Rich with natural resources, Africa is a hydrocarbon explorer and producer’s playground, offering significant prospects to both regional and international stakeholders. Sizeable discoveries coupled with governments taking major steps to improve their regulatory environments – based on the value of market-driven policies and enabling legislature in attracting foreign investment – have created significant opportunities for American-based companies and financiers looking to capitalize on the continent’s resources. Accordingly, recent regulatory reforms have only further positioned Africa as the ideal investment destination in 2021 and beyond.
Nigeria’s Petroleum Industry Bill Enhances Investment Attraction
Arguably one of the most highly anticipated Bills in Africa’s energy sector, Nigeria’s Petroleum Industry Bill (PIB) was officially passed into law in July 2021 by the Nigerian Senate. Since it was first presented to the National Assembly in 2008, the PIB has seen thirteen years of revision, amendments, and debate, with the final draft seeing deliberation and input by both the executive and legislative arms of government.
The PIB marks a significant turning point for the resource-rich nation in West Africa as it offers a complete sector restructuring, consolidating 16 petroleum laws into a single, transparent document. With the aim of establishing an enabling environment for international investment, so as to accelerate hydrocarbon development in the face of declining production from ageing fields, the PIB has significantly enhanced the sector’s attractiveness.
PIB specifics include the streamlining and reducing of oil and gas royalties; dividing the Nigerian National Petroleum Corporation division into three separate entities – namely, the Nigeria Petroleum Assets Management Company, National Petroleum Company and the Nigeria Petroleum Liability Management Company; the expansion of local capacity; strong environmental and social components; and the creation of a domestic natural gas market. At a time when the country is facing falling oil revenues and reduced investment resulting from the COVID-19 pandemic and global shift away from fossil fuels, the PIB will not only unlock significant investment for the country, but spur exploration and production, positioning the country as a premier hydrocarbons destination in 2021 and beyond.
Senegal Transforms Petroleum and Power Sector Regulation
With recent sizable oil and gas discoveries made offshore Senegal and Mauritania, Senegal’s parliament has prioritized regulatory reforms to fast-track development and ensure maximum returns for both the country and investors. In 2019, Senegal signed into law a new petroleum code, updating the 1998 legislation, which provides productive changes to enhance exploration and production, as well as local company participation. The new code comprises changes to exploration rights – now granted for a period of up to four years – with exploitation authorizations granted for a period of up to 20 years. Additionally, the new code requires a minimum 10% interest for the state-owned company, Petrosen, during exploration and development phases. By ensuring the state takes on an active role in sector development, Senegal is increasing local capacity and participation.
Meanwhile, the country passed a new electricity code into law in June 2021 which provides a regulatory framework for the power sector. Comprising key components such as rural electrification, provisions for Independent Power Producers, renewable power generation, and energy savings, and by transforming the state-owned power utility Senelec into a holding company – dividing the company according to generation, transmission and distribution – the Law aims to enhance power sector activities, driving electrification and socio-economic growth.
Gabon Increases Production Sharing Contracts Through Hydrocarbons Code
Gabon has managed to maintain its sector’s attractiveness for international investment in a capital competitive environment through a revised Hydrocarbon Code that not only liberalizes its oil and gas exploration market, but provides increasingly lucrative opportunities for regional and international investors. Adopted in July 2019, the new Hydrocarbon Code offers financial incentives to developers and increases flexibility and adaptability in terms of taxation on both the operating and exploration phases.
Gabon’s Hydrocarbon Code modernizes its regulatory framework, featuring revised fiscal policies, tax amendments, and attractive terms for investors that resulted in a record number of PSCs signed in 2020. By prioritizing fiscal incentives, reducing state participation in PSCs, as well as the maximum stake the state can acquire in an exploration company, the Code has attracted an influx in regional and international company participation, despite the lack of hydrocarbon discoveries. What’s more, the Code grants potential investors greater control over operations and reduces potential risk for companies. Accordingly, the Code has positioned Gabon as a competitive investment destination during- and post-COVID-19.
With several African countries aggressively pursuing regulatory reforms to enhance their attractiveness for foreign investors, the upcoming U.S.-Africa Energy forum, taking place on the 9th-10th of December 2021 in Houston, Texas, will provide insight into the regulatory achievements made in Africa thus far, promoting Africa as an attractive investment destination for global players. Sponsorship sales are open until the end of week and delegate sales are available until 10 December.
