The Liberian Government is taking steps to bring its petroleum policy up to date and into line with best practice for oil governance. The new bill presents the core objective of creating an environment that will provide for stable and profitable upstream exploration & production activities. It represents a general trend across Africa of redefining the legal and fiscal framework of the oil sector.
The preliminary draft is aimed at the revision of the Petroleum Law of 2002, the revision of the act establishing the National Oil Company of Liberia (NOCAL) coupled with laws relating to a model Production Sharing Contract and a revenue management. The proposed bill is to establish an independent regulator to facilitate effective monitoring of the sector and to develop regulation policy. It, would also, implement the constitutional provision providing that petroleum resources (oil and gas) belong to the state and excludes thereby any possibility for oil companies to own private property rights relating to petroleum resources. In addition, it will reform the fiscal regime adapting the progressive fiscal terms giving the State an increasing share of profits as the overall profitability of a project increases.
Elsewhere, the operators of the petroleum sector would be obliged to comply with the principles of Liberia Extractive Industries Transparency Initiative (LEITI) and to conduct their oil activities in full compliance with transparency and accountability obligations. Under new laws, operators would also be expected to conduct an Environmental and Social Impact Assessment and create an Environmental Management Plan before the commencement of any drilling operations.
Undoubtedly, the planned reform may force certain oil investors to redefine their investment strategies as the proposed amendments will affect substantially their activities in Liberia. More onerous obligations of environmental and fiscal nature coupled with the new regulatory policy and strict liability principles will probably lead to more efficient monitoring of the sector and might consequently reduce a flow of investors’ money.