In brief: natural gas production in Angola

Regulation of natural gas production

What is the ownership and organisational structure for production of natural gas (other than LNG)? How does the government derive value from natural gas production?

Under the legal system set out in the Petroleum Activity Law, petroleum operations (including the gas industry) are conducted based on the concession system, which, as opposed to the strict contractual system, assumes that the operating oil companies obtain a licence or a concession from the state under certain terms and conditions, most of which are established by legislation and some of which are negotiated on a case-by-case basis between the state and the relevant oil companies.

Changes are foreseen in the near future as the creation of a national petroleum agency is to come. So far, Sonangol, as a national oil and gas company and a strategic public company, may associate with national or foreign investors of proven suitability and technical and financial capacity, subject to prior authorisation from the government, and, in matters concerning production of natural gas, this association may take one of the following forms: a commercial company, a consortium contract or a production sharing contract or agreement.

When a commercial company or a consortium contract is established and in which Sonangol holds a participation as defined by legislation, Sonangol participation shall be greater than 50 per cent. However, the government may, in duly justified cases, authorise Sonangol to hold a lesser stake.

In addition to the above-mentioned forms of association, Sonangol is also allowed to exercise oil operations through risk services contracts.

However, the most common form of association is the production sharing contract.

The government will derive value from the following taxes: petroleum production tax, petroleum revenue tax, petroleum transaction tax, surface area charge and contributions towards the training of Angolan staff. As a part of all production sharing agreements, Sonangol is entitled to part of the production. Recently Presidential Legislative Decree 7/18 established some changes to the legal and fiscal regime applicable to the activities of prospecting, research, evaluation, development, production and sale of natural gas. The general terms of tax declaration and tax settlement regarding the gas operations are defined by the Taxation of Petroleum Activities Law (Law 13/04), but Presidential Decree 7/18 defines the specific tax ranges, which vary from 5 to 25 per cent, for gas operations.

Describe the statutory and regulatory framework and any relevant authorisations applicable to natural gas exploration and production.

The concession of mineral rights is formalised via a concession decree and then materialised in the production sharing contract with regard to exploration and production. The mineral rights are held by the state and the concessionaire is the National Agency for Oil & Gas. An entity is granted concession and, entering a block exploration either as an operator or as a member of the contractor group, shall follow the applicable rules, and some restrictions applicable to the change of parties defined both in the concession decree and the production sharing contract. The simple ‘lease’ of granting rights does not apply.

The statutory framework for domestic natural gas sector is set out in various laws and regulations, as follows:

• Decree 39/00 – environmental rules applicable to oil activities;
• Law 10/04 – the Petroleum Activity Law and Presidential Decree 211/15 is the main legal instrument covering the rules to access and conduct petroleum activities; this Law was amended by law 5/19 of 18 April where the role of the National Agency for Oil & Gas was defined;
• Law 11/04 – the Petroleum Customs Law is the instrument covering the customs regime and incentives specifically applicable to the sector;
• Law 13/04 – the Petroleum Taxation Activities Law provides the taxation framework applicable to petroleum activities;
• Executive Decree 187/08 – gas volume meters rules;
• Executive Decrees 188/08, 189/08, 193/08, 200/08 and 203/08 – technical regulations on design, construction and operation of gas pipelines;
• Decree-Law 17/09 – recruitment, integration and training of Angolan staff for the execution of oil-related operations;
• Executive Decree 38/09 – safety rules for oil operations;
• Law 28/11 – refining of crude oil and the storage, transportation, distribution and commercialisation of petroleum products;
• Law 2/12 – the Angolan Oil and Gas Foreign Exchange Law for the Oil Industry determines a special foreign exchange regime for the oil industry;
• Presidential Legislative Decree 7/18 – legal and fiscal regime applicable to the activities of prospecting, research, evaluation, development, production and sale of natural gas;
• Law 26/12 – the Crude Oil and Natural Gas Transportation and Storage Law;
• Presidential Decree 132/13 – the legal regime for the activities of refining of crude oil, storage, transportation, the logistical superintendency system of petroleum derivatives and of the operation of the wholesale and retail market;
• Executive Decree 97/14 – regulation on management of operations;
• Presidential Legislative Decree 7/18 – establishes the legal and fiscal regime applicable to the activities of prospecting, research, evaluation, development, production and sale of natural gas;
• Presidential Decree 86/18 – introducing several modifications to the rules governing the public tenders for awarding of oil blocks and procurement of supplies and services by oil operators; and
• Presidential Decree 15/19 of 9 January, which redesign the role of, and statute in relation to, Sonangol EP.

As per the Petroleum Activity Law, mining rights are granted to the National Agency for Oil and Gas as the exclusive state concessionaire. Although Presidential Decree 15/09 of 15 January redesigned Sonangol EP’s role, with the latter no longer being the concessionare ,and Law 5/19 of 18 April granted the Natonal Agency for Oil and Gas the concessionaire role, Sonangol was granted pre-emption rights for transmissions of the operator role and was granted the right to be financed by the concession group.

The Ministry of Mineral Resources and Petroleum (MIREMPET) is the government branch responsible for regulatory policies governing the production, transmission, distribution and supply of natural gas, and for authorising and monitoring drilling and production activities.

Under the Petroleum Activity Law, any dispute arising in connection with any licence or concession instruments or between the Ministry and the licensee or Sonangol and associates of Sonangol (associates) will be settled by arbitration, usually in accordance with the arbitration rules established in the individual contracts, unless the matter is expressly excluded from arbitration under the Petroleum Activity Law (eg, security of public maritime ownership and concessionaire, tax, environment and supervision of oil activities).

The recent ratification of the New York Convention by Angola offers parties to arbitral proceedings seated outside Angola the guarantee that they will be able seek the recognition and enforcement of their award in Angola.

The law does not distinguish between conventional and unconventional sectors, and the above-mentioned regulation applies to both sectors.

Are there different rules for, or any restrictions on, unconventional natural gas production (including fracking)?

No specific rules apply despite general rules such as Law 5/98 of 19/06 1998, the law on the basis of the environment. Any activity that can potentially harm the environment is required to apply for an environmental licence, and the submission of an environmental impact assessment shall be a minimum requirement. Therefore, fracking will be submitted to environmental licensing.

Are participants required to provide security or any guarantees to be issued with a licence to explore for or to store gas?

Participants are required to provide evidence of financial resources and technical capability before they can qualify to participate in crude oil and natural gas operations. Additionally, a bank guarantee ensuring fulfilment of work obligations under prospecting licences and concession is required and Sonangol may require associates to present parent company guarantees.