Regulations Regarding the State Fee for the Production of Hydrocarbons

Issued pursuant to
Section 10, Paragraph twelve of the
Law On Subterranean Depths

I. General Provisions

1. These Regulations prescribe the procedures for calculation of the State fee for the production of hydrocarbons (hereinafter - fee), the amount and the procedures for payment of the fee.

2. The fee shall be payment for hydrocarbons produced in the exclusive economic zone of the Republic of Latvia or on the lands owned by the State in the territory of Latvia.

3. The fee shall be paid by merchants (commercial companies), which have received a licence for the exploration and production of hydrocarbons (hereinafter - licence) and produce hydrocarbons in the exclusive economic zone of Latvia or on the lands owned by the State in the territory of Latvia (hereinafter - licensee).

II. Determination and Control of the Amount of Hydrocarbons

4. The amount of hydrocarbons produced shall be determined by the licensee at the measurement point and at the time specified in the licence.

5. The amount of oil produced in a month shall be determined in barrels to the precision of one barrel.

6. The amount of natural gas produced in a month shall be determined in cubic metres to the precision of up to one thousand cubic metres.

7. The measurement of the amount of hydrocarbons produced and the readings of the measurement device (meter) connected with the outlet flange of a drilling well shall be controlled by the Ministry of Economics.

III. Procedures for the Calculation of the Fee

8. A licensee shall calculate the fee individually for the amount of hydrocarbons produced in each area covered by a licence for the exploration and production of hydrocarbons.

9. The rate of the fee shall be determined in percentage from the value of the amount of hydrocarbons produced in the exclusive economic zone of the Republic of Latvia or on the lands owned by the State in the territory of Latvia.

IV. Fee Rates

10. The rate of the fee for oil shall be 15% of the value of the amount of oil produced in a month in each area covered by a licence for the exploration and production of hydrocarbons.

11. The rate of the fee for natural gas shall be 10% of the value of the amount of natural gas produced in a month in each area covered by a licence for the exploration and production of hydrocarbons.

V. Determination of the Amount of the Fee

12. The fee shall be calculated in lats for:

12.1. the oil produced in a month, using the following formula:

ON_n = W_n x 0,15, where

ON_n - the hydrocarbon fee for oil in lats;

W_n - the value of oil in lats which has been determined in accordance with Paragraph 13 of these Regulations; and

0,15 - the hydrocarbon fee rate for oil expressed in decimal numeration;

12.2. the natural gas produced in a month, using the following formula:

ON_g = W_g x 0,10, where

ON_g - the hydrocarbon fee for natural gas in lats;

W_g - the value of natural gas in lats which has been determined in accordance with Paragraph 14 of these Regulations; and

0,10 - the hydrocarbon fee rate for natural gas expressed in decimal numeration.

13. The value of oil produced shall be determined each month, calculating the average monthly price of the oil benchmark "Brent Dated". The calculations shall be based on the average daily price of the oil benchmark "Brent Dated" published by the agency "Platts" on working days of the respective month. The value of the oil produced shall be determined, using the following formula:

W_n = V_n x P_vid x r, where

W_n - the value of oil in lats;

V_n - the amount of oil produced in barrels in a month;

r - the exchange rate of the United States of America dollar against lat specified by the Bank of Latvia on the last working day of the respective month;

P_vid - the average monthly price of the oil benchmark "Brent Dated" in United States of America dollars per barrel, which has been calculated, using the following formula:

P_vid = (P₁ + P₂ + P₃+ ... + P_n/n, where

P₁, P₂, P₃…P_n - the average price of oil in United States of America dollars per barrel on each working day of the respective month; and

n - the number of working days in the relevant month.

14. The value of natural gas produced shall be determined each month, comparing the amount of natural gas with the amount of oil in accordance with the energy equivalent and calculating the average monthly price of the oil benchmark "Brent Dated". The calculations shall be based on the average daily price of the oil benchmark "Brent Dated" published by the agency "Platts" on working days of the respective month. The value of the natural gas produced shall be determined, using the following formula:

W_g = V_g x P_vid x r x 5, where

W_g - the value of natural gas in lats;

V_g - the amount of natural gas produced in a month (in thousands of cubic metres);

r - the exchange rate of the United States of America dollar against lat specified by the Bank of Latvia on the last working day of the respective month;

P_vid - the average monthly price of the oil benchmark "Brent Dated" in United States of America dollars per barrel, which has been calculated, using the following formula:

P_vid = (P₁ + P₂ + P₃+ ...P_n) / n, where

P₁, P₂, P₃…P_n - the average price of oil in United States of America dollars per barrel on each working day of the respective month; and

n - the number of working days in the relevant month.

VI. Procedures for Payment of the Fee

15. Payment of the fee shall be commenced for the month in which the first barrel of oil or cubic metre of natural gas was produced and shall be paid subsequently once a month by the fifteenth date for the previous month.

16. A licensee shall pay the fee in lats individually for the amount of hydrocarbons produced in each area covered by a licence for the exploration and production of hydrocarbons.

17. Revenue from payments of the fee shall be transferred into the State basic budget.

VII. Closing Provision

18. Cabinet Regulation No. 53 of 8 February of 2000, Regulations Regarding the State Fee for the Production of Oil (Latvijas Vēstnesis, 2000, No. 44/46; 2003, No. 58) is repealed.

Informative Reference to European Union Directive

These Regulations contain legal norms arising from Directive 94/22/EEC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons.

Prime Minister V. Dombrovskis

Minister for Economics A. Kampars

Translation © 2010 Valsts valodas centrs (State Language Centre)