or exploit hydrocarbons, oil deposits or other substances. Machine Translated by Google -43- _________________________________________________________________________ hydrocarbons, and may be extended for up to four (4) more periods, of one (1) year each. The modification of this period and its extensions will be authorized by decree. PARAGRAPH I: In order to obtain each annual extension, the contractor will submit, for approval, a schedule of activities and budget of expenses that will be developed during the requested extension, in which it must include a schedule of activities and a Budget of expenses for each stage of the project. In addition, it will verify that in the previous period it fully complied with the schedule of activities and corresponding budget of expenses. PARAGRAPH II: Exploration operations on the ground must begin within six (6) months from the date of signing the contract granting exploration rights for hydrocarbons, oil deposits and other hydrocarbon substances. ARTICLE 11. The exploitation period of the contracted area may be up to twenty (20) years and with a maximum of two (2) extensions of five (5) years each. The first extension may be requested after seventy-five percent (75%) of the term of the contract for the granting of rights to exploit hydrocarbons, deposits of oil and other hydrocarbon substances, while the second extension may be requested when fifty percent (50%) of the term of the first has elapsed. PARAGRAPH I: The period of exploitation of unconventional hydrocarbons in the area contracted may be for up to twenty (20) years and with a maximum of two (2) extensions of five (5) years each. This term will include an initial period of up to five (5) years, to be defined by the contracting party and approved by the Ministry of Energy and Mines at the time of signing the corresponding contract. This initial period must establish a plan in accordance with acceptable technical-economic criteria that will have as its objective the commercial exploitation of the discovered deposit. The first extension will be requested after seventy-five percent (75%) of the term of the contract has elapsed, while the second extension will be requested when fifty percent (50%) of the term of the first has elapsed. PARAGRAPH II: When the exploitation of the contracted area is authorized before the expiration of the exploration period, the exploitation period will be automatically increased for the unused years of the exploration period, without granting an extension of more than thirty (30) years. PARAGRAPH III: Extensions will be granted only for well-founded reasons and as long as the contractor has complied with all its contractual obligations. PARAGRAPH IV: The Ministry of Energy and Mines, at any time, may take the necessary measures to prevent and preserve the deposits, oil or gas fields, their facilities and dependencies and act against those who harm or disable them. Machine Translated by Google -44- _________________________________________________________________________ PARAGRAPH V: During the exploration or exploitation period, the contractor may submit a waiver of the hydrocarbon exploration or exploitation rights contract, oil deposits or other hydrocarbon substances, before the Ministry of Energy and Mines, which must authorize it. , provided that the contractor has complied with all the obligations stipulated in the contract until the day of resignation. The Ministry of Energy and Mines, on behalf of the Dominican State, will be fully free to enter into a new contract over the same areas by complying with the current public contracting requirements. ARTICLE 12. The contracted area or contracted area will be divided into blocks, each with a maximum area of one hundred thousand (100,000) hectares. These blocks will be composed of lots with a maximum area of one thousand five hundred (1,500) hectares. PARAGRAPH I: The maximum area over which a contractor may exercise the rights granted, through adjudication, assignment, transfer or legal continuity, will be: a) Ten (10) blocks, in the case of offshore areas. b) Five (5) blocks, if it is a land area. c) Ten (10) blocks, if it is, simultaneously, five (5) coast blocks outside and five (5) from the ground area. PARAGRAPH II: If at the end of the granted exploration period and its extensions, if any, the existence of hydrocarbons has not been demonstrated, the contractor will return the contracted area duly restored, operating the full termination of the exploration contract. PARAGRAPH III: The Ministry of Energy and Mines may establish, through regulations and/or contractual terms, the conditions and requirements for the return of percentages of the contracted area or area object of the contract during the exploration period. ARTICLE 13. When hydrocarbon discoveries have been made in an area, in order to grant the exploitation rights, the commerciality or economic feasibility of the hydrocarbons discovered must be determined, and from the date of signing the contract for the granting of exploitation rights. The periods of exploitation and the consequent extensions referred to in Article 10 will be counted. The Ministry of Energy and Mines will define the conditions for the declaration of commerciality by resolution. ARTICLE 14. In order to explore and exploit hydrocarbons, the corresponding contract granting exploration or exploitation rights with the Ministry of Energy and Mines, on behalf of the Dominican State, without prejudice to the environmental permits that must be issued by the Ministry of Environment and Natural Resources, whose pronouncements must be produced within a Maximum of Machine Translated by Google -45- _________________________________________________________________________ ninety (90) calendar days, counted from the filing of the request. The Ministry of Energy and Mines, together with the Ministry of the Environment and Natural Resources, will coordinate the evaluation, control and monitoring of the security, preservation and conservation measures that must be observed. ARTICLE 15. The Ministry of Energy and Mines will determine the maximum rate of productive efficiency. For this, it will take into account the characteristics of the deposits, the recovery of investments and the future use of crude oil in the country. This will be the maximum rate of oil production that can be extracted from a reservoir, to obtain the maximum final recovery of the reserves. This production must be reviewed by the parties, every six months, being able to proceed to the review before the six-month period, if necessary, in the opinion of the Ministry of Energy and Mines, and to guarantee that the "national reserves-national production" ratio is maximized. ”, in order to ensure the national supply of hydrocarbons in the long term. ARTICLE 16. The contractors will measure and record all the hydrocarbons extracted and recovered daily, using certified methods and instruments under the current regulations established by the Ministry of Energy and Mines, and strictly complying with the technical standards established and recognized by industry practice. international oil company The contractors will notify the Ministry of Energy and Mines of the volume of hydrocarbons produced in each development area, in the manner and within the terms established in the contract. The Ministry of Energy and Mines will have the right to inspect and verify the measurement instruments, as well as to audit the measurements. notified. ARTICLE 17. The Ministry of Energy and Mines will include in the technical prescriptions and terms of reference of public contracting mechanisms, the need for accreditation of the contractor, in terms of technical capacity, financial and moral solvency, as well as proven experience in the extractive industry of oil and natural gas, depending on the activity to be tendered. ARTICLE 18. At the end of a contract granting exploration or exploitation rights, due to expiration of the term, resignation, expiration, nullity or for any other cause that occurred during the exploration or exploitation period, the contractor must deliver to the Ministry of Energy and Mines, free of charge and in good production condition, the wells that were in activity at that time; and, in good condition, all the equipment, tools, machinery, installations and other furniture and real estate that have been acquired for the purposes of the contract, as well as transfer those that the Ministry of Energy and Mines indicates, to the places that it determines. If the termination of the contract occurs during the exploration period, the contractor will deliver to the Vice Ministry of Hydrocarbons, free of charge and in good condition, the wells, camps and infrastructure works. Unless otherwise agreed between the parties, all the wells, buildings and equipment referred to in this article will become the property of the State. Machine Translated by Google -46- _________________________________________________________________________ ARTICLE 19. The contractor will be responsible for the abandonment, cessation and dismantling of its activities, and the recovery, rehabilitation or remediation of the affected area, and must establish a bond as guarantee. The Ministry of Energy and Mines, acting on behalf of the Dominican State, will set the amount and modality of provision of the guarantee fund, which must be updated periodically, in such a way that it covers and complies with the amounts and periods of validity of the contract, and especially the eventual dismantling, rehabilitation or remediation of the area over which the exploration or exploitation rights will be exercised. ARTICLE 20. The Ministry of Energy and Mines will establish the corresponding rules and regulations and the conditions for the management and use of the natural gas produced as a result of the exploitation of hydrocarbons. CHAPTER V UNIFICATION ARTICLE 21. When the same hydrocarbon deposit extends over more than one contracted area or area object of the contract, the contractors of all the affected contract areas must agree, under the guidelines and approval of the Ministry of Energy and Mines, a contractual modification for the unification of their respective exploitation rights of said deposit. If an agreement is not reached within a period that the Ministry of Energy and Mines considers appropriate, this Ministry will establish the conditions that will govern the unified production of said hydrocarbon deposit, and the Ministry of Energy and Mines may proceed to the termination of the contracts due to expiration, in which case, the Ministry of Energy and Mines may tender the entire deposit. ARTICLE 22. When the hydrocarbon deposit extends beyond the area contracted or area object of contract to areas where production is not authorized, the Ministry of Energy and Mines will adopt the necessary measures tending to guarantee the interests of the State in the exploitation of the deposit, being able to proceed to tender the area that has not been object of hiring a new bidder, in which case, the original contractor and the new successful bidder must sign a unification agreement. ARTICLE 23. In the event that a hydrocarbon deposit extends beyond national borders to areas that are under the jurisdiction of neighboring countries, the signing of an agreement will be required, and its subsequent approval by the Dominican State, in accordance with the current legal and constitutional provisions, corresponding to international agreements. The Dominican State may adopt the necessary measures to protect the interests of the Dominican Republic, including, among others, the revocation of the right to produce the deposit in question. Machine Translated by Google -47- _________________________________________________________________________ CHAPTER VI OF THE STORAGE AND TRANSPORT OF THE HYDROCARBONS ARTICLE 24. Every contractor is obliged to provide, in its facilities and at no cost to the State, the storage, for a maximum period of thirty (30) days, of the hydrocarbons that the State receives as a royalty. After this term, the State will pay the rates agreed upon by the parties, leaving the contractor with the responsibility for the hydrocarbons that it stores. ARTICLE 25. The construction of the transportation infrastructures that are necessary as a result of the exercise of the granting of exploitation rights of oil and gas pipelines, are subject to compliance with the procedure and the regulations issued for this purpose by the Ministry of Energy and Mines, and to the granting of the corresponding license issued by it. ARTICLE 26. Any contractor authorized and provided with the corresponding license from the Ministry of Energy and Mines, shall have the right to build one or more oil pipelines, exclusively intended for the service of its exploitation or that of its affiliates. PARAGRAPH I: The contractor must allow the transportation capacity that it is not using to be available in its infrastructures to transport the hydrocarbons of third parties, at their request and in accordance with the amount conventionally agreed upon or set by the Ministry of Energy and Mines, as payment for these services; however, for the contractor it will not be obligatory to make the additional investments of oversizing its facilities to satisfy, neither present, nor eventual third-party transportation demands. PARAGRAPH II: The State will have, over third parties, a preferential right to transport the hydrocarbon substances from the royalties that correspond to it, and must pay for the transport in accordance with the current rates, determined by the Minister of Energy and Mines. When the contract comes to an end, for any of the established reasons, the transport infrastructures (oil or gas pipelines) built by the contractors will pass to the State, free of charge. PARAGRAPH III: The Ministry of Energy and Mines may build transportation infrastructure (oil and gas pipelines), directly or through contracts with third parties, exclusively for the purposes of this Regulation. CHAPTER VII OF THE CONTRACTS ARTICLE 27. The Ministry of Energy and Mines, on behalf of the Dominican State, will sign the contracts with which they are awarded the public bidding processes in accordance with current regulations on the matter. Machine Translated by Google -48- _________________________________________________________________________ PARAGRAPH: The bidding process will be subject to the current legal provisions for public contracting mechanisms, unless otherwise provided by law. The Ministry of Energy and Mines must prepare the technical specifications and specifications in accordance with the criteria established in the principles of efficiency, equality, free competition, transparency, publicity, economy, flexibility, fairness, responsibility, morality, good faith, reciprocity , participation and reasonableness, trying to guarantee the moral, financial, and technical feasibility of the bidders. ARTICLE 28. The granting of exploration, exploitation, or technical evaluation rights will only be granted through contracts resulting from public bidding processes or other similar mechanisms established by the laws in force for public contracting. PARAGRAPH I: The contractor or winner of an exploration, exploitation or technical evaluation contract, which has been awarded three (3) blocks, may not participate in other bids. If they do so, their proposals will not be considered within the bidding processes, leaving the State free of all responsibility, as the successful bidder renounces any repetition against the State. PARAGRAPH II: The partners, natural or legal, of the commercial companies that are awarded three (3) blocks, are disqualified from exercising the rights established in Paragraph I of this article. ARTICLE 29. The object of the contracts will be the granting of rights for the exploration and exploitation of hydrocarbons within the specified area or contracted area, with the limitations of hectares established in Article 12 of this Regulation, as well as the contracting of activities technical evaluation. The contracts referred to in this Chapter shall be awarded in compliance with public contracting regulations and in accordance with the principles of rationality, objectivity, transparency and non-discrimination. ARTICLE 30. The activities of technical evaluation, exploration and exploitation of hydrocarbons may be carried out under the following contractual forms: a) Technical Evaluation Contract: It is the one entered into by the State, with the contractor and by which it obtains the authorization to evaluate the hydrocarbon potential and identify the areas of greatest prospective interest within a specific area. b) Contract granting rights to explore or exploit the area specific: It is the one entered into by the State with the contractor, and by which the latter obtains authorization to explore or exploit hydrocarbons in the area covered by the contract or contracted area; in merit of which the State, in consideration, transfers the right of ownership of the extracted hydrocarbons to the contractor, who must pay a royalty to the state. Machine Translated by Google -49- _________________________________________________________________________ c) Other contracting modalities authorized by the Ministry of Energy and Mines for the exploration and exploitation of hydrocarbons, including production sharing contracts, maximum quota contracts, public-private partnership contracts, among others. ARTICLE 31. The contracts for the granting of hydrocarbon exploration or exploitation rights, as well as those for technical evaluation, will be signed by the Ministry of Energy and Mines, in the name and on behalf of the Dominican State, after receiving the corresponding Special Power. of the President of the Republic, at least will stipulate the following: a) The object, the application and the specific area or contracted area. b) The terms and conditions through which the rights of exploration, exploitation or technical evaluation. c) The minimum investment commitment, to be set by the Ministry of Energy and Mines. d) The terms and conditions of the works during the period of exploration or of exploitation, which must include matters related to the technical control of operations, budgets, work schedules and expense budgets, production, royalties, supply, form of information and the possibility of reviewing it when circumstances so require. merit. e) Everything related to the use of gas. f) The maximum duration or validity, the conditions and unilateral termination clause pure and simple in favor of the Dominican State, the rights, the obligations of dismantling, rehabilitation and/or remediation, before resignation or arrival of the term, the sanctions and the responsibility of the parts. g) The taxes to which the contractor is subject, in accordance with current legislation on matter. h) The guarantee of faithful performance that the contractor must render, in order to ensure the correct execution of the contract and the guarantee fund for the protection of the environment and natural resources. The amount of the guarantee of faithful compliance will be defined in the notice, in accordance with the proposed minimum schedule and the guarantee fund according to the weighting of the eventual environmental damage, risks, dismantling and remediation costs that this program may generate. These guarantees will be determined by the Ministry of Energy and Mines and must be rendered by the contractor, no later than sixty (60) days from the date of signing the contract. Machine Translated by Google -50- _________________________________________________________________________ i) Before the entry into force of the contract, the contractor will provide the Ministry of Energy and Mines with an environmental impact study, which must be evaluated and approved by the Ministry of Environment and Natural Resources, and any permit that may be required by competent institutions to ensure the proper execution and safety of the activities covered by the contract. j) The obligation to previously submit to the Ministry of Energy and Mines any transfer, lease, assignment or legal continuity of exploration and exploitation rights, as well as changes in the shareholding composition, for its approval and registration. ARTICLE 32. Any natural or legal person who is awarded a contract granting exploration or exploitation rights for hydrocarbon substances, must consign, at the time of signing the contract, two (2) guarantees, namely: 1. Guarantee of Faithful Compliance: To ensure the correct execution of the contract and the investment commitments for the activity of granting exploration and exploitation rights, which must be provided in cash or another existing or suitable modality for the purposes, as long as when it is expressly to cover the economic or financial obligations arising from the execution of the contract, either at first request and without the need for an affirmative declaration or enforceability. This guarantee may be reduced to the extent that the specific area over which the exploration or exploitation rights have been granted or the contracted area is reduced. And it may be executed in the event of noncompliance, termination of the contract due to noncompliance or to be charged to expenses or debts derived from the contract. there are no pending debts, expenses or damages to be covered by the contractor. The determination of the amount of the Performance Bond will be made in accordance with the considerations of the Ministry of Energy and Mines, and the best international practices. 2. Guarantee Fund: It is the one that must be constituted to guarantee the expenses of dismantling, environmental remediation and restitution of the intervened area by virtue of the exercise of the exploration or exploitation rights granted. This guarantee must be determined by the Ministry of Energy and Mines and constituted by the contractor at the latest at the start of the work or activity, either in cash or in any of the modalities accepted by the laws in force and recognized by the authorities. financial and monetary. The amount of the guarantee fund will be established by the Ministry of Energy and Mines in the Terms of Reference and Specifications of the public tenders, and will be equivalent to a percentage of the investment to be made by it or the successful bidder(s). This guarantee fund must be constituted in favor of the Dominican State, executory Machine Translated by Google -51- _________________________________________________________________________ first requirement, without the need for a declaration of enforceability or affirmativeness and must be valid for more than six (6) months after the expiration of the contract granting exploration or exploitation rights. The guarantee will be returned to the contractor when moving to the exploitation period, and once it has demonstrated that it has complied with all the obligations of the exploration period or when the contract is terminated, prior justification of not having had favorable results in the exploration. . This guarantee will become effective in the event of non-compliance with any of the obligations stipulated for this period, and will serve to cover the expenses of dismantling, rehabilitation and remediation that may be necessary, and the remaining amounts may be returned. CHAPTER VIII OF RIGHTS AND OBLIGATIONS COMPLEMENTARY CONTRACTORS ARTICLE 33. The contractor may not assign, transfer, encumber, or dispose in any way, partially or totally, of the rights conferred by the contract, without the prior authorization of the Ministry of Energy and Mines. PARAGRAPH: Whoever intends to be a contractor through assignment, continuity, transfer or participation, must meet the conditions and requirements equal and sufficient to assume the rights, obligations and responsibilities of the assignor or transferred. When the assignment, transfer or continuity is partial, the assignor and the assignee, the transferor and the transferred, will be jointly and severally liable for compliance with the terms of the contract before the State and third parties. ARTICLE 34. The contractor may subcontract the execution of activities related to the provision of services in the field of hydrocarbons, such as geological or geophysical studies, drilling or line services, construction of oil pipelines, gas pipelines and the like, in which case the contracts The respective companies must comply with the same requirements stipulated in Article 8 of this Regulation, except for those companies subcontracted by the contractor whose work within our country is for a maximum period of one (1) year. The contractor must keep the Ministry of Energy and Mines informed of these contracts, through written notifications to the Vice Ministry of Hydrocarbons. ARTICLE 35. The national production of hydrocarbons is destined to cover, as a priority, the needs of the country and the national reserve, as determined by the Dominican State, through the Ministry of Energy and Mines. For this purpose, every contractor is obliged to sell to the Dominican State the production necessary to satisfy the internal market, at the market price determined and set according to the prices or price weightings of the international market for equivalent crude oils. The Ministry of Energy and Mines will issue the necessary regulations for the establishment of the procedure for fixing and determining the price. Machine Translated by Google -52- _________________________________________________________________________ PARAGRAPH: Contractors may export surpluses, subject to compliance with applicable legal provisions. ARTICLE 36. The contractor must start the exploration or exploitation or technical evaluation works no later than six (6) months from the date of signing the contract granting rights, for which it must notify the Ministry of Energy and Mines, to through its Vice Ministry of Hydrocarbons, and send periodic information regarding the development of the works, its operations and the investments it makes and about the productions it obtains. All studies, information and data, processed and unprocessed, obtained by contractors and subcontractors, will be delivered to the Ministry of Energy and Mines, through its Vice Ministry of Hydrocarbons. In addition, you must submit reports in the form and terms agreed in these Regulations. Said information will be the property of the Dominican State and, to the extent that it is not confidential for reasons of national security or when its confidentiality is in accordance with the best interest of the Dominican Nation, it will be publicly available. PARAGRAPH I: In particular, the contractor is obliged to provide the detailed and truthful information requested by the Ministry of Energy and Mines regarding the characteristics of the deposit, as well as the geological and geophysical reports referring to the exploration or exploitation, prepared and signed by qualified technical personnel. PARAGRAPH II: The information provided by the contractor, which is private or constitutes a commercial or economic secret, will be considered confidential, and may not be communicated to third parties during the term of the contract, without the express authorization of the contractor. PARAGRAPH III: For the purposes of this article, the contractor must indicate whether the information is confidential or not, when submitting it to the Ministry of Energy and Mines. If a third party requests access to information classified as confidential by the contractor, that Ministry will be responsible for ultimately deciding on the nature of said information, in accordance with the laws that govern the matter and the principles of due administrative process. PARAGRAPH IV: In all cases, the geological and geophysical information submitted by the contractor shall be considered confidential during the term of the permit or contract in question. PARAGRAPH V: When the Ministry of Energy and Mines deems it necessary, it may verify, contrast and verify directly and by any means, the accuracy and veracity of the data and information mentioned in this article. PARAGRAPH VI: The contractor and his subcontracted personnel will provide the officials in charge of inspection, surveillance, oversight, conservation, and all the necessary facilities for the proper performance of their duties. Machine Translated by Google -53- _________________________________________________________________________ CHAPTER IX OF EASEMENTS AND EXPROPRIATION ARTICLE 37. The exploration, exploitation and transportation of hydrocarbons together with the activities and works required for their execution are declared to be of high public interest. For this purpose, the Ministry of Energy and Mines may recommend easements and expropriations on privately owned land, as long as they are essential to carry out the respective activities and works, which will be constituted or declared in accordance with those established in the legal framework. valid. PARAGRAPH I: Likewise, the contractors must conclude with the owners and occupants of the land, the necessary agreements that allow access and use of the area in which the exploration or exploitation activities will be carried out, as the case may be, and must indemnify previously to said owners, if necessary. The amount corresponding to such compensation shall be borne by the contractor. PARAGRAPH II: If an agreement is not reached, the value of the area in which the exploration or exploitation activities will fall, as the case may be, must be estimated for purposes of compensation to the owners, prior to the expropriation process. In estimating the value of the property or the damages caused, the existence of hydrocarbon substances in the subsoil will not be taken into account, nor will capital gains derived from the project that originates the expropriation be recognized. In case of expropriation, the current laws that govern the matter must be observed. CHAPTER X OF ENVIRONMENTAL PROTECTION ARTICLE 38. Exploration and exploitation activities must comply with all the rules and legal and regulatory requirements on environmental protection and the recovery of renewable natural resources, as stipulated by Law No.64-00, of August 18, 2000. In order to guarantee a rational use of natural resources and to protect their current and future uses, the Ministry of Energy and Mines will grant any adjudication, conditional on the approval, by the Ministry of Environment and Natural Resources, of a study of the environmental impact of its activities, in compliance with current legal provisions on the matter. The successful bidder or beneficiary of the bidding process must submit this study within four (4) months after being notified of the corresponding award resolution. PARAGRAPH I: The Ministry of Energy and Mines and the Ministry of Environment and Natural Resources will have a period of three (3) months, counted from its presentation, to evaluate the aforementioned environmental impact study. If the study is approved, the award will be considered final and the contract will be signed. If the study is incomplete or deficient, the Ministry of Energy and Mines may grant the interested party an additional term of up to two (2) months to correct or perfect it. Machine Translated by Google -54- _________________________________________________________________________ If it is not completed or corrected to the satisfaction of the Ministry of Energy and Mines and the Ministry of Environment and Natural Resources, or if the environmental impact study is not presented, or is not approved by both ministries, the award will be declared as deserted for all legal purposes. PARAGRAPH II: The Minister of Energy and Mines may deny the final award of the contract if the Ministry of Environment and Natural Resources determines that the exploration or exploitation activities in the contract area or contracted area may cause serious or irreversible damage to the environment. or produce imminent danger or high risk to the safety or health of people or property. PARAGRAPH III: Environmental impact studies must be carried out by qualified technicians, in accordance with international standards in the hydrocarbon industry and the regulations of the Ministry of the Environment and Natural Resources. PARAGRAPH IV: The environmental impact analysis must include, at least, the following: 1) A description of the project. 2) Its impact, direct and indirect, on the natural, animal and human environment. 3) The unavoidable, reversible or irreversible adverse effects of the project. 4) A physical, biological and human diagnosis, which must include: Yo. The effects on the vegetation in general, and on the areas to be deforested, especially. ii. The effects on soils and the necessary programs to control their erosion. iii. The effects on the quality of inland water, groundwater and marine, as well as the necessary programs for the control of the pollution. IV. Effects on flora and fauna. v. The effects on populations and human settlements. saw. The quantities of waste and the plans for its management and disposal. 5) Mitigation measures and contingency plans to prevent, detect and control the harmful effects on marine and terrestrial ecosystems. Machine Translated by Google -55- _________________________________________________________________________ 6) A program to establish protection zones in the surroundings of the areas of exploration and exploitation of hydrocarbons, which minimize the effects harmful to natural resources and the environment in general. 7) The possible effects on the archaeological and cultural wealth. 8) Adverse effects on social economic activities. PARAGRAPH V: The aforementioned study will be reviewed and updated periodically, as the work corresponding to the exploration and exploitation periods progresses. CHAPTER XI RESPONSIBILITY ARTICLE 39. The contractor shall indemnify and exempt the State from all liability for damages of any kind, including, among others, damages to third parties, property or compensation to persons for death or injury caused by contractors or their associates or by any entity or person that represents them, or acts under their responsibility. PARAGRAPH: The contractor will be solely responsible for all the obligations that correspond to him as the employer of the workers he uses in the execution of the exploration or exploitation contract, including everything that may arise from labor, social security, tax laws and any another similar. CHAPTER XII OF THE EXTINCTION, THE MATURITY, THE FINES, NULLITY AND EXPIRY ARTICLE 40. The contract will be terminated by: a) Arrival of the term or expiration of the contracted term, and its extensions, if the had. b) By resignation, which must be motivated and expressed, by means of a declaration formal duly notarized, and which will take effect when accepted, by resolution, by the Ministry of Energy and Mines, The resignation in mode none exempts the contractor from complying with its obligation to restore, remedy and rehabilitate the area object of the exploration or exploitation activities, as the case. c) By nullity, which must be declared by resolution of the Ministry of Energy and Mines, ex officio, or at the request of third parties. They will be null: Machine Translated by Google -56- _________________________________________________________________________ Yo. The contracts granted to officials, descendants, ascendants and collaterals up to the second degree of consanguinity of the Minister of Energy and Mines. ii. The contracts granted within the perimeter, surface or area granted in a pre-existing or pending contract, concession, license or permit, to the full extent and proportion in which they overlap. iii. Assignments, transfers or legal continuity of rights that do not meet with the provisions of this Regulation. IV. Contracts affected by absolute nullity in accordance with current legislation. d) By Expiration, which will be declared by the Ministry of Energy and Mines by resolution. The following shall be grounds for expiration of the contracts for the granting of exploration, exploitation and technical evaluation rights: Yo. Failure to start exploration or exploitation or technical evaluation activities within the terms established in this Regulation. ii. The interruption, without justified technical reason, of the exploration or exploitation programs, for more than one hundred and twenty (120) days in one (1) year, without the consent of the Ministry of Energy and Mines. iii. The increase or reduction of the agreed production, without proper authorization, which must be based on technical reasons. IV. Inflicting serious damage to the deposits. v. Inadequate maintenance of production, transportation or storage facilities. saw. Failure to deliver the requested information and data. vii. Failure to deliver the information and data requested, in the manner and time provided by the Ministry of Energy and Mines or other competent public institutions. viii. The provision of false or untrue information. ix. Inadequate technical handling of hydrocarbons, which means serious damage to the environment and natural resources. x. The refusal of the contractors to put into practice the unification plan of in accordance with Chapter V of this Regulation. xi. Failure to comply with the obligations and conditions stipulated in the contract. xii. The denial of access to the facilities being explored or exploited to personnel duly appointed by the Ministry of Energy and Mines and identified for inspection, verification and oversight purposes. Machine Translated by Google -57- _________________________________________________________________________ PARAGRAPH. The Ministry of Energy and Mines, after studying the case, may grant a prudential period, not greater than thirty (30) business days, for the purpose of the contractor covering his fault, desisting from non-compliance and/or presenting reasonable justification in accordance with the principles of due administrative process. CHAPTER XIII TAXATION AND OTHER FISCAL MATTERS ARTICLE 41. Every contractor is subject to the payment of income tax, established in the Tax Code. For this purpose, the value of the royalty referred to in the following article, will be considered as a deductible expense. PARAGRAPH I: Every contractor is exempt from any other tax, direct or indirect, that taxes their income or the capital invested in the activities object of this decree. PARAGRAPH II: As a fiscal incentive, an income tax exemption is granted for a period of five (5) years in favor of the contractor who is the first to exploit a hydrocarbon deposit. ARTICLE 42. During the exploitation period, the contractor will deliver to the Dominican State, through the Ministry of Energy and Mines, a royalty in money or in kind of the gross hydrocarbon product, at the will of the State, in the facilities of the production field where the inspection is carried out. It will be calculated according to the criteria of the best international practices, always guaranteeing the interests of the Dominican State, the levels of oil prices, and indexing formulas and variations of the consumer price index may be established. PARAGRAPH I: After the contractor pays the royalty in cash, or after the hydrocarbons have been marketed in kind, at a price that may not be less than that of the international markets for equivalent crude oil, the royalty will be distributed as follows: up to five percent (5%) for all the provinces in whose territorial district there are commercial fields in production. It will be proportional to the extension of the territory and the population. These parameters will be valued as follows: fifty percent (50%) for the municipality where the hydrocarbon field or well is located and fifty percent (50%) for the municipalities of the province of each of the demarcations. PARAGRAPH II: The surplus over the five percent (5%) royalty will be allocated to the Dominican State. PARAGRAPH III: The following are exempt from the payment of this royalty: Machine Translated by Google -58- _________________________________________________________________________ a) The natural gas strictly necessary for the extraction of crude oil, as long as when the contractor presents a complete, demonstrative and accepted report explicitly by the Ministry of Energy and Mines through its Vice Ministry of Hydrocarbons. b) The natural gas that is confined to the field, in accordance with the technique, after express authorization of the Ministry of Energy and Mines, through its Vice Ministry of hydrocarbons. c) The gases destined for internal consumption within the area in operation. PARAGRAPH IV: The procedure for the liquidation of royalties, referred to in this article, will be defined by means of the corresponding regulations that will be issued by the Ministry of Finance of the Dominican Republic. PARAGRAPH V: Those projects pre-determined by the Ministry of Energy and Mines or cataloged by it as tertiary production, extra heavy oil, offshore and/or the exploitation of non-conventional hydrocarbons that due to their productivity, location and other unfavorable technical and economic characteristics, and that are approved as such by the Ministry of Energy and Mines, may be subject to a reduction in royalties of up to fifty percent (50%) by the Ministry, but without this being consider an obligation on the part of the Ministry of Energy and Mines, which must evaluate the technical conditions in each case. PARAGRAPH VI: Tertiary production projects are considered to be those production projects in which improved oil recovery techniques are applied. Extra heavy oil projects are considered to be those that require special treatment (oil quality below 16 degrees API and with a viscosity at reservoir temperature above 1000 centipoise). Any other conditions to determine or qualify a project as exploitation of unconventional hydrocarbons must be determined by resolution by the Ministry of Energy and Mines in accordance with international practice on the matter. ARTICLE 43. The royalties referred to in this Chapter will be collected after discounting the crude oil and natural gas that are consumed for the benefit of the respective contract, within its boundaries. ARTICLE 44. Hydrocarbon substances or hydrocarbons received by the State Dominican Republic as royalties, may be sold without being subject to the procedures established in the tax laws, with the sole condition that the sale price is not less than that offered by the producer or entity that pays the royalty. PARAGRAPH I: Collection in money: Whenever contractors must pay royalties in money, they must make available the corresponding amounts, within the terms established by the competent authority, or within those agreed between the parties, as the case may be. Machine Translated by Google -59- _________________________________________________________________________ If they incur in arrears, they assume the obligation to recognize and pay the State the amount necessary to cover the unpaid amount, the corresponding default interest, and the expenses incurred by the State to make the payments effective in its favour. PARAGRAPH II: Collection in kind: When the collection of royalties must be carried out in kind, the contractors must deliver the corresponding quantity of hydrocarbons to the Dominican State, for which purpose, the parties must agree in writing on the procedure applicable to the programming of deliveries and other relevant aspects, to carry them out in a complete, technical, timely and safe manner, either in the contract granting exploitation rights, or in a subsequent agreement. ARTICLE 45. With the exception of income tax and value added tax, contractors will enjoy total exemption from general and local taxes, including fees for the importation of equipment, machinery, vehicles for field work, instruments, spare parts, materials and other goods and services, strictly necessary to correctly execute the contract. PARAGRAPH I: This exemption will apply for the exploration period and for the first twelve (12) years of the hydrocarbon exploitation period, as long as the goods to be imported are not acquired in the country, in similar conditions of quality, quantity and price, in which case they will be purchased locally and will enjoy the same exemption. PARAGRAPH II: Once the objective of the contract has been fulfilled, the goods imported with exemption will be re-exported, except for those that by their nature are fungible or consumable. PARAGRAPH III: The goods and services referred to in this article will be defined in the corresponding regulations issued by the Executive Branch through the Ministry of Finance. PARAGRAPH IV: The Ministry of Finance and the General Directorate of Customs will have all the facilities in order to expedite the processing of imports carried out by the contractor, in order to carry out their exploration and/or exploitation. ARTICLE 46. The transport tax, on all hydrocarbon transport infrastructure (gas and oil pipelines), will be five percent (5%) of the resulting value by multiplying the number of barrels transported by the current rate for each oil or gas pipeline. . CHAPTER XIV RIGHTS AND PARTICIPATION OF THE STATE ARTICLE 47. In addition to royalties, the State is entitled to a percentage of all hydrocarbons extracted and conserved in an area, based on the terms agreed upon in each contract and after deducting royalties and oil for investment recovery. . Machine Translated by Google -60- _________________________________________________________________________ ARTICLE 48. Public-private alliances may be established and in accordance with the interest of the Dominican State, it has the right to invest or participate in any contract, in accordance with the existing modalities in the Common Law and in accordance with the stipulations to intervene. When the Dominican State invests or participates in a contract, it will have the right to receive the participation in the hydrocarbons that correspond to its investment or participation, in addition to the royalties and the percentage of the hydrocarbons. CHAPTER XV EMERGENCY SITUATIONS ARTICLE 49. In the event that a national emergency occurs or is imminent, such as an armed conflict or a natural disaster, the Dominican State may seize during the emergency, in whole or in part, the production of hydrocarbons from any contracted area, except the part of the production necessary for the operation, and require the contractor to increase production to the maximum technically feasible capacity. Under such circumstances, the Dominican State may also requisition the facilities of any hydrocarbon operations. ARTICLE 50. The value of the hydrocarbons seized by the Dominican State will be calculated in accordance with the regulations issued by the Ministry of Energy and Mines to establish the procedure for determining and fixing the value of the seized production. CHAPTER XVI APPLICABLE LAW AND COMPETENT JURISDICTION ARTICLE 51. Natural or legal persons, national or foreign, that develop hydrocarbon activities will expressly submit to the laws of the Dominican Republic. However, exploration and exploitation concession contracts may provide for alternative dispute resolution mechanisms, including arbitration provisions, the content of which shall be duly approved by the competent body. ARTICLE 52. The Ministry of Energy and Mines and the successful bidders will not submit, in any case, to foreign laws. The arbitration procedure in any case, will be adjusted to the following: a) The applicable laws will be the laws of the Dominican Republic. b) It will be held in Spanish, and c) The award will be issued in strict law and will be binding and firm for the parties. Machine Translated by Google -61- _________________________________________________________________________ CHAPTER XVII FINAL PROVISIONS ARTICLE 53. The non-confidential information held by the Ministry of Energy and Mines and the Vice Ministry of Hydrocarbons on the existence of hydrocarbons, their exploration and exploitation, will be used to attract foreign investment, according to the respective international mechanisms and the following rules: a) All companies, national or foreign, will have access to this information, in the moment they request it and unless said information is being prepared or reserved for some future bidding process. b) When at the request of an interested party, the Ministry reproduces that information, may charge a fee for the right to use it. c) The rate to reproduce information will be estimated by the Ministry of Energy and Mines; its value will be weighted at the international level, with the objectives of promoting the country. d) The review of information of a promotional nature in the offices of the Ministry of Energy and Mines, or in other authorized offices, inside and outside the country, will not have no cost. ARTICLE 54. This Regulation repeals or modifies any norm of equal or lesser hierarchy, insofar as it is contrary to it. ARTICLE 55. Send to the Ministry of Energy and Mines and the Ministry of Environment Environment and Natural Resources. GIVEN in Santo Domingo de Guzmán, National District, capital of the Dominican Republic, on the twenty- ninth (29th) day of the month of February of the year two thousand and sixteen (2016); years 173 of the Independence and 153 of the Restoration. DANILO MEDINA