The emergence of East Africa as an oil and gas hub raises some very important Legal issues that the region will have to face if it plans on competing in the global market
East Africa is emerging as one of the most significant regions in the continent’s oil and gas industry. However, the fact remains that the region does not hold the experience of its Western and Northern counterparts and the local governments will have to learn the nuances of the industry quickly.
An inadequate infrastructure to cope with the new-found industry, there are also legislative challenges governing the level of production as well as balancing the interests of those concerned.
In such an emerging market, it is crucial that an effective legal framework is in place to manage the growth of the industry and balance domestic interests with those of international oil companies.
In seeking to achieve this balance, the governments will need to turn their attentions to their current legislation, and where necessary implement new legislation and regulatory changes to deal with any areas of inadequacy and to support the market in their development.
Overriding all of these issues will be the Legal Systems in place and the applicable Rule of Law governing the relationship between the investors and the transacting sovereign state and National Oil Company.
Other key areas to be considered will include the local laws on Employment and Immigration as contractors enter the country on a large scale. Procurement and Local Content will also need to take into account any pricing or bidding advantages, import duties and employment and visa quotas. Similarly, legislation on health, safety and the environment will need to be scrutinised.
From a financial perspective, Foreign Investment Laws, Taxation and Customs Duties will need to ensure that attracting foreign investment is aligned with maximising local return.
Such a balance should also take into account the issues of sovereignty and ownership of the oil and gas dealing with the granting of exploration and production rights to oil companies and the granting of leases, servitudes and easements to oil companies and pipeline owners/operators.
This also links into the importance of the types of exploration and production contracts to be utilised in the region, whether these should be Exploration and Production Licences, Exploration and Production Sharing Agreements or Enhanced Technical Services Agreements.
Recognition of the Agreement on Trade Related Aspects of Intellectual Property Rights will also need to be borne in mind as well as relevant Sanctions and Export Control where applicable.
As well as the above issues to be considered by the regional governments, investors will also face challenges in engaging with the government as they seek to negotiate their agreements with those who will find many of the terms unfamiliar.
Even where model agreements provide a rigid structure, investors will encounter underlying resistance and pressure from both governments and NGO’s.
Such knowledge gaps and inexperience will need to be built up over time and further developed and investors should bear this in mind when seeking to enter into the market in East Africa.
Staff Writer
Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and...
More by Staff Writer
A Word of Caution…
Hugh Fraser weighs in on the challenges facing East Africa operators
The emergence of East Africa as an oil and gas hub raises some very important Legal issues that the region will have to face if it plans on competing in the global market
East Africa is emerging as one of the most significant regions in the continent’s oil and gas industry. However, the fact remains that the region does not hold the experience of its Western and Northern counterparts and the local governments will have to learn the nuances of the industry quickly.
An inadequate infrastructure to cope with the new-found industry, there are also legislative challenges governing the level of production as well as balancing the interests of those concerned.
In such an emerging market, it is crucial that an effective legal framework is in place to manage the growth of the industry and balance domestic interests with those of international oil companies.
In seeking to achieve this balance, the governments will need to turn their attentions to their current legislation, and where necessary implement new legislation and regulatory changes to deal with any areas of inadequacy and to support the market in their development.
Overriding all of these issues will be the Legal Systems in place and the applicable Rule of Law governing the relationship between the investors and the transacting sovereign state and National Oil Company.
Other key areas to be considered will include the local laws on Employment and Immigration as contractors enter the country on a large scale. Procurement and Local Content will also need to take into account any pricing or bidding advantages, import duties and employment and visa quotas. Similarly, legislation on health, safety and the environment will need to be scrutinised.
From a financial perspective, Foreign Investment Laws, Taxation and Customs Duties will need to ensure that attracting foreign investment is aligned with maximising local return.
Such a balance should also take into account the issues of sovereignty and ownership of the oil and gas dealing with the granting of exploration and production rights to oil companies and the granting of leases, servitudes and easements to oil companies and pipeline owners/operators.
This also links into the importance of the types of exploration and production contracts to be utilised in the region, whether these should be Exploration and Production Licences, Exploration and Production Sharing Agreements or Enhanced Technical Services Agreements.
Recognition of the Agreement on Trade Related Aspects of Intellectual Property Rights will also need to be borne in mind as well as relevant Sanctions and Export Control where applicable.
As well as the above issues to be considered by the regional governments, investors will also face challenges in engaging with the government as they seek to negotiate their agreements with those who will find many of the terms unfamiliar.
Even where model agreements provide a rigid structure, investors will encounter underlying resistance and pressure from both governments and NGO’s.
Such knowledge gaps and inexperience will need to be built up over time and further developed and investors should bear this in mind when seeking to enter into the market in East Africa.
Staff Writer
Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and... More by Staff Writer
Related