I OVERVIEW2
i Electricity sector
As an overview, the electricity sector in each of the states has the following characteristics:
a the supply of electricity is among the weakest in the world,3 even compared with other states of the same income bracket;
b the cost of electricity is among the highest in the world as a result of the preponderance of thermal energy dependent on the price of oil;
c there is a precarious financial situation among public operators of electricity, who cannot pass on the increased costs of production to consumers;
d the power infrastructure is in a state of disrepair, which leads to significant energy losses; and
e growing demand colliding with a persistent shortfall in production and poor quality of services is causing chronic power cuts and slowing industrial development.
The current amount of investment only represents a small fraction of the sum needed to fill the gap between supply and demand. The use of private investment appears today to be the only way to significantly improve the performance of the electricity sector. Resources in the region (hydraulic, gas, solar, wind) remain largely underutilised and the question of their recovery is central.
In parallel with production capacity, the development of national transport networks and their interconnection is a key factor for both industrial (mining industry in particular) and remote rural community development.
African regional organisations have created a forum in which states agree to coordinate their national energy policies. Among the instruments of this coordination, the most relevant in the context of this study are:
a the Convention dated 5 July 1996 governing the Economic Union of Central Africa (CAEU), adopted within the framework of the Economic and Monetary Community of Central Africa (CEMAC);4
b the Protocol dated 18 October 1983 on cooperation in energy between the members of the Economic Community of Central African States (ECCAS);5
c the A/P4/1/03 Energy Protocol, adopted by the Economic Community of West African States (ECOWAS)6 on 21 January 2003; and
d the Additional Act No. 04/2001 dated 19 December 2001 on the adoption of a common energy policy of the West African Economic and Monetary Union (WAEMU).7
The first reforms of the electricity sector, which were conducted to segment activities, introduce free competition and allow the participation of the private sector, appeared twenty years ago, primarily within the framework of these organisations.8 However, no French-speaking state seems yet to have fully completed the transition.
New power regulations are about to enter into force in the Ivory Coast and the Democratic Republic of the Congo (see outlook below), and have not been included in this overview.
ii Oil and gas sector
The legal systems in each of the states are civil law-based and reserve to the state the ownership of all natural resources located within its sub-soil, including hydrocarbons.
These systems provide for concession agreements or production sharing contracts to be concluded between the state and hydrocarbons title holders, as well as the principles on which they will interact with the mining titles to which they relate.
The legislation also provides for detailed rules applicable to midstream and downstream sectors, which they regulate and generally subject to prior approval. Half of the states do not produce hydrocarbons and are dependent on imports from neighbouring countries. Some of these states are in the process of amending or creating legislation to foster the development of the hydrocarbons sector so as to generate revenues from the exploitation of their oil and gas resources.
Interconnected cross-border oil and gas infrastructure is being operated, and projects are being developed or extended between a growing number of states which are likely to attract producers and have a positive impact on states' revenues and local development, through both production of oil and gas and, ultimately, power generation. New oil and gas regulations are about to enter into force in Niger (see outlook below) and have not been included in this overview.
II REGULATIONS
i National and regional regulators
Electricity sector
National regulation authorities
Except for Guinea,9 all the states' legislation provides for the creation of a regulation authority in the electricity sector.10 Some of these national authorities may have only been set up very recently,11 or even not yet be effective.12
Among the recurring missions of the various national regulation authorities, one may highlight the following:
a monitoring that operators comply with the applicable regulations;
b intervening in the setting or approval of electricity tariffs;
c ensuring compliance with competition rules in relation to power production, transport and distribution;
d preserving customers' interests;
e promoting competition and private sector participation according to objective, transparent and nondiscriminatory (e.g., third-party access to transmission networks and customers' access to the power supply) conditions;
f taking part in the awarding of contracts via the setting up of tendering processes;
g proposing amendments to the state relating to both the institutional and regulatory frameworks; and
h implementing dispute resolution mechanisms (such as conciliation or arbitration) between the electricity sector's players (between operators or between operators and customers).
Regional regulation authorities
Within the framework of the West African Power Pool (WAPP), in January 2008 the ECOWAS Conference of Heads of State established the ECOWAS Regional Electricity Regulatory Authority (RERA).13 This special body is in charge of setting up cross-border power exchange regulations as well as supporting the Member States' national electricity regulators.
Oil and gas sector
National regulation authorities
Contrary to the electricity sector and with some notable exceptions,14 the hydrocarbons sector is not characterised by the existence of specific regulators that are independent from the sector's supervisory authority (in most cases, the ministry in charge of energy or hydrocarbons).
This obviously does not mean that this sector is not regulated.15 The hydrocarbons sector is eminently strategic and constitutes one of the domains where the state fully exercises its sovereignty and the implementation and control of these regulations are often left to the central (ministry level) and local (prefecture level) authorities.
Regional regulation authorities
With the exception of cross-border projects that are likely to exist mainly for the purpose of transporting hydrocarbons,16 there is currently no regional authority regulating the hydrocarbons sector in the states concerned.
ii Regulated activities
Electricity sector
Electricity production, transmission and distribution is typically considered a public service17 and placed under the state's authority. The electricity sector is, overall, open to the private sector, yet the above activities are regulated. Also, these activities are subject to obligations of regularity, continuity, permanence and equality of treatment, which are inherent to public service.
The public service of electricity can be delegated to private entities. Delegation occurs though a contract, the most usual form of which is, in the electricity sector, a concession contract (long-term lease contracts are also envisaged by some legislation).18 The public service concession holder is responsible for all operation and maintenance costs and, when acting as a concessionaire, also for the financing of the infrastructure. It is remunerated essentially through fees paid by users. Long-term lease contracts, under which the state bears the responsibility for the investment, is generally reserved for the country's national company.19
Generally, the public service concession holder must comply with the following obligations:
guarantee a permanent and continuous supply of electricity under the best pricing conditions;
b comply with the principles of equality of treatment and electricity market access; and
c ensure a satisfactory coverage of power supply across the country.
The public service of electricity delegation is typically governed by a convention, including specifications, the purpose of which is to determine, in particular:
a the purpose, extent and duration of the relationship;
b the investment plan;
c the conditions relating to the maintenance of the infrastructure;
d the quality of the service;
e accounting and financial aspects;
f tariffs;
g the conditions of remuneration of the operator;
h the applicable tax regime; and
i termination events.
Legislation also allows private operators to access the sole power production sector. Independent power production by private operators is, therefore, possible in most of the states.
In order to carry out its activity, an independent producer must generally sign a concession contract with the state, as well as a power purchase agreement with the transmission and/or distribution network operator, as relevant. Legislation may also provide for the granting of licences or sometimes even mere authorisations, in particular when production facilities have a capacity below a certain threshold.20 The situation in Chad is, in fact, very specific, as the legislation provides that producing and selling electricity outside the framework of the public service is possible without formalities, other than a mere declaration.
Oil and gas sector
Of strategic importance to the economy and development policies, the oil and gas industries are particularly regulated. All the legislation indeed provides that the state is (and remains) the owner of the resources located in its sub-soil (including liquid and gaseous hydrocarbons), together with the right for the state to grant (and renew and withdraw as the case may be) all titles necessary for prospecting, exploring and exploiting these resources and monitor, on the one hand, the rational exploitation of these resources and, on the other hand, the conditions for their marketing. This combines further with strict monitoring of the upstream and downstream sub-sectors.
Distinction based on the nature of the substance concerned
Traditionally, liquid and gaseous hydrocarbons were treated like any other mineral substances and generally subject to the provisions of mining law. Legislation has evolved, in particular based on international practice, the development of production sharing systems (replacing concessionary systems), and specific tax regimes applicable to hydrocarbons exploration and exploitation.
Distinction based on the sub-sector concerned
Regulations (upstream and downstream) relating to hydrocarbons in most of the states are generally provided for in a unique legislative instrument enacting the country's 'petroleum' or 'hydrocarbons' code.21 If so, midstream and downstream activities, the principles of which are provided for in said code, are regulated by implementing regulatory instruments (such as presidential decrees or ministerial orders). Some states enacted special legislative instruments dedicated to midstream/downstream activities, which notably regulate the refining, transport, storage, transformation, distribution and marketing of hydrocarbons.22
Hydrocarbons rights and titles
Hydrocarbons titles are either exploration or exploitation titles.23 These titles are granted by the state24 through administrative acts (generally ministerial orders or presidential decrees) to companies that demonstrate the technical and financial capacities required to carry out the necessary petroleum operations.25
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Footnotes
1 Pascal Agboyibor is a partner, Bruno Gay is of counsel, and Gabin Gabas is an associate at Orrick, Herrington & Sutcliffe.
2 This chapter covers the following countries: Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Democratic Republic of the Congo, Gabon, Guinea, the Ivory Coast, the Republic of the Congo, Mali, Niger, Senegal and Togo (individually referred to as 'state' or collectively as 'states'). This overview is not intended to present a detailed description of all applicable regulations relating to electricity and hydrocarbons of each state, but rather to highlight the common principles and main trends in each of the states concerning the rules and functioning of these industries. However, this overview will not present local practices which may deviate from the applicable law, and a deep analysis of the texts and practices in these states will thus be necessary to acquire a thorough understanding of these sectors.
3 For instance, the electrification rate of the Member States of the ECOWAS is 17 per cent, compared with a global average of 80 per cent.
4 The CEMAC is composed of six Member States: Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon and the Republic of the Congo.
5 The ECCAS is composed of 10 Member States: Angola, Burundi, Cameroon, the Central African Republic, Chad, the Republic of the Congo, the Democratic Republic of the Congo, Gabon, Equatorial Guinea and São Tomé and Príncipe. It can be noted that, through its Decision No. 15/CEEAC/CCEG/XIV/09 dated 24 October 2009, the ECCAS adopted the Central African Regional Electricity Market Code. This code, however, does not yet seem to have been implemented by the Member States.
6 The ECOWAS is composed of 15 Member States: Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea Bissau, the Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.
7 The WAEMU is composed of eight Member States: Benin, Burkina Faso, the Ivory Coast, Guinea Bissau, Mali, Niger, Senegal and Togo.
8 The electricity sector is notably governed: in Benin, by the 2004 Agreement revising the Benin- Togo code of electricity and by Law No. 2006-16 dated 27 March 2007 establishing the code of electricity and complementing the Benin-Togo code of electricity; in Burkina Faso, by Law No. 027-2007/AN dated 20 November 2007 establishing the general regulation of the sub-sector of electricity and Decree No. 2008-370/PRES/PM/MCE/MEF/MCPEA/MATD establishing the granting conditions of licences and authorisations, of concession or farming agreements and of the declaration of facilities in the sub-sector of electricity; in Cameroon, by Law No. 2011/022 dated 14 December 2011 governing the electricity sector and Decree of Implementation No. 2012/2806/PM dated 24 September 2012; in Chad, by Law No. 14/PR/99 dated 15 June 1999 concerning the production, transmission and distribution of electric energy; in the Ivory Coast, by Law No. 85-583 dated 29 July 1985 organising the production, transmission and distribution of electric energy, soon to be replaced by the law passed on 27 February 2014 establishing the code of electricity (not yet published in the Official Journal at the time of writing); in the Democratic Republic of the Congo, by numerous regulations, including the Decree dated 2 June 1928 on the general conditions concerning electric energy, the Decree dated 31 July 1953 establishing provisions for the import and export of electric energy, the Order- Law No. 61-61 dated 26 February 1953 on the distribution of electric energy, and numerous ministerial orders dated 16 November 1994; in Gabon, by Law No. 08/93 setting the legal status of the production, transport and distribution of drinking water resources and electric energy; in Guinea, by Law No. L/93/039/CTRN concerning the production, transmission and distribution of electric energy, as well as Decree No. D/2001/098/PRG/SGG dated 18 December 2001 establishing the reorganisation of the electricity sector during the transitory period; in Mali, by Order No. 00-019 dated 15 March 2000 establishing the organisation of the electricity sector; in Niger, by Law No. 2003-004 dated 31 January 2004 establishing the code of electricity and its Decree of Implementation No. 2004-266/PRN/MME dated 14 September 2004; in the Central African Republic by Order No. 05.001 dated 1 January 2005 establishing the code of electricity; in the Republic of the Congo, by Law No. 14-2003 dated 10 April 2003 establishing the code of electricity; in Senegal, by Law No. 98-29 dated 14 April 1998 concerning the electricity sector, revised by Law No. 2002-01 dated 10 January 2002; in Togo, by the 2004 Agreement revising the Benin-Togo code of electricity, and by Law No. 2000-012 dated 18 July 2000 concerning the electricity sector.
9 Guinea established a National Council for Power, a consultative body whose mission is to assist the minister in charge of energy on topics relating to energy policy.
10 It is common for the water sector to be under the supervision of the same authority.
11 For example, the regulation authority for the sub-sector of electricity in Benin has only been effective since July 2013.
12 As is the case in Chad.
13 The RERA was created by Additional Act No. A/SA.2/01/08 and is governed by Regulation of the Council of Ministers No. C/REG.27/12/07 dated 15 December 2007 relating to the composition, organisation and functioning of the RERA.
14 For example, the Authority for the Downstream Petroleum Sector Regulation (Chad), the Regulation Agency of the Petroleum Downstream Sector (Republic of the Congo), the National Office of Petroleum Products (Mali), and the National Committee for Hydrocarbons (Senegal).
15 The oil and gas sector is notably governed: in Benin, by Law No. 2006-18 dated 17 October 2006 establishing the petroleum code in the republic of Benin; in Cameroon, by Law No. 99- 013 dated 22 December 1999 establishing the petroleum code and Decree No. 2000/465 dated 30 June 2000, as well as Law No. 2012/006 establishing the gas code dated 19 April 2012; in the Central African Republic, by Order No. 93.007 dated 25 May 1993 establishing the petroleum code and its implementation decree, as well as Law No. 07.005 dated 24 April 2007 establishing the reorganisation of the downstream petroleum sub-sector in the Central African Republic, Law No. 07.006 dated 24 April 2007 establishing the Agency of Stabilisation and Regulation of Petroleum Product Prices and Law No. 07.007 dated 24 April 2007 establishing the Central African Company of Storage of Petroleum Products; in Chad, by Law No. 07- 006 dated 2 May 2006 concerning hydrocarbons, modified by Order No. 10-001 dated 30 September 2010; in the Ivory Coast, by Law No. 96-669 dated 29 August 1996 establishing the petroleum code as amended by Ordinance No. 2012-369 dated 18 April 2012 and amending Law No. 96-669 dated 29 August 1996 establishing the petroleum code; in the Democratic Republic of the Congo by Order-Law No. 81-013 dated 2 April 1981 establishing general legislation on mines and hydrocarbons; in Gabon, by Law No. 14/82 dated 24 January 1983 establishing the regulation concerning the exploration and production of hydrocarbons in the Republic of Gabon; in Guinea, by Order No. 119 PRG-86 dated 28 September 1986; in Mali, by Law No. 04-037 dated 2 August 2004 establishing the organisation of exploration, production, transport and refining of hydrocarbons and Decree No. 04-357 dated 8 September 2004, as well as Inter-ministerial Order No. 94-5801/MET-MFC dated 9 May 1994; in Niger, by Law No. 2007-01 dated 31 January 2007 establishing the petroleum code; in the Republic of the Congo, by Law No. 24-94 dated 23 August establishing the hydrocarbons code and Decree No. 2008-15 dated 11 February 2008 setting the granting procedure for liquid or gas hydrocarbon mining titles and by Law No. 6-2001 dated 19 October 2001, modified by the order dated 1 March 2002, concerning the refining, import, export, transit, re-export, storage, massive export, distribution and sale of hydrocarbons and of derived products; in Senegal, by Law No. 98-05 dated 8 January 1998 establishing the petroleum code, Law No. 98-31 dated 14 April 1998 concerning the activities of importing, refining, storing, transporting and distributing hydrocarbons, and Law No. 2010-22 establishing the orientation of the biofuels sector; and in Togo, by Law No. 99-003 dated 18 February 1999 establishing the hydrocarbons code in the Republic of Togo.
16 The West African Pipeline Authority (WAPA) in particular regulates the project operated by the West African Gas Pipeline Company Limited (WAPCo).
17 Importing electricity is sometimes also considered as a public service.
18 Although the legislation of Cameroon, Mali, Niger, Senegal and Togo provides that the delegation of public service for electricity can only be established via concession agreements.
19 This is the case between Burkina Faso and Sonabel, for example.
20 This is the case in Benin, Burkina Faso (below a certain threshold), Cameroon (for independent production other than hydroelectricity), the Central African Republic, Mali (below a certain threshold), the Republic of the Congo, Senegal (for producing or selling electricity in general) and Togo.
21 In general, the word 'petroleum' may be misleading, as this legislation also governs natural gas exploration and exploitation. Therefore, and unless otherwise provided, the words 'petroleum' and 'hydrocarbons' used in this chapter shall refer to both liquid and gaseous hydrocarbons.
22 For instance, in Senegal: Law No. 98-31 of 14 April 1998 relating to hydrocarbons import, refining, storage, transport and distribution; in Guinea: Decree No. D/91/261 relating to oil products specifications, storage, transport and distribution; in the Republic of the Congo: Law No. 6-2001 of 19 October 2001, as amended, relating to the refining, import, export, transit, re-export, storage, massive transport, distribution and marketing of hydrocarbons and oil products; and in Cameroon: Law No. 2012-006 of 19 April 2012.
23 The term of exploitation titles range from 20 to 35 years depending on the applicable legislation. States also regulate prospecting activities, which are generally non-ground disturbing and do not grant the holder the exclusive right to obtain an exploration or an exploitation title. This chapter does not cover such prospecting authorisations.
24 Authorities competent for granting these titles may vary from one country to another. Exploration titles are generally granted by the minister in charge of hydrocarbons, and exploitation titles are granted by the president.
25 Remarkably, certain legislation, e.g., that of Niger and the Republic of the Congo, provides that exploration and exploitation titles can only be granted to companies specialising in the hydrocarbons sector. Other legislation sets forth additional capacity-related conditions with respect to companies acting as operators.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
