Equatorial Guinea approves New Local Content regulation for Oil and Gas Sector

Dear Friends
The signing of the Local Content Regulation (the “Regulation”) by Equatorial Guinea’s Minister of Mines Industry and Energy, H.E. Gabriel Mbaga Obiang Lima, further reinforces the Government’s commitment to solidifying its position as the 3rd largest oil producer in Sub-Saharan Africa to benefit the people of Equatorial Guinea. The stimulation of the national economy and social infrastructure has been at the backbone of every Production Sharing Contract negotiated and every well drilled, as such; the Regulation enshrines the Country’s commitment by increasing the contribution from the petroleum industry in the local economy.

This pro-growth and market driven Regulation will ensure national participation in the oil and gas sector. Moving forward, all agreements must have local content clauses and provisions for capacity building and preference must be given to local companies in the award of services contracts. On the other hand, the MMIE will be responsible for providing a list of eligible local companies to be invited to tender bids. Further, companies will be required to register and enroll with the Ministry of Mines, Industry and Energy (“MMIE”) before beginning their activities, to have a head office in Equatorial Guinea, and send all requests for services to the MMIE before hiring any service companies. This measure is aimed at ensuring that international oil companies become truly local in nature, and thereby invest in the communities in which they operate.

Article 12 of the Regulation deals with situations where there is no suitable local company to carry on a task. In these cases, contractors are required to give preference to companies owned by citizens of CEMAC states—or citizens of an African state, if all else fails. Additionally, when there are no local companies capable of executing specific contracts, operators and exploration companies must ensure they develop and implement plans to integrate Local Content provisions into the project.

Articles 27 through 32 of the Regulation address the integration, funding and development of Equatorial Guinean personnel in the hydrocarbon sector. It mandates the submission of a program for the development of local content, as well as an education and training plan for each national citizen employed. All companies must inform the MMIE of any vacancies and any jobs they intend to create, so the Ministry may disseminate this information to potential candidates. Companies are also required to submit to the MMIE a system of evaluation of Local personnel, which must be approved by the Ministry. Furthermore, articles 33 through 49 deal with the funding and implementation of social works, and put forth a balanced pragmatic approach on how companies could undertake their corporate social responsibility in Equatorial Guinea.

The Regulation also makes mention of penalties and fines that may accrue as a result of violation of the requirements under the Regulation. In cases of substantial and material violations, or the threat of substantial and material violations, companies may face sanctions ranging from monetary fines to the premature termination of contracts. In addition, companies may be precluded from entering into any new service agreements until they have complied with applicable laws and regulations.

This new Regulation will not only boost the local economy and investment, but it will also boost Equatorial Guinea’s most valuable resource: its people and the local communities. In sum, this new Local Content Regulation serves to highlight the importance of human capital in Equatorial Guinea, putting its citizens and local interests in the forefront of social and economic development.
For EG companies seeking to be local partners, most IOCs and international oil and gas services companies have strict requirements on who they will partner with. These requirements range from compliance with safety and environmental standards to requirements for their partners not to be politically connected/exposed or have any hint of being involved in bribery and corruption. This is because of these companies own internal requirements; such as compliance with laws and regulations in their home countries (e.g. Foreign Corrupt Practices Act in the US and Bribery Act in the UK); and the impact any “bribery/impropriety” scandal can have from a public relations and share price (in the case of listed companies) perspective.
This regulation will ensure that most potential local partners will be subject of rigorous due diligence not only on themselves but also their business associates. Being a member of TRACE International and having gone through its anti-bribery and corruption course can also be a pre-requisite for an international oil and gas company taking on a local partner.
Centurion Lawyers and advisors have extensive experience advising clients on various local content compliance issues within the oil sector in Equatorial Guinea and across Africa. If you would like any further information on this new regulation, please do not hesitate to contact us

Sincerely

NJ Ayuk JD MBA
Centurion LLP

Parques de África
Esq. Antiguo Ayuntamiento
Barrio Caracolas
Malabo, Equatorial Guinea
Mobile: +240 222 781 613
www.centurionlawfirm.com

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