The term of the PSA is nine years divided into three periods of three years each. The structure which has been negotiated is intended to provide a fair return to both the host government and to the contractor, generally in line with a well-established international format. The work obligation in the first period consists of new seismic acquisition and one new exploration well.
Aminex announced an exclusive twenty-year Petroleum Agreement with the DPRK in September 2004 under which it undertook to carry out certain work and provide technical assistance aimed at advancing petroleum exploration in the country. This is now well-advanced and Aminex, together with Korean specialists, has made rapid progress during 2004/5 in extensively analysing existing technical data.
In exchange for carrying out this work, Aminex received (1) rights to a royalty on hydrocarbons to be produced from any new drilling in the country by third parties (2) entitlement to a carried interest in any new wells drilled by other incoming companies and (3) prior rights to apply for specific licenses and explore in its own name anywhere in the contract area.
By signing the PSA Aminex has now exercised these prior rights over most of the contract area and will now commence a full exploration program, including conducting new seismic surveys and exploration drilling. The Aminex PSA, which is made under Swiss law, is far more comprehensive than any other exploration agreement previously signed in DPRK and is an important step for Aminex and for the exciting oil and gas potential of the country. Intermittent exploration has taken place over a thirty-year period and oil has already been discovered in the West Sea but never exploited due to lack of resources. The West Sea basin is adjacent to and thought to be an analogue of Bohai Bay, China's largest indigenous source of oil and gas and the scene of recent major discoveries.
The strategic area covered by the PSA is very large and offers the potential for high-impact petroleum exploration. With the PSA in place Aminex will commence new seismic surveys shortly. Brian Hall, Chief Executive of Aminex, commented:
"The agreement is the culmination of our work since we signed a Petroleum Agreement last year for cooperation with the DPRK. This extensive PSA of 66,000 square kilometers includes several distinct basins and presents a rare opportunity for an independent company to gain exclusive access to a potentially important new petroleum province. The proceeds of a recent successful share placing and open offer to existing shareholders will be partly used in the initial work envisaged by the PSA".
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