Research On Contract Strategies For A Potential Sino-Russian KZ Coalbed Methane Development Project

China has the intention to invest in developing KZ coalbed methane project that Russia is seeking international oil and gas companies to join.To safeguard China’s legitimate rights and interests and provide sound advice for the development of KZ coalbed methane,this article conducts research on the contract selection and optimization during Sino-Russian cooperation.First of all,Russia’s relevant laws and policies on foreign energy are studied.Besides,possible contract models are identified after combing through the fiscal and tax clauses of various oil and gas contract models in Russia,including Concession Contract,Direct Production Sharing Contract,and Indirect Production Sharing Contract.Key parameters such as reserves,investment,production,costs,price are also estimated,and benefits and risks of the project investment are evaluated based on the oil and gas contract models.Moreover,the impact of non-standard clauses in various contracts on economic efficiency is further analyzed.On the basis of this research,the following conclusions are drawn.Firstly,in case of Concession Contract,the project is affordable only when the export tariff of the project is exempted.Secondly,in case of Direct Production Sharing Contract,the project isn’t affordable even if the enterprise obtains the maximum lawful share;thirdly,in case of Indirect Production Sharing Contract,the project is affordable only when the enterprise obtains more than 21.24% shares,with more than 27.43% shares as ideal result.Therefore,this paper argues that the model of Concession Contract exempted from tariffs or Indirect Production Sharing Contract can be negotiated,while Direct Production Sharing Contract shall not be considered.