On November 20, 2024, Angola enacted Presidential Decree 8/24 on Oil & Gas Incremental Production ("Incremental Production Decree"). This legal statute creates a new special legal and tax framework aimed to promote additional investments on (i) Offshore Mature Blocks and (ii) Offshore Undeveloped Areas. The framework reflects Angola's attempt to increase oil and gas exploration activities to boost production (which has declined since its peak).
Incremental Production Decree Details
An Offshore Mature Block is one where at least 50% of its development areas are classified as "mature." An Offshore Undeveloped Area is one where a new development area may be created within a production block.
Requirements
In order to benefit from the special regime for Offshore Mature Blocks, the operator must file a production incentive request with the national concessionaire for the relevant field, indicating that:
- It is located within an Offshore Mature Block; and
- Its internal rate of return does not exceed 25% (based on the concession's contractual/fiscal terms and the price per barrel set by the national concessionaire).
In order to benefit from the special regime for Offshore Undeveloped Areas, the operator must file a production incentive request with the national concessionaire for the relevant field that indicates that:
- The field is located within an offshore producing block;
- The development pertains to an accumulation lacking commercial production potential; and
- The project, when isolated from the neighboring development areas, has a maximum rate of return of 25% by reference to the concession's contractual/fiscal terms and the price per barrel set by the national concessionaire.
Tax Incentives
The tax incentives for Incremental Production are awarded through reductions in the Petroleum Production Tax (Royalty) and Petroleum Income Tax rates. Tax calculations and assessment in respect of incremental production projects are made separately from those for regular projects.
For Association Agreements, the tax reductions:
- Petroleum Production Tax (Royalty) – reduced to 15% (20% being the regular rate).
- Petroleum Income Tax – reduced to 55.75% (65.75% being the regular rate).
For Production Sharing Agreements, the tax reduction:
- Petroleum Income Tax – reduced to 25% (50% being the regular rate).
Also, for Production Sharing Agreements, the national concessionaire's profit-oil share is reduced to 25% (as noted above) while cost-oil may be increased up to 70%.
All costs related to an exploration well are recoverable or deductible from any existing or future production from any block development area regardless of whether the well ever generates production.
Other, Ongoing Developments
In addition to the above specific regulatory initiatives, Angola previously introduced a "permanent offer" auction system, similar to Brazil's, where blocks with known shallow and deepwater discoveries are available. A2025 deepwater bid round will feature eight blocks (Kwanza Basin - 22, 35, 36, 37, 38, and 39 - and Benguela Basin - 25, 26, and 40).
Also, if the long-anticipated results of some major international energy companies drilling campaigns in the of the Namibe Basin are positive, this may trigger renewed interest in Angola and wider region.
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Mayer Brown has decades of experience in Angola and other African countries on a wide range of legal, tax, and commercial matters. Feel free to contact us should you have any related questions.
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