1. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 15 – Energy – Upstream Hydrocarbons Bilateral screening: Chapter 15 PRESENTATION OF MONTENEGRO Brussels, 10-11 April 2013 1

2. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: Energy Chapter 15: ENERGY UPSTREAM HYDROCARBONS AUTHORISATIONS Vladan Dubljević Deputy Minister, Ministry of Economy vladan.dubljevic@mek.gov.me

3. Chapter 15: Energy PRESENTATION OVERVIEW 1.Relevant EU acquis 2.Montenegrin Law Conformity 3.Institutional framework 4.Planned activities M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

4. Chapter 15: Energy RELEVANT EU ACQUIS Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for prospection, exploration and production of hydrocarbons (31994L0022) M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

5. Chapter 15: Energy MONTENEGRIN LAW CONFORMITY - MAIN PRINCIPLES - Directive 94/22/ECMontenegrin Law on Exploration and Production of Hydrocarbons (Law on Hydrocarbons) Conformity Member State's sovereign rights over hydrocarbon resources within their territories Determine the geographical area Article 8, and enabling regulation Full Authorise entities to exercise those rights Article 6 N11, N12, Article 9, Article 11 P3, etc Full M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

6. Chapter 15: Energy MONTENEGRIN LAW CONFORMITY - MAIN PRINCIPLES - CONTINUED Directive 94/22/ECMontenegrin Law on Hydrocarbons Conformity Systems for granting authorisations "Licensing round": notices must be published in the Official Journal of the European Community and a 90-day application period is applied Article 20 Published in the Official Gazette of Montenegro Partial Full conformity when Montenegro joins the EU "Open door": areas available on a permanent basis, they may be the subject of a request for or grant of authorization at any tim e Not applicable, as all open areas must be subject to public invitation competition. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

7. Chapter 15: Energy MONTENEGRIN LAW CONFORMITY - MAIN PRINCIPLES - CONTINUED Directive 94/22/ECMontenegrin Law on Hydrocarbons Conformity Procedures to grant authorizations Open to all interested entitiesArticles 3 and 4,Full Applicants necessary capabilities: financial, technical and operational Article 12 P4 N5, and Article 20 P4 N5 Full Transparent manner by introducing: objective and non-discriminatory criteria Article 12 P2 Article 20 P2, Partial Amendments to the Law planned to formally introduce the requirement M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

8. Chapter 15: Energy MONTENEGRIN LAW CONFORMITY - MAIN PRINCIPLES - CONTINUED Directive 94/22/ECMontenegrin Law on Hydrocarbons Conformity Procedures to grant authorizations Prevent exclusive right to a single entity by defining: extent of the area and duration of the authorization Article 9, 13, 27, 37, 38Full Third-countries: principle of reciprocity Not applicable until Montenegro joins the EU M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

9. Chapter 15: Energy INSTITUTIONAL FRAMEWORK Parliament of Montenegro – adopts the PCC Government of Montenegro - defines block delineation; approves a bid round; defines area and royalty fees; defines rules on relinquishment; and other high level policy Ministry of Economy – opens a bid round; evaluates bids; defines all technical regulations for upstream operations; and other policy issues Administrative body - controls every day operation PCC PCC Production Concession Contract M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

10. Chapter 15: Energy INSTITUTIONAL FRAMEWORK Government of Montenegro - adopts the ECC ; Ministry of Economy – announces the application invitation; defines rules for procedure; manages data obtained from exploration Administrative body - carries out application procedure; controls every day operation ECC ECC Exploration Concession Contract M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

11. Chapter 15: Energy PLANNED ACTIVITIES Law on Exploration and Production of Hydrocarbons is almost fully in accordance with the EU Directive 94/22/EC; Areas currently not conformed with are in the Montenegrin legal tradition left for a public invitation process; however, Montenegro has already started drafting the amendments to the Law on Hydrocarbons to reach the full conformity with the EU Directive 94/22/EC; M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

12. Chapter 15: Energy PLANNED ACTIVITIES - CONTINUED Areas to be addressed by the amendments to the Law on Hydrocarbons include, inter alia: – Defining explicitly that criteria will be objective and non- discriminatory (presently defined in bidding documents); – Defining a possibility for an entity not be considered for authorization due to reasons of national security or previous lack of efficiency; – Defining that a prospective Operator will be subject to specific criteria (presently defined in bidding documents); M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

13. Chapter 15: Energy PLANNED ACTIVITIES - CONTINUED Areas to be addressed by the amendments to the Law on Hydrocarbons include, inter alia: – Reporting to the European Commission and publication in the Official Journal, from such time Montenegro joins the EU; and – Scope for future EU Regulation on safety of offshore oil and gas prospection, exploration and production activities. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 15: ENERGY

14. Thank you for your attention. QUESTIONS 14