Communication/Publications/Report: Final report on the Comparative Study of the legal and contractual framework in the matter of hydrocarbons

In an international context characterized by fluctuations in crude oil prices, Africa, whose subsoil remains under-explored, continues to excite interest from its historical investors as well as from those who are newly involved in the petroleum sector.
Since fossil fuels like oil and gas, by their nature are not renewable, these resources will one day be exhausted.
So, faced with this state of affairs, political decision-makers are today confronted with a number of questions, ranging from deciding the best tax regime applicable to the activities of exploration, development and exploitation, to implementing the most appropriate institutional framework to ensure a sustainable economic development of this resource.
These are many important questions for the Member Countries heavily or entirely dependent upon the exploitation of hydrocarbons for their general economic development.
It is in this context that the 7th Action Programme of the African Petroleum Producers' Association (APPA) chose among their priorities to carry out the Comparative Study of the Legal and Contractual Framework in the Matter of Hydrocarbons in the APPA Member Countries.
The aim of this study is to promote the implementation of the most appropriate legal, fiscal and contractual frameworks for the exploration and exploitation of hydrocarbons in Member Countries.
Based on a comparative review of legal and contractual frameworks in place in these countries, the study makes recommendations for best practice in petroleum industry operations, respecting the interests of the parties’ involved and international standards, as well as proposing a standard APPA Model Petroleum Production Sharing Contract.

 

The Study was carried out in three major stages:

• The collection of data and the writing of the preliminary report;
• The writing of the provisional report and the project of a standard production sharing contract;
• The writing of the final report on the study and the final version of the standard production sharing contract.

 

The first stage involved collecting data and writing the preliminary study report, and consisted of making a general examination of the petroleum industry legislation and regulations in force in the 16 Countries, Members of APPA when the study began in December 2010, in order to establish a comparison with a global benchmark.
To do this, more than 170 texts were collected and analyzed.
The main differences in regulatory and contractual matters between the Member Countries became obvious in the preliminary report based on this work. This preliminary report was also presented to Member Countries in Brazzaville (Congo) in June 2011.
The observations of member Countries have been taken into consideration to draw up the provisional report and the standard Production Sharing contract which is used by Member Countries The Provisional Report and the model PSC were presented to Member Countries in February 2012 during a workshop seminar in Malabo, together with a comparative analysis of fiscal regimes in the world and in Member Countries.
The recommendations made in February 2012 by Member Countries about the provisional report and about the PSC template were taken into account in drawing up the final version of the report and the model production sharing contract.

 

At the end of this work, the final report on the study covered the following points in turn:

1. General principles of the petroleum regime,
2. Administrative organization of the petroleum sector,
3. Fundamental expectations of the State in the petroleum sector,
4. Fundamental expectations of the Investor.

The APPA Standard Model Production Sharing Contract contains 33 articles and covers numerous subjects, including:

1. The exploration period and exploration areas returned;
2. Obligations linked to exploration;
3. Evaluation of findings and production period;
4. Conduct of petroleum operations;
5. Fees, recovery of petroleum costs and production sharing costs;
6. Participation of the State;
7. Petroleum revenues;
8. Upgrading crude oil;
9. Customs reglementation;
10. Foreign currency;
11. Transfer and change of monitoring;
12. Ownership of data, goods and production;
13. Local content and social programmes;
14. Restoration of sites/abandoned plans.

The popularization and assimilation of the results of this important study in the Member Countries presuppose among other things:

1. The edition and the provision available to all the Member Countries of the final report of the study in required number and according to the working languages;
2. The Organization, by the Member Country, of an official ceremony of disclosure of the final report of the study in the country;
3. The creation, by the Member Countries, of National Committees to the rereading of oil texts in force;
4. The training of petroleum executives, lawyers, economists and other on the results and recommendations of the Comparative Study;
5. The implementation of the process of adoption of new petroleum system by the competent authorities;
6. The organization, by the Ministry of Hydrocarbons, of seminars for dissemination of new texts.

Ten (10) months after the completion of this study, several Member countries were using it as a basis to improve the legal framework of their petroleum activities.

 

The document drawn up comprise 300 pages and is available in the five working languages of APPA, i.e. French, English, Arabic, Spanish and Portuguese.

 

Finally, it should be pointed out that this comparative study is the result of hard work carried out by:

• the APPA Secretariat, who collected and made available more than 170 texts, organized three (3) meetings for assessing the study's progress and managing relations with the Consultants;
• The 4 Member Countries (Gabon, Angola, Equatorial Guinea and Nigeria) who co-financed this study to the tune of 317 million CFA francs;
• All the 16 Member Countries who made all the texts available, participated in the work sessions, produced the review and commentary on the study;
• The Group of Consultants, Gide Loyrett Nouet and Macleod Dixons, who called on skills worldwide to carry out this important, study (Pedro Van Meurs, Peter Cameron, etc.)

As the time comes to implement the recommendations of this important study, our hope is that the will and determination shown by the different countries during its preparation will continue to motivate them so that in the next five years, the legal framework of petroleum and gas activities in the APPA Member Countries will be in line with the best international practices.

 

This report costs 500 euros. To acquire it, contact us....

 

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