Congo : The Bill on hydrocarbons Code passed by the cabinet
The Republic of the Congo, (“The Congo «) is an African country, located in Central Africa. It is a member of several regional organizations such as the Economic and Monetary Community of Central Africa (“CEMAC”), the Economic Community of Central African States (“CEEAC”), and the Association of African Petroleum Producers (“APPA”). Its economy is dominated by the oil sector, which represents more than 60 % of the country’s GDP, despite numerous efforts to diversify the country’s sources of income.
Twenty years after the enforcement of the hydrocarbons code; it was time for the government, following the assessment of the code thereof, to set up a new legal framework in line with the practice laid down in production sharing contracts (“CPP”) and to line up with the innovations of legislations in the sector within the region. It is in this context, at the cabinet meeting held on March 25, 2015 that the Congolese Minister of Hydrocarbons submitted to the aforesaid cabinet a Bill on Hydrocarbons Code (“Bill”).
On the regional level, the Bill herein passed at the cabinet meeting “draws comprehensively inspiration from the legal and tax frameworks in force in the countries members of the APPA, and which has a profound vocation to improve the Congolese legislation in this field.
The Bill which, generally, preserves the main provisions of the hydrocarbons code in force provides, however, some innovations. For instance:
1. Granting on exclusive basis to the National Oil Company of Congo («SNPC») mining titles. Unlike the hydrocarbons code in force, the Bill provides the exclusivity for granting hydrocarbons mining titles to the SNPC, with possibilities of partnerships with national or foreign partners. Thus, any company aiming to undertake activities for search or exploitation of hydrocarbons should contact the SNPC to obtain the title or to partner with the SNPC in order to conduct activities for search or exploitation.
2. Reinforcement of penalties in the event of noncompliance with legal and contractual provisions by oil companies. The objective targeted in the reinforcement is to urge companies that are in the search and exploitation of hydrocarbons to strictly comply with legal provisions enacted/
3. Setting up of a unique tax and customs regime. This regime, single and unique, will be applicable to all oil companies.
4. Fixing of minimum share of the “Oil Benefit” of the State to 35%. While the hydrocarbons Code in force refers to CPP for the fixing of the percentage of “Oil Benefit” on behalf of the State, the Bill provides for a minimum threshold of 35% of «Oil Benefit». Therefore, it is agreed that the “Oil Benefit” on behalf of the State will be 35% or more, it will depend on negotiations to be conducted prior to the signing of CPP by the parties.
5. Permanent prohibition of gas flaring in the Congo. The Bill strictly prohibits to flare excess fuel gas combined with oil.
6. Establishment of a minimum participation of 15% for national private companies in the CPP. For the sake of promoting the emergence of the middle class, the Bill calls for companies’ signatories of the CPP; that a minimum quota of 15% be reserved or allocated to private national companies. This will, not only create jobs, but ensure that a portion of income remains in Congo.
7. Establishment of a national fund for prevention of environmental risks. This fund should be able to deal with emergencies related to serious accidents or industrial disasters caused by activities relating to the exploration and exploitation of hydrocarbons. The environmental issues were in the first position in the national and international scene. The Congo has ratified several international treaties, conventions, covenants, etc. relating to the protection of the environment, most of which are subsequent to the promulgation of the hydrocarbons Code in force. Thus, for the sake of development in harmony with the oil business requirements and international standards in this field, the Bill provides for the establishment of a national fund for prevention of environmental risks.
Legislative adoption process and promulgation of the law on new hydrocarbons code
Article 118 paragraph 2 of the Constitution provides that “the Bills, as considered in the cabinet meeting following a view from the Supreme Court, are brought in to one or the other House.” Therefore, after the adoption by the cabinet, the Bill will be brought in to one of the Parliament Houses. The task will be for the honorable Members of Parliament and Senators to adopt the text in the terms proposed or in different terms by bringing in the changes they deem necessary.
Finally, in accordance with Article 83 paragraph 2 of the Constitution, the President of the Republic shall promulgate the law passed by both Houses within twenty days of the transmission that will be made by the office of the National Assembly.