The Hungarian Minister of National Development (the “Minister”) recently published public invitations to tender for concessions for the prospection, exploration and production of hydrocarbons in four areas in Hungary, and public invitations to tender for concessions for the prospection, extraction and exploitation of geothermal energy in three areas in Hungary. This is an important step in the country’s upstream market since such concessions have not been tendered in Hungary for a long time.
The main details of the areas designated for hydrocarbon concession are as follows:
- the sizes of the tendered areas range between 278 sq km and 471 sq km;
- the overburden is surface, the bedrock ranges from 5,000 to 6,500 metres below Baltic sea level.
The core details of the areas designated for geothermal concession are as follows:
- the sizes of the tendered areas range between 100 sq km and 525 sq km;
- the overburden is 2,500 metres measured from the surface, the bedrock is 6,000 metres measured from the surface.
The concessions grant exclusive rights in the given areas for a 20-year duration from the entering into force of the concession contract and may be extended once without another tender for up to 10 years.
Participation in the tendering procedure is equally open to domestic or foreign entities subject to complying with a set of detailed conditions. The main criteria for the evaluation of the tenders are the content of the planned work programme, the bidder’s ability to perform the concession contract and the concession fee proposed by the bidder, which may be equal to or higher than the minimum net concession fee specified in each tender. The range of the indicated minimum net concession fees are:
- for hydrocarbon concessions: between HUF 293,000,000 (approx. EUR 1 million) and 413,000,000 (approx. EUR 1.4 million);
- for geothermal concessions: between HUF 38,500,000 (approx. EUR 130,000) and 50,000,000 (approx. EUR 170,000).
The details of the tender are set out in the tender documentation, which bidders may purchase for approx. EUR 85 with the submission of a bidder identification sheet. The language of the entire tendering procedure, including the tender documentation and the bids to be submitted, is Hungarian.
Following the purchase of the tender documentation, submitting a bid requires the payment of a participation fee equal to 3% of the minimum net concession fee and the provision of a financial bid security equal to 7% of the minimum net concession fee specified in the given tender.
Each bidder may only submit one bid in any of these concession tenders, which must be binding on the bidder. Bids may be submitted by 15 November 2013 (the deadline may be extended once by 60 days), and are planned to be evaluated within 90 days of the expiry of the submission deadline. Successful bidders will have to conclude a concession contract with the Minister within 60 days of the publication of the results of the tenders.
It is expected that these new hydrocarbon and geothermal energy concession tenders will attract substantial interest from major domestic and international players in the upstream gas and geothermal industry.