Oil & Gas Asset Due Diligence
The seller sends a deck, the lawyer sends whatever documents you ask for, the geologist sends their own model of the field. A buyer, an investor or a lending bank has exactly one way to check that these numbers don't contradict each other and won't diverge from reality after closing — an independent due diligence. Here's what a technical and legal review of an oil and gas asset covers, what a license with violations actually risks, and how long it usually takes.
Due diligence of an oil and gas asset is an independent check of reserves, license conditions and field economics before a deal — not a recap of the seller's deck. The first things to check are license status (a single violation can already trigger early termination), the reserves category and calculation date, production history and post-tax cash flow.
What Does Oil & Gas Due Diligence Cover?
Due diligence of an oil and gas asset is not one procedure but a bundle of three reviews: technical (geology, reserves, production profile), legal (license, encumbrances, corporate structure) and financial (cash flow, taxes, liabilities). Different specialists own different layers, but together they answer one question — does the asset match what the seller says about it.
"During the Due Diligence process, the operational, financial, tax and legal aspects of the planned deal were examined." — Delovoy Profil Group — Due Diligence case study for an oil & gas M&A deal (in Russian)
In that real case, due diligence was run by a dedicated team of lawyers, tax specialists, financial consultants and analysts, and one of the practical obstacles was mundane — the seller initially handed over an incomplete set of documents, and part of the data had to be requested separately. For a Russian oil and gas asset there's an extra layer that a generic industrial business doesn't have: subsoil-license status and the reserves category as recorded on the State Balance. Without it, the technical part of due diligence stays incomplete no matter how good the rest of the paperwork is. Sometimes the seller commissions this review in advance, to control the process rather than chase someone else's questions — that's called vendor due diligence, covered in the piece on selling an oil & gas asset.
How Are Reserves and Geology Verified?
The technical layer starts with a question a seller's deck rarely answers upfront: as of what date were the reserves calculated, and under which methodology. A gap of several years between the calculation date and the deal date is common for assets that haven't been developed in a while.
"Geological audit is an independent check of the reliability of geological data collected during prospecting and exploration work on a subsoil block." — Nedra Consulting — geological audit of a subsoil block (in Russian)
Reserves that went through the official procedure carry a formal status — a state expertise finding, run for oil and gas by the FBU "GKZ". This isn't an optional box-ticking review: it runs on a regulated clock.
"The timeline for… state expertise: no more than 45 working days from the date the expert commission is formed…" — Rosnedra — state expertise of mineral reserves (in Russian)
Due diligence checks not just whether a GKZ finding exists, but its date: if a block sat undeveloped for years, the finding may be stale, and enough new data may have accumulated since to recalculate reserves differently.
What Are the Risks of a License With Violations?
A subsoil license isn't paperwork that simply comes attached to a block — it's a live contract with the state, one you can breach and lose. Due diligence checks license-condition status precisely because the law allows a fairly sharp response to violations.
"…violation by the subsoil user of license conditions, where a single instance of non-compliance is, under that license, grounds for early termination of the right to use the subsoil…" — ConsultantPlus, Russia's Subsoil Law, Art. 20 (in Russian)
The wording matters: if a license explicitly flags a condition as essential, breaching it once is enough to terminate the subsoil right. Systematic violation — two or more times within four years — is grounds for termination regardless, even without any condition singled out as essential. Beyond termination itself, the law also carries direct administrative liability for breaching license conditions.
"Violation of the conditions set out in a subsoil-use license… carries an administrative fine… for legal entities — from three hundred thousand to five hundred thousand rubles." — ConsultantPlus, Russia's Administrative Offences Code, Art. 7.3 (in Russian)
For a buyer, this means inherited violations aren't an abstract legal risk — they're a concrete chance of losing the asset itself, or paying a fine for something that happened before the deal. Due diligence checks the history of regulator orders and correspondence with Rosnedra separately from the current state of reserves — the two layers rarely line up in a seller's deck.
How Long and How Much Does Due Diligence Cost?
The format of the review drives its length more than the size of the asset: an express review and a full review are different products with different depth and different price tags.
"The average timeline for an express review is 10 to 14 calendar days, and for a full Due Diligence — 4 to 6 weeks." — Allent-Audit — Due Diligence: timeline, cost and outcome (in Russian)
Cost tracks timeline and scope — from a few hundred thousand to several million rubles, per the same source. For an oil and gas asset, industry specifics add to the overall workload: the geological and license layer needs specialist expertise a generalist audit team doesn't have — a separate track alongside financial and legal due diligence, not something folded into them for free.
How Does AVP AI Run an Express Due Diligence in Minutes?
The technical layer of due diligence is the most labor-intensive — and, at the same time, the one you can independently verify fastest: reserves, production profile and economics can be recalculated from open geological data without waiting for full access to the seller's data room. AVP AI — an AI platform for oil and gas asset evaluation — does exactly that, in minutes instead of weeks.
Given coordinates or a license number, the platform pulls the block's geology from open industry sources, estimates reserves by analogy across a probabilistic P90/P50/P10 range, builds a production profile, and runs the economics — NPV, IRR — across several oil and gas price scenarios. The result can be checked directly against the numbers the seller is claiming — a mismatch shows up immediately, not after weeks of analyst work.
An important caveat: this is an express layer of technical and economic review, not a substitute for full due diligence. The platform doesn't pull litigation history and doesn't check the corporate structure or encumbrances on the license-holding company — that still needs lawyers and access to the deal's closed data room. But the technical layer — where a buyer's expectations and a seller's deck most often diverge — AVP AI covers without waiting for full document access. If the express review confirms interest in the asset, the same calculation pipeline carries into buying an oil field — now with a ceiling price in hand, and into license area screening when there's more than one lot to choose from.
Frequently Asked Questions on Oil & Gas Asset Due Diligence
A seller's deck shows the numbers it's in their interest to show — reserves with no calculation date, say, or a production profile with no violation history. Due diligence is an independent check of the same inputs, using open and requested data, run by lawyers, geologists and financial analysts working for the buyer, not the seller.
Under Article 20 of Russia's Subsoil Law, a single license-condition violation is already enough for early termination of the subsoil right if the license says so directly, and a systematic violation — two or more times within four years — is grounds for termination regardless. Separately, under Russia's Administrative Offences Code, a legal entity faces a fine of 300,000 to 500,000 rubles for breaching license conditions.
A classical express review takes 10 to 14 calendar days, and a full review takes 4 to 6 weeks, per deal-advisory data. Cost depends on the scope of the review and can run from a few hundred thousand to several million rubles.
Given a license number or coordinates, the platform recalculates the asset's reserves by analogy (P90/P50/P10), its production profile and post-tax economics — NPV, IRR — in minutes, and checks them against the seller's numbers. This is an express layer of technical review, not a substitute for full legal due diligence.
Sources
- Analysis & consulting Delovoy Profil Group ↗ case study: Due Diligence for an M&A deal acquiring a foreign oil & gas company (in Russian)
- Analysis & consulting Nedra Consulting ↗ Geological audit and investment-attractiveness assessment of a subsoil block for acquisition (in Russian)
- Official source Rosnedra ↗ Organizing the state expertise of mineral and groundwater reserves (in Russian)
- Legal document ConsultantPlus ↗ Russian Subsoil Law, Article 20: Termination of the right to use subsoil (in Russian)
- Legal document ConsultantPlus ↗ Administrative Offences Code, Article 7.3: Using subsoil without a license or violating license conditions (in Russian)
- Analysis & consulting Allent-Audit ↗ Due Diligence: timeline, cost and outcome for the buyer (in Russian)
We will run due diligence on one of your assets — free of charge
Give us a license number or coordinates — we will pull the geology, estimate reserves, build a production profile and NPV. Reconcile it with the seller data room and see the gaps.