For an oil producing country, the passing of oil and gas regulations is very important.
One such regulation is Law No 95/13 of 08/8/95 to lay down special measures for the promotion of the production of liquid hydrocarbons from marginal fields to the national mining domain. This piece of legislation outlines the special measures for the promotion of the activities of production from marginal fields identified anywhere in the sedimentary zone of the national territory extending offshore to the limits of Cameroon territorial waters. According to Section 2 of this law a field is said to be marginal when the volume of exploitable reserve of hydrocarbons estimated before the development is below or equal to 3 million metric tons or 20 million barrels.
The estimation of the exploitable reserve of liquid hydrocarbons of a given marginal field is to be decided jointly by the Republic of Cameroon and the companies holding oil concessions. Nevertheless, in the event of persistent disagreement as to the figures of the reserve the parties could seek the arbitration of an independent third party.
The scope of application of this law is tripartite, to wit:
- One, to liquid hydrocarbon discoveries, on the date of promulgation of the law, in the free areas of the national mining territory.
- Two, to liquid hydrocarbon discoveries identified or to be identified on the current mining titles of which production operations cannot be profitably undertaken under the conditions defined by the contract linking the Republic of Cameroon and the holders of these titles.
- Three, to discoveries resulting from exploration and valuation works in the whole free sedimentary zone in the national territory and extending offshore up to the limits of territorial waters undertaken by the state through public establishments mandated for the promotion and management of state interests in the hydrocarbons domain.
These public establishments, their branches or affiliated companies can undertake and accomplish works of valuation and exploitation in solo or joint venture.
Hydrocarbons discoveries are exploited according to the Law. However, when it concerns exploitation by a public establishment or branch, thereof, the award of a concession is subordinate to the signing of a contract with the State. This contract defines the commercial and financial terms and lays down the conditions for funding the investments, the sharing of production, the mode and mechanism for recovering investment cost, the modalities for the conduct of the operation, the fiscal regime and all other conditions required by the mining legislation in force.
The State can make special measures to promote oil production activities. These measures shall concern one exploitation licence or a set of exploitation licences in one sedimentary basin. Such special measures are to improve the productivity and valorization of discoveries to be exploited, especially: the sharing of production, quantity of production necessary for the repayment of costs, mechanism for the recovery of expenditure, depreciation and yielding of investments.
The application of special measures for marginal fields ceases to operate as soon as the cumulative production of the said field goes above the maximum volume of 3 million metric tons by 1/6.
In the same series, Law No 95/14 of 08/8/95 on the keeping of the books of petroleum companies in US $ was passed.
According to this law, petroleum companies undertaking, research, exploitation and production of hydrocarbons in Cameroon are authorised to keep their capital in same currency for easy comparison. This law applies mutatis mutandis, with retroactive effect as of 01/01/94 to petroleum companies operating in Cameroon before this date.
A most recent piece of legislation in this area is law No 98/3 of 14/4/98 to lay down special measures relating to the exploration of hydrocarbons in the mining property of the state. Section 1 of this law states its purpose in the following terms "...to institute special fiscal measures to promote hydrocarbons exploration activities..."
Like its 1995 counterpart the scope of application of this law is tripartite, ie
- One, to exploration permits in force on the date of the enactment.
- Two, to exploration permits granted with effect from the date of enactment.
- Three, to concessions valid for liquid hydrocarbons deriving from exploration permits referred to in one and two above.
This law is a charter of rights and the benefits are to be enjoyed by holders of the permits or concessions referred to above. They shall also be subject to the obligations arising herefrom without prejudice to the rights, benefits and other obligations arising from conventions and agreements previously signed with the Republic of Cameroon.
Under this law, expenses related to drilling and three-dimensional seismic surveys incurred during a financial year by a contractor on any exploration permit that fails to give rise to commercial production is deductible from the contractors income tax at the end of the fiscal year in question. Moreover, the state of Cameroon shall guarantee fair and just remuneration for the investment of a contractor investing in exploration under the terms of the contract binding them.
The remuneration referred to above, otherwise called "Guarantee Mining Revenue" shall represent a percentage of the "Total Mining Revenue", the latter being the net difference between turnover and cost.
The Guarantee Mining Revenue rate shall vary with the geographical location of the sedimentary basin. It shall be 22%, 26% and 30%, after paying company tax, for the Rio Del Ray basin, Douala/Kribi-Campo basin and Other Basins and Deep-Sea zones respectively. Or, 42.84%, 50.63% and 58.42% in the same order, before paying company tax. It is for the contractor to choose.
In the event of joint venture between the state and a contractor expenses shall be shared equally. But in terms of Total mining revenue, 60% shall go to the state and 40% to the contractor.
There are tax exemptions for sub-contractors who do not have a permanent establishment in Cameroon.
The law does not repeal the 1995 law on marginal fields.
NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought for specifics.
For further information contact Mr Nico Halle, Tel: +237 42 64 79 or Fax: +237 43 26 34.