Behind the scenes: TOGY talks to NJ AYUK. Centurion LLP is recognized internationally
With a team of seven in-house lawyers from around the world, Centurion was created in 2007 to provide legal services to oil and gas ﬁrms in Equatorial Guinea. It has offered advice on business law for Ghana, Cameroon, Gabon, Chad, South Sudan and Kenya and extended services formerly nonexistent in the market. It was the ﬁrst state law ﬁrm to negotiate a productionsharing contract and a joint operating agreement on behalf of an international company – Afex Global and Vanco Energy.
TOGY talks to NJ AYUK
THE OIL & GAS YEAR:What is needed to bridge the gap between the legal traditions of irms from the US and Europe with the local framework?
N.J. AYUK: You need values and strong ethical training within your own irm so that you can understand the client’s interests as a services provider. The client’s interests are your irst commitment. We have been trained abroad but also understand the rules in Equatorial Guinea and the West Africa region. We are aware of the standards that a US citizen would expect, and we bring these expectations to the table and localise them. We take the time to sit down with local oicials and pay attention to their concerns and opinions. When we disagree, we disagree, but we do so respectfully and always try to ind a consensus moving forward.
TOGY:What is the legal authority that governs the oil and gas industry in Equatorial Guinea?
NA: Hydrocarbons Law 8/2006, which came into efect in November 2006, is the controlling legal authority on oil and gas activities in the country. Oil and gas operations are governed by joint-venture agreements and production-sharing contracts. In Equatorial Guinea, the production-sharing contracts are for an initial term of ive years followed by two terms of three and two years respectively.
TOGY: How has ease of business improved for companies entering the country’s energy industry?
NA: Compared with before, the situation has improved tremendously. It used to take between nine and 15 months to register a company here. However, with Gazprom Neft and Vanco, it took our irm three months to get these companies legally incorporated. This shows the evolving nature of the country. Over the past three years, the government has cut some of the bureaucratic bottlenecks from the process. It has realised that the easier they make it for businesses to come in and establish themselves, the better it is for the industry as a whole. The harmonised business laws for West African states have shaped a lot of business practice in the country and the friendly tax policies have also eased business entry and operation. There are now service contractors, service providers and oil irms from around the world making big returns on their investments here.
TOGY: Will production-sharing contracts with oil companies become more restrictive?
NA: If the government starts investing during the exploration period it will be more restrictive. If global irms keep carrying the government then it is likely to continue its liberal approach in giving more favourable terms to oil companies, because the government has an open investment policy. It is international best practice – when someone puts in all the money, they are justiied in demanding a higher share because they are assuming all the risk. It should be made more certain that this risk will be compensated for in the event that it is successful. In an area where the government is putting in 50 percent of the money, then it is most likely to ask for 50 percent of the related shares. If you adhere to international best practices and international compliance principles, encourage investment on the best possible terms to investors and ensure that the people of the country are protected and respected, then there is a suicient share of the proit for both sides. Both sides can build that synergy when they are investing in the oil and gas industry. Investors and the people will be happy and the government will have taken care of its obligation to the people. Looking within the legal and policy framework of the country, that is what will happen over the long term.
TOGY: Is the walk-in approach better than holding up a round for competitive bidding?
NA:Holding a round of competitive bidding is better. However, the government is always ready to attract investors in the oil and gas industry. The Ministry of Mines, Industry and Energy has always been open to accepting proposals from companies that are interested in open exploration blocks. The country can arrange a bidding round even at this stage because it has done it in the past, most recently in 2006. There is talk of a new bidding round in the near future, and this will create momentum with more players involved. It is always a big advantage when you have more players trying to participate in the bidding process. This gives the government a better chance to scrutinise the proceedings and see who has a better project plan, who has a better tender and who has the best proposals to meet the government’s vision for 2020. In light of the dynamics of the country, the government has decided not to wait for a bidding round. Instead, it will work with companies instead of making them wait. If a company believes it has the technical and inancial capability to invest in the country’s oil and gas industry here and is ready and willing to do so, then the government is open to that. That can be seen with Vanco, Gazprom Neft, the production-sharing agreement with Marathon and with other companies trying to enter the market. The government believes that if you have the ability and you believe you can do it, the process is essentially still the same.
TOGY: Is the legal framework in line with national goals of creating a regional services hub?
NA: If you meet the legal requirements then you will have the opportunity to invest. Ohada business laws apply to Equatorial Guinea when it comes to doing business here. Unlike Nigeria or Angola, local content rules are very accommodating to investors. Therefore, Equatorial Guinea stands to be a service hub for companies wanting to do work in the region. Once you are incorporated in Equatorial Guinea, you can work from your base to serve other Ohada states without needing many of the permits since the business laws are harmonised. There are other areas where investors should pay keen attention. In the upstream sector, they should focus on the construction and maintenance of crude oil storage tanks, manufacturing of consumable materials in exploration and ield transportation and equipment for rig movements. In the downstream sector, investors should consider domestic manufacturing of LNG cylinders, valves and regulators, installation of illing plants, retail distribution and development of simple, lexible and less expensive gas burners to encourage the use of gas instead of wood. A second LNG train will open many doors for service providers. Investors should view Equatorial Guinea as a place where they can get huge rewards from a variety of investment areas. Service companies are one area in which, if you provide the right services to oil and gas companies, you can get good returns. Luba Freeport is a step in the right direction and represents another area for investment, because any equipment facility within the country could not only serve Equatorial Guinea but also the oil and gas industry in neighboring countries as well. There are other areas in which to invest and still make substantial proits. Everyone tends to looks at blocks, but there is also a huge return on investment from providing services to these oil companies. This is true, because the country’s investment laws are very fair and successful in attracting foreign investment to the country
Wedded to West Africa
As a member of the Economic and Monetary Community of Central Africa (CEMAC), Equatorial Guinea has worked towards building an economic union and common market with other West African members over the past several years. Despite some success, CEMAC has been slow to implement many of its original objectives. CEMAC is an ofspring of the Customs and Economic Union of Central Africa, which began in 1966. CEMAC commenced operation in 1999, replacing the older organisation with the addition of a monetary union. In 1994 CEMAC introduced a tarif scheme for the Union, applying the same external tarifs on imports as non-CEMAC countries. Today CEMAC countries – including Cameroon, Gabon, Chad, Central African Republic and the Republic of the Congo – have a common financial, regulatory and legal structure. They use a common currency, the Central African franc, which is pegged to the euro, and the movement of capital within the CEMAC zone is free. Headquartered in Cameroon, the monetary union is administered by the Bank of the Central African States. Prior to 2000, Equatorial Guinea was one of the weakest members of CEMAC, requiring large support from the central bank. After major oil inds, today Equatorial Guinea accounts for 60 percent of CEMAC’s inancial strength, demonstrated by the construction of the CEMAC building in the capital Malabo. Equatorial Guinea was the only nonFrench speaking country in the Union until 1992, when it added French as an oicial language to tie itself more closely to other CEMAC countries. Despite measures aimed at greater integration, CEMAC ha not implemented many of its goals. A Customs union has yet to be achieved, many tarif and non-tarif barriers still exist, and the free movement of citizens is also not a reality. Equatorial Guinea’s inancial strength has led some to wonder whether the country would be better of if it left the monetary union. According to CEMAC’s treaty, the common market and economic union should be completed and evaluated by 2015. Now many are waiting to see whether the fulfilment of the treaty will be possible.
Reproduced with kind permission of The Oil & Gas Year. You can find the briefs in their original form by visiting www.theoilandgasyear.com
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