Gabon's Minister of Oil and Hydrocarbons has just unveiled a new offshore licensing round covering 12 shallow-water and 23 deep-water blocks. This new bid round for offshore licenses takes place in the context of the adoption of a new hydrocarbons code for Gabon in a bid to attract further investment in to the country's upstream industry with more generous terms on offer. Gabon's Minister of Oil and Hydrocarbons announced that such revised legal framework should be adopted by the end of the year and aims at fostering competitiveness and adaptation to oil price fluctuations. One flagship change to the regime is that corporate income tax will be reduced from 35% to zero.
The current upstream legal regime is set forth under Law no. 011/2014 dated 28 August 2014 ("Hydrocarbons Law"). Under the Hydrocarbons Law, upstream activities are principally carried out under (i) production sharing contracts and (ii) exploration and production sharing contracts. Under a production sharing contract, the contractor is granted an exclusive development and production right for a production period of 10 years which may be renewed twice for up to 5 years. Under an exploration and production sharing contract, the contractor is granted an exclusive exploration right and an exclusive production right where there has been a discovery. The exploration period may not exceed 8 years (including any extensions).
According to details revealed by Gabonese authorities, under the new regime interested companies would bid for production sharing contracts with an exploration period of 10 years and an exploitation period of 15 years for oil and 20 years for gas, which could both be further extended by an additional 15 years. This proposal in the new hydrocarbons code appears to mark a significant increase in the periods for both exploration, and development and production.
Under the proposed regime, the Government of Gabon will own a 15% carried interest once a discovery has been made (down from 20% under the Hydrocarbons Law). It is not yet clear whether the national oil company will continue to be able to acquire up to 15% in each production sharing contract at market conditions, as it is currently is able to do under the Hydrocarbons Law. As for royalties, rates are to be set at 7% for oil and for 4% for gas in conventional offshore areas, decreasing to 5% for oil and 2% for gas in ultra-deep offshore areas. This constitutes a significant reduction compared with the current Gabonese upstream legal framework, where royalties rates are contractually set between 13% and 17% for conventional areas and between 9% and 15% for deep offshore. Profit oil is to be set at 45% and cost oil recovery capped at 75% for oil and 90% gas.
Bids are required to be submitted by 22 April 2019 and successful bidders shall be announced on 24 June 2019 with production sharing contracts signed in the summer of 2019 following negotiations between the Ministry of Oil and Hydrocarbons and the successful bidders.
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