Oil & Gas

The Tunisian state plays a dual role in the oil and gas industry: a regulatory role and ownership of 100% of the national oil company, Entreprise Tunisienne des Activités Pétrolières (ETAP).

According to Article 6.1 of the Hydrocarbons Code, “prospecting work as well as exploration and exploitation activities may only be undertaken by virtue of a hydrocarbons title granted by the minister in charge of Hydrocarbons”. Private ownership (either Tunisian or foreign) of hydrocarbon titles is allowed. Applicants can be granted the following permits:

• a prospecting licence;
• a prospecting permit;
• an exploration permit; and
• an exploitation permit (concession).

According to Article 92 of the Hydrocarbon Code, no exploration permit can be granted to a private entity except in association with ETAP.

An applicant for an exploration permit must include in its application an option for ETAP to participate in any permit under the terms specified in the Hydrocarbons Code and the applicable conventions. A joint venture formula with ETAP can be chosen. In this case, ETAP will participate in the permit to a maximum rate set by the convention. In the event of an oil or gas deposit discovery, ETAP will reimburse the company for expenditures incurred in exploration and exploitation up to its participation rate in the concession.

The Hydrocarbons Code also provides for the possibility of concluding a production sharing agreement with ETAP if ETAP owns the permit and the foreign investor qualifies as an ‘entrepreneur’.

• Beylical Decree of 13 December 1948 establishing special provisions to facilitate the exploration and exploitation of mineral substances of the second group, as amended by Law58-36 of 15 March 1958;
• Beylical Decree of 1 January 1953 related to mining, together with the texts on its application;
• Decree-Law 85-9 of 14 September 1985 instituting special provisions related to the exploration and exploitation of liquid and gaseous hydrocarbons, as amended by Law 87-9 of 6 March 1987; and
• The Hydrocarbon Code, which was promulgated by Law 99-93 dated 17 August 1999, as amended, most recently by Law2017-41 of 30 May 2017.

• Law90-56 of 18 June 1990 on the exploration and production of liquid and gaseous hydrocarbons;
• Decree2000-713 of 5 April 2000 on the composition and functioning of the Consultative Committee of Hydrocarbons (CCH);
• Decree 2000-946 of 2 May 2000 on the details and number of the summit references of the elementary perimeters constituting hydrocarbon titles;
• Order of the Ministry of Industry of 15 February 2000 on the submission and instruction of claims of hydrocarbon titles; and
• Law 88-91 of 2 August 1988 creating the National Agency of Environment Protection, which introduced the obligation to conduct an environmental impact study (EIS).

Article 59 of the Hydrocarbons Code requires exploration permit and concession holders to comply with existing requirements on health and safety, environmental protection, water and forestry. In the absence of other requirements, the titleholder must:

• complete an EIS;
• enact measures to protect the environment and respect the commitments made in the EIS;
• obtain insurance to cover the risk of harmful impacts to the surroundings or third parties; and
• take measures necessary to protect human life and the environment in case of extraordinary circumstances due to the titleholder’s behaviour or natural phenomena.

Titleholders are subject to the relevant legislation on the conservation and use of water discovered through their activity in compliance with the Water Code (Law 75-16 dated 31 March 1975, as amended by Law 87-35 dated 6 July 1987 and Law 2001-116 dated 26 November 2001).

Other potentially relevant legislation includes:

• the Forestry Code (Law 88-20 dated 13 April 1988, as modified and supplemented by Law 2005-13 dated 26 January 2005);
• the Water and Soil Conservation Law (Law 1995-70 dated 17 July 1995);
• the Waste Management Law (Law 96-041 dated 10 June 1996 relating to waste and its management and suppression) and its implementing regulations; and
• the Air Quality Law (Law 2007-34 dated 4 June 2007).

The hydrocarbons regulations are enforced by the General Direction of Hydrocarbons (DGH) and the CCH, which operates under the aegis of the Ministry of Industry, Energy and Mining.

The DGH represents the granting authority within the meaning of the Hydrocarbons Code and is in charge of the following activities, upon a binding opinion of the CCH:

• the grant of hydrocarbon titles;
• the grant of extension and renewal of hydrocarbon titles; and
• the authorisation of the assignment of interests within hydrocarbon titles.

The DGH has the following powers, among others:

• to require at any time a guarantee for the performance of minimum work obligations;
• to require the titleholder to assign to the granting authority a discovery deemed exploitable if the titleholder has not developed that discovery within six years (liquid hydrocarbons) or eight years (gaseous hydrocarbons) of the discovery date;
• to purchase with priority the hydrocarbons production required to meet national consumption needs up to 20%;
• to authorise pipeline construction works;
• to authorise the use of the public domain for exploration and production activities;
• to control and follow up on service companies operating in the hydrocarbon sector;
• to control all prospecting, exploration and exploitation activities;
• to forbid any works that violate the Hydrocarbons Code; and
• to order the immediate cessation of works in case of a breach of safety or environmental requirements.

These powers are controlled by the Tunisian Parliament and its Energy Committee, pursuant to Article 13 of the 2014 Constitution, which provides as follows: “Natural resources belong to the people of Tunisia. The State exercises sovereignty over them in the name of the people. Investment contracts related to these resources shall be presented to the competent committee in the Assembly of the Representatives of the People. The agreements concluded shall be submitted to the Assembly for approval.”

In the 1980s, the oil regulations were significantly affected by globalisation. A new Hydrocarbons Code was duly enacted in 1999, which sets forth the basic standards and requirements for prospecting, exploration and production activities in Tunisia.

Many implementation decrees have been enacted to enforce and clarify the main provisions of the Hydrocarbons Code, such as those on:

• the calculation of royalties;
• the submission of concession and permit claims; and
• the conditions for crude oil and oil product transport, refining, distribution, storage, import and export.

Tunisia has significantly reformed its oil and gas legislation to make it compliant with global environmental, health and safety standards. Therefore, alongside its policy of incentivising exploration and production, the government has enacted a raft of laws and decrees relating to health, safety and environmental requirements, in accordance with the commitments that Tunisia has undertaken under international anti-pollution conventions.

Local communities have no jurisdiction in oil and gas matters, which are the exclusive preserve of the Tunisian state, except in relation to the collection of local taxes and the authorisation of use of lands that belong to them.

Upstream sector: Tunisia is a small producer of oil and natural gas. Oil production began in 1966, and had reached 118,000 barrels per day by 1980 and 63,000 barrels per day by 2015. The country has been a net importer since 2000. Tunisia’s main deposit was also the first to be discovered: El Borma, discovered in 1964 on the Tunisian-Algerian border.

Offshore production in the Gulf of Gabes is centred on the Ashtart deposit; what at the time was Elf Aquitaine commenced production in the gulf in 1974. Gas production increased in the 2000s thanks to two offshore deposits: Miskar (production commenced in 2006) and Hasdrubal (production commenced in2009). These two deposits are now experiencing a natural decline in production.

The Zarat deposit is scheduled to come into service around 2020 and should boost national production.

Downstream sector: The only refinery in the country, which is managed by the Tunisian Company of Refining Industries, is located in Bizerte. Its capacity is 34,000 barrels per day, which is much less than Tunisia’s national consumption; as a result, the country also imports refined products, primarily diesel. Refined petroleum is essentially imported too.

The Trans-Mediterranean Pipeline – one of the gas pipelines that facilitate the export of Algerian gas to Italy – crosses the Tunisian territory. It has operated since 1983. In return for the pipeline crossing its territory, Tunisia is entitled to 5.625% of the gas, in kind or in money, in accordance with a treaty brokered in 1977. As the capacity of the Trans-Mediterranean Pipeline has gradually increased, so has Tunisia’s quota; added to national production and gas imported directly from Algeria, this meets the country’s consumption requirements.

According to the Energy Information Administration, Tunisia’s consumption in 2015 was 98,000 barrels per day.

Natural gas consumption is in the order of 6.5 cubic kilometres, of which more than half is imported via the Trans-Mediterranean Pipeline. Some 70% of that gas is used for the production of electricity.

• Crude oil production (including condensate and liquefied petroleum gas) is mainly located in the following permit areas:
• • Hasdrubal;
  • El Borma;
  • Ashtart;
  • MLD;
  • BBT;
  • Franig;
  • Rhemoura;
  • Hajeb/Guebiba;
  • Ezzaouia;
  • DjebelGrouz;
  • Cercina;
  • SidiLitayem;
  • Miskar;
  • Adam; and
  • Dorra.
• Gas resources are located within the following permit areas:
• • Miskar;
  • El Borma;
  • Adam;
  • OuedZar;
  • DjebelGrouz;
  • ChaouchEssaida;
  • Chourouq;
  • Dorra;
  • Anaguid Est;
  • MLD;
  • Jinane;
  • Chergui;
  • Hasdrubal;
  • Maamoura;
  • Baraka;
  • Franig;
  • Bagel;
  • Sabria;
  • Ghrib; and
  • El Bibane.

The main players are as follows:

• OMV;
• ENI;
• Shell;
• Total;
• Anglo Tunisian Oil &Gas;
• Perenco;
• CYGAM Energy;
• Winstar Resources;
• Chinook Energy; and
• Africa Hydrocarbons.

Oil and gas represents 80% of the energy consumption in Tunisia.

Local oil and gas production is insufficient to cover national consumption needs, so Tunisia is obliged to import most of its oil and gas. The deficit of Tunisia’s energy balance reached TND 435.5 million in January 2020.

Prospecting, exploration and exploitation activities may be undertaken only by:

• the Tunisian state; or
• state-owned or private companies, whether Tunisian or foreign.

The eligibility criteria are as follows:

• adequate financial resources;
• the technical competence to conduct such activities under optimal conditions; and
• for foreign companies, incorporation under the laws of a country which has diplomatic relations with Tunisia or a registered office in such country.

According to Article 15.1 of the Hydrocarbons Code, an exploration permit will be granted based on:

• the applicant’s technical and financial capacity;
• the importance, nature and consistency of the proposed work programme; and
• the level of Entreprise Tunisienne des Activités Pétrolières’ (ETAP) participation or the conditions for production sharing.

An exploration permit will be granted at the sole discretion of the granting authority, without any possible compensation for rejected applicants.

See question 3.1.

According to Article 10 of the Order of the Ministry of Industry of 15 February 2000 on the submission and instruction of claims for hydrocarbon titles, an application for an exploration permit must be submitted to the General Direction of Hydrocarbons (DGH) through a specific form annexed to the order, together with the tax stamp. The following documents should also be attached:

• the bylaws of the applicant, a list of its directors and the minutes of the board of directors’ meeting at which the power of attorney for signature of the application was granted;
• the balance sheet and financial statements of the applicant (or its parent company),together with an annual report of activities;
• a receipt of payment of the fixed fee, as provided by the Hydrocarbons Code;
• the applicant’s written commitment to deliver to the granting authority copies of all seismic records, studies and information gathered during the performance of the works;
• the applicant’s written commitment to pay to the state the proportional royalty on production; and
• a memorandum of works, including a detailed work programme and the conditions for ETAP’s participation.

The exploration permit will be granted by order of the Ministry in charge of Hydrocarbons, on the binding opinion of the Consultative Committee of Hydrocarbons (CCH), and will be published in the Official Gazette.

The timeline for this procedure, once all required documents have been submitted, is between one and three months, depending on when the CCH meeting is scheduled.

Hydrocarbon prospecting, exploration and exploitation activities may be undertaken by:

• the Tunisian state; or
• state-owned or private companies, whether Tunisian or foreign, provided that they have the necessary financial resources and technical capacity to perform their activities under optimal conditions.

No specific requirements or restrictions apply to foreign operators; they just need to incorporate a company or a branch in Tunisia in order to operate legally.

There is no indigenous ownership in Tunisia.

According to Article 101.1 of the Hydrocarbons Code, the applicant for a hydrocarbon title must pay a fixed fee equal to the minimum hourly wage multiplied by the number of entire elementary perimeters.

An exploration permit is granted for an initial duration of up to five years, with the possibility of renewal for two consecutive periods of four years each. Exceptionally, a third renewal for an additional four years is possible, but only under strict conditions.

An exploitation concession is granted for a duration of 30 years.

To renew an exploration permit, a written application must be submitted to the DGH at least two months before the expiry of the validity period, together with the following documents:

• receipt of payment of the fixed fee, as required by Article 101.1 of the Hydrocarbons Code (see question 3.5);
• two copies of the situation plan of the permit; and
• the memorandum of works, which must indicate:
• • the exploration works realised during the permit validity period; and
  • the works that the contractor commits to realise, at its own cost and expense, during the first renewal validity period.

Once submitted to the DGH, the renewal application will be transferred to the CCH for its opinion. If the CCH issues a favourable opinion, the DGH will notify the applicant of the renewal of its permit. The decision will be issued by order of the Ministry in charge of Hydrocarbons and will be published in the Official Gazette of the Republic of Tunisia.

An exploration permit grants the titleholder the exclusive right to perform the exploration works within the permit area and the exclusive right to obtain concessions in case of a discovery.

The rights and obligations of the titleholder are set out in the convention related to the permit. This convention will govern many aspects, such as:

• the conditions for realisation of the works;
• the conditions for grant of a concession;
• the methods and conditions for the collection of royalties, in cash or in kind;
• the methods through which the granting authority will exercise control and through which information will be communicated;
• the conditions under which breach of the convention will entail the cancellation of a concession; and
• the exchange control conditions applicable to the titleholder.

Decree 2001-1842 of 1 August 2001 sets out a standard convention for exploration works in the hydrocarbons sector.

According to Article 36 of the Hydrocarbons Code, the titleholder can relinquish its exploration permit at any time by written declaration, as long as it has fulfilled its minimum work obligations. If not, the titleholder will have to pay a compensatory indemnity to the granting authority equal to:

• the difference between the minimum required expenditures and the effective expenditures realised during the validity period; or
• the amount necessary to achieve the works scheduled for the validity period.

According to Article 34 of the Hydrocarbons Code, any assignment of rights and interests in an exploration permit, whether total or partial, is subject to the prior authorisation of the granting authority upon the binding opinion of the CCH. The assignee must comply with the conditions set for grant of the permit.

The authorisation of assignment takes the form of an order of the Ministry in charge of Hydrocarbons and is published in the Official Gazette of the Republic of Tunisia.

Assignments between affiliate companies are exempt from such authorisation.

The assignment of rights and interests in prospecting or exploration permits or concessions may be effected tax free.

The rights and interests in a hydrocarbon title can be pledged. Such pledge is subject to prior notification of the DGH and must be recorded in the title register held by the DGH in order to be fully enforceable.

According to Article 61 of the Hydrocarbons Code, the titleholder is obliged to restore the site to its original condition at the end of the exploration period – whether:

• on termination of its last validity period;
• on surrender or cancellation; or
• when the holder of the exploitation concession intends to cease its exploitation activities.

The titleholder must submit an abandonment and site restoration plan to the hydrocarbons and environmental authorities for their joint approval.

According to Article 118 of the Hydrocarbons Code, the concession holder can build up a reserve to cover the costs of abandonment and restoration of the site during the last five years (offshore) or three years (onshore) of the concession.

According to Article 123 of the Hydrocarbons Code, the titleholder may be exempt from its decommissioning obligations where the concession is renounced or the term of the concession has expired if:

• the concession still has an economically profitable exploitation period of at least three years; and
• exploitation of the relevant deposit during this period would cover all costs, including the cost of site restoration, and ensure a reasonable profit.

According to Article 84 of the Hydrocarbons Code, the titleholder is entitled to occupy the lands necessary to perform the exploration/production works.

The occupation of private lands is possible only:

• with the written authorisation of the landowner; and
• in consideration of payment of an occupation indemnity in favour of the landowner.

Wells cannot be drilled less than 50 metres from any house or enclosure, except where authorised by the landowner.

If the exploration or production activities require the permanent occupation of land, the state can proceed with expropriation in accordance with the applicable laws and grant the occupation to the titleholder.

If the occupation of the land prevents the landowner from accessing its land for more than three years, the landowner can force the titleholder to purchase the land. The purchase price cannot be less than twice the market value of the land at the date of its occupation. If the parties cannot reach agreement, the price will be set by the court. The occupation cannot start until the price has been paid or deposited with the General Treasury.

There are no native or tribe title issues in Tunisia.

No, except the requirement for the applicant to submit an environmental impact study together with its application for a hydrocarbon title (see question 1.4).

The applicant for a concession must provide a development plan which includes a detailed study of the facilities necessary for the production, treatment, transportation and storage of hydrocarbons.

No specific provisions govern the processing and refining of oil and gas.

According to Article 49.2 of the Hydrocarbons Code, the concession holder is free to dispose of the hydrocarbons produced through the concession, including by exporting them, provided that it has fulfilled its obligations in relation to payment of the proportional royalty and the delivery of minimum quantities for local consumption needs (the granting authority has a priority right to purchase up to 20% of the production under Article 50 of the Hydrocarbons Code).

The transport of oil and gas is governed by Chapter IV of the Hydrocarbons Code.

The transport of oil and gas by pipeline must comply with the applicable regulations relating to:

• the protection of environment;
• the preservation of resources;
• the prevention of accidents;
• the protection of third parties;
• safety; and
• the technical requirements applicable to construction and the exploitation of pipelines.

The co-holders of a concession and/or the holders of different concessions can cooperate in order to transport the hydrocarbons produced from their concessions.

The granting authority can authorise either a public or a private company to build and operate facilities for the storage and transport of hydrocarbons for the account of titleholders.

Cross-border transportation is subject to agreement between the relevant states (eg, the Trans-Mediterranean pipeline that transports Algerian gas to Italy viaTunisia).

The installation and exploitation of pipelines are subject to the authorisation of the granting authority, which is subject to the opinion of the relevant authorities and approval of the environmental impact study by the competent authorities.

See question 1.4.

See question 1.4.

See question 3.11.

The Hydrocarbons Code does not provide for any sanctions in this regard. This will therefore depend on the provisions of the convention and other agreements (eg, joint venture, production sharing contract) applicable to the permit. In any case, the General Directorate of Hydrocarbons can require that the titleholder provide a guarantee to cover the performance of its decommissioning obligations.

The main regulatory bodies responsible for ensuring compliance with environmental obligations are:

• the National Agency of Protection of Environment, established under Law 88-91 of 2 August 1988; and
• the National Agency of Waste Management, established under Decree 2005-2317 of 22 August 2005.

No data on this is available.

No specific requirements in this regard are applicable in the oil and gas sector. Health and safety requirements in the industrial sector are set out in the following instruments:

• Law87-31 dated 6 July 1987 ratifying Arab Convention 7 on health and safety at work;
• Law94-28 dated 21 February 1994 on a compensation regime for damages resulting from work accidents and occupational diseases;
• Decree2000-1989 dated 12 September 2000 setting out a list of businesses which must appoint a responsible person for safety at work;
• Decree2000-1985 dated 12 September 2000 on the organisation and functioning of occupational healthcare services;
• Decree68-88 dated 28 March 1968 relating to hazardous establishments;
• Decree 68-83 dated 23 March 1968 specifying the types of works that require specific health surveillance;
• Decree68-328 dated 22 October 1968 setting out general hygiene rules applicable to businesses subject to the Labour Code;
• Decree75-503 dated 28 July 1975 setting out protection measures for employees working in establishments using electrical currents;
• the Order of the State Secretary of Industry dated 19 March 1959 setting out general safety rules for elevators;
• the Order of the Ministry of Social Affairs dated 12 June 1987 listing equipment and components which cannot be used, marketed, sold or leased without a safety device; and
• the Order of the Ministry of Social Affairs dated 5 May 1988 setting the maximum weight of loads to be carried by a single worker.

Different administrations play an active role in the enforcement of health and safety regulations, such as the following:

• the Ministry of Employment/Ministry of Social Affairs:
• • the General Directorate of the Labour Inspection;
  • the Directorate of Inspection of Health and Safety at Work;
  • the National Social Security Fund; and
  • the Institute of Health and Safety at Work, a public administrative establishment created by Law90-77 of 7 August 1990 which operates under the aegis of the Ministry of Social Affairs;
• the Ministry of Interior:
• • the Department of Civil Protection;
• the National Institute of Normalisation and Industrial Property;
• the National Agency of Environment Protection;
• the Ministry of Public Health;
• the National Centre of Radioprotection; and
• private organisations (eg, civil society associations, training and teaching bodies).

The Superior Council of Prevention of Professional Risks was also established to coordinate the activities of the above bodies, pursuant to Decree1761 of 25 November 1991, as amended by Decree96-1001 of 20 May 1996.

Given the significant number of legal instruments applicable in this regard, it is not possible to provide an exhaustive summary of the consequences of breaches and sanctions.

As an example, any breach of health and safety requirements pursuant to Decree68-328 dated 22 October 1968 setting out general hygiene rules applicable to businesses subject to the Labour Code may be sanctioned by fines ranging from TND 24 to TND 60 (Article 234 of the Labour Code). The court can also order the implementation of safety measures within an appropriate timeframe; if such measures are not implemented accordingly, the court can order the closure of the establishment.

Any occupational accident will also entail the civil and/or criminal liability of the employer, which will be governed by the applicable regulations in force, such as:

• the Code of Obligations and Contracts;
• the Penal Code; and
• Law 94-28 of 21 February 1994 related to the compensation of damages resulting from work accidents and professional diseases.

Article 152-2 of the Labour Code imposes a general duty on employers to take all necessary and appropriate measures to protect their workers and mitigate professional risks. An employer has several obligations in this regard, including:

• to protect the health of the employees at work sites;
• to guarantee an appropriate workplace and working conditions;
• to protect employees against risks inherent in the use of equipment, tools and other products;
• to provide individual and collective means of protection and train employees in their use; and
• to inform employees of the risks of their job.

Best practices in relation to health and safety are issued by the Tunisian Institute of Health and Safety at Work. The employer must establish measures to safeguard health and safety in accordance with the applicable regulations. For example, employers with more than 500 employees must establish an occupational health service; while those with fewer than 500 employees must join a group occupational health service or set up their own occupational health service (Article 153 of the Labour Code).

Employers with more than 40 employees must have an occupational health and safety committee, comprised of:

• The employer or his representative;
• two representatives of the employees;
• the occupational doctor; and
• the person responsible for safety at the company.

The committee has the following duties:

• to develop and implement company health and safety policies;
• to provide information and training in the field of occupational health and safety; and
• to propose programmes for the prevention of professional risks within the company and ensure that such programmes are followed up.

A person responsible for safety at the company must also be appointed (Article 154-5 of the Labour Code).

No data is available on the specific approach to health and safety issues in the oil and gas sector.

However, diseases relating to hydrocarbon products are expressly recognised and listed in the occupational diseases schedule lists (Schedules20 to32 annexed to the Order of the Ministry of Social Affairs of 10 January 1995, amended on 29 March 2018, and setting out the list of occupational diseases).

Due to the particularity of each permit or exploitation concession agreement, this question discusses only the applicable tax rules in accordance with the Hydrocarbons Code.

In this respect, the Hydrocarbons Code defines two types of tax regimes:

• the fiscal regime of the holder; and
• the fiscal regime in the case of production sharing contracts (PSCs).

Holder: The main taxes applicable in this regard are:

• corporate tax;
• royalties on production;
• registration duties;
• turnover taxes; and
• local taxes.

The fiscal regime that applies to the petroleum industry in Tunisia consists of a combination of royalties, corporate profits tax and an export duty on crude oil, oil products and natural gas. Each is described below.

Royalties: An oil and gas entity is subject to the disbursement of a portion of its production, commonly referred to as a royalty, in respect of oil production. Generally, for gas, the royalty due is paid in cash. The production percentage will vary according to the R-factor as determined in the Hydrocarbons Code.

In case of non-participation by Entreprise Tunisienne des Activités Pétrolières (ETAP) in an exploitation concession, the rate of the proportional royalty applicable to the concession may not be less than 10% for liquid hydrocarbons and 8% for gaseous hydrocarbons.

Corporate income tax: According to Article 107.2 of the Hydrocarbons Code, for oil and gas entities, the taxable income is determined for corporate income tax purposes in accordance with the rules set out in the Individual and Corporate Income Tax Code.

For hydrocarbon activities, the taxable income is calculated separately by the holder from its other activities in Tunisia, in accordance with Article 106 of the Hydrocarbons Code.

Ring fencing: Tunisia applies the ring-fencing principle in determining an entity’s corporate tax liability in relation to its oil and gas activities. In this respect, hydrocarbon income tax is determined separately for each concession.

Profits tax levied on taxable profit: A concession holder should maintain Tunisian tax records for its hydrocarbon activities in Tunisian dinars and in accordance with the local legislation for each concession. Taxable profit is equivalent to non-exempt income less deductions. Non-exempt income includes:

• sales income (determined with reference to accounting data for sales); and
• non-sales income (certain items that are specifically mentioned in the Tax Code).

Deductions include expenses to the extent that they are economically justified and documented in accordance with Tunisian legislation.

The income tax from hydrocarbon activities should be determined using a variable rate based on the R-factor, according to Article 101.3 of the Hydrocarbons Code. The corporate income tax rate used will vary according to the nature of the hydrocarbons (whether liquid or gaseous).

However, in the case of participation by ETAP in an exploitation concession at a rate equal or greater than 40%, the corporate income tax rate applicable to the profits generated from that concession is set at 50%.

During the prospecting and exploration stage, oil and gas companies will not generate any profits from their hydrocarbon activities. At the option of the holder, the exploration costs incurred can either be:

• treated as deductible expenses in the fiscal year in which they were incurred; or
• capitalised and depreciated from the first fiscal year of production at a maximum rate of 30%.

Development costs are deductible through the depreciation of constructed fixed assets.

Export duty: This is determined based on the price fixed every month by the General Directorate of Hydrocarbons. However, any amount paid as export duty levied on the export of hydrocarbons produced by a company or on its behalf is considered an advance of the corporate income tax due by that entity for the fiscal year in which the relevant amount was paid or, otherwise, for subsequent fiscal years.

Production sharing contracts: The profit oil/gas allocated to the contractor by ETAP should be adjusted according to the R-factor, increased over the period in which the contractor has recovered all of the prospecting, research and appraisal, development and exploitation expenditures it has incurred.

According to Article 114.1 of the Hydrocarbons Code, in consideration of the share of production made available to ETAP after deduction of the recovery oil and profit oil/gas, the contractor will be deemed to have paid the corporate income tax (ie, the contractor tax will be paid by ETAP). This tax is set for every fiscal year to the value of the production quantities taken by the contractor as profit oil/gas.

According to the Hydrocarbons Code, the corporate income tax due will be directly settled by ETAP on behalf of the contractor. This amount will be credited to the contractor’s corporate income tax account with the revenue authorities.

According to Articles 105.2 and 105.3 of the Hydrocarbon Code, investors are assured of stability for “taxes, levies, and duties”.

Articles 116 and 130-4 of the Hydrocarbon Code and Customs and Taxation Official Bulletin N545/87-08 contain fairly typical exemptions from import duties.

Further information on the Tunisian tax system applicable to the oil and gas sector can be found in the following resources:

• National Resource Governance Institute, “Assessing Tunisia’s upstream petroleum fiscal regime” (12 September 2019) (https://resourcegovernance.org/analysis-tools/publications/tunisia-upstream-petroleum-fiscal-regime-oil-gas); and
• World Bank, “Legal Review of Tunisia’s Upstream Hydrocarbon Framework” (1 October 2020) (https://documents.worldbank.org/en/publication/documents-reports/documentdetail/409211601882728699/legal-review-of-tunisia-39-s-upstream-hydrocarbon-framework).

No.

Article 21 of the Hydrocarbons Code and most of the conventions related to exploration permits provide that disputes must be settled through international arbitration, through either the International Chamber of Commerce, the International Centre for Settlement of Investment Disputes or ad hoc arbitration.

Disputes in the oil and gas sector involve issues such as the following:

• shareholder/joint venture disputes;
• abusive termination of contracts;
• court/arbitration disputes between oil and gas companies and subcontractors;
• maritime disputes;
• tax disputes between the titleholder and the granting authority (eg, Lundin v Tunisian Republic – ICSID Case ARB/12/30);
• expiry of concessions and breach of priority rights or pre-emption rights;
• rejection by the Consultative Committee of Hydrocarbons of the financial or technical capacity of an applicant to a hydrocarbon title;
• surface tax;
• environmental issues (gas flaring);
• compensatory indemnity issues in case of non-compliance with minimum work obligations and payment of guarantees to the granting authority;
• labour disputes, illegal strikes, illegal blockage of oil and gas valve stations and production sites;
• real estate issues;
• criminal proceedings (eg, damages to equipment); and
• social security, tax and insurance issues.

Many disputes are settled amicably, while others are settled through arbitration.

No data is available on this.

The legal framework governing hydrocarbons in Tunisia, and in particular the process for the grant of permits, is somewhat opaque and ambiguous, due to the lack of competition.

Important steps have been taken since 2016 through the ‘OpenGov’ initiative to make oil and gas permit documents publicly available (eg, conventions, joint ventures and production sharing contracts) – http://data.industrie.gov.tn/.

Efforts are underway to reform the Hydrocarbons Code, presenting an opportunity for Tunisia to improve the legal framework according to international best practices.

The Tunisian energy sector faces several challenges:

• a structural deficit in the primary energy balance since 2001 (reaching 3.4 million tonnes of oil equivalent (Mtoe)in 2014);
• the increasing prominence of gas in primary energy demand (reaching 53% in 2014);
• the use of gas as a primary source of power generation (73%in 2014);
• strong dependency on natural gas in power generation (98% in 2014); and
• limited diversification of gas supply (53% is supplied by a single source – Algeria).

Gas market options: Given the declining gas supply and increased demand, it is expected that the gas deficit will increase to 4.4 Mtoe by 2030. Several measures are underway to limit this deficit, as follows:

• increased exploration activities and the development of new conventional gas projects (eg, Nawara, Zarat, Chaal);
• the increased contribution of renewable energy to the energy mix, with a target of 30% of power production by 2030;
• reductions in gas demand through the introduction of coal-fired power plants in 2022;
• exploration of shale gas to supplement local reserves and increase local supply;
• diversification and improvement of the security of the gas supply through the introduction of liquefied natural gas (LNG); and
• diversification of energy supply and reduction in gas demand for power generation through electrical interconnection with Italy.

Shale gas: Recoverable reserves of shale gas are estimated at 23 trillion cubic feet or 650 billion cubic metres.

At the current rate of consumption (6.2 billion cubic metres in 2014), these reserves could meet Tunisia’s consumption needs for more than 100 years.

LNG: In an effort to improve diversification and strengthen the security of the gas supply, Tunisia has started early assessment work on LNG import projects involving floating storage and regasification units, and is reviewing the status and applicability of these kinds of projects for the country. Advice and technical assistance are also being sought to help the Tunisian government in planning and implementing a feasible LNG project that maximises value and minimises commercial risk.