Fundamentals of Petroleum Law PDF

FUNDAMENTALS OF PETROLEUM LAW PETROLEUM LEGAL REGIME Dr. Richmond Osei-Hwere Faculty of Law, KNUST Saturday, 28 April 2018  Structure of a Petroleum Regime Constitution Petroleum Law Petroleum Regulations...

FUNDAMENTALS OF PETROLEUM LAW PETROLEUM LEGAL REGIME Dr. Richmond Osei-Hwere Faculty of Law, KNUST Saturday, 28 April 2018  Structure of a Petroleum Regime Constitution Petroleum Law Petroleum Regulations Host Government Contracts – Concessions and Licences – Production Sharing Agreements – Joint Ventures – Service Contracts – Hybrids Saturday, 28 April 2018  Petroleum Regime Framework Saturday, 28 April 2018  Petroleum Features of a National Constitution Most national constitutions address the state‘s entitlement to natural resources – "ownership of natural resources is the entitlement of the state" is a typical statement Some constitutions require oil & gas activity to be performed by a state company (ie. Mexico) Some go further, reserving the revenues from these resources to the state (ie. Kuwait) These provisions can have an important impact on how petroleum resources can be exploited, and the capital that is available to do so Saturday, 28 April 2018  Examples of Restrictive Constitutions Kuwait: “Article 21- Natural resources and all revenues therefrom are the property of the State and it shall ensure their preservation and proper exploitation due regard being given to the requirements or State security and the national economy.” Mexico: Constitution- Article 27(6)- “The Nation shall carry out the exploitation of petroleum and hydrocarbons in any of its physical forms...” and Regulatory Law Art. 6- “Compensation must always be in cash and under no circumstance may a percentage of the products or a participation in the results of the exploitation be granted in compensation for the works or services. Saturday, 28 April 2018  Petroleum Law This is the cornerstone of an effective petroleum legislative framework Selected specific key provisions: – confirms state property rights to petroleum – creates a “Competent Authority” with jurisdiction over management of the state’s interest (whether it be a Ministry, a regulatory body, or a state oil company, or all of these) – may establish and empower a national oil company Saturday, 28 April 2018  Petroleum Law – governs the grant of petroleum rights – governs petroleum operations – establishes fiscal regime (royalties, taxes, duties) – ensures energy security – attracts investment – protects the environment, ensures health & safety of workers Saturday, 28 April 2018  Trend in Energy Regulatory Structure More countries adopting the "separation of roles” regulatory structure Saturday, 28 April 2018  Petroleum Regulations The second essential component of a successful, modern petroleum legislative framework implements policy and objectives of the Petroleum Law Selected specific provisions: -host government contracts contemplated -mechanism for awarding contracts established -environmental protection procedures created Saturday, 28 April 2018  Types of Host Government Agreements Concessions Joint Ventures Production Sharing Contracts/Risk Sharing Contracts Service Contracts Hybrids (involving attributes of more than one of the above types) Saturday, 28 April 2018  Distinguishing Types of Host Government Contract Saturday, 28 April 2018  Usage of Host Government Contract Types Saturday, 28 April 2018  Overview of Ghana’s Upstream Petroleum Regime Outline – Applicable laws – Ownership – Petroleum terms and relinquishment – Regulatory architecture – Work programme and financial obligations – Assignation of Interest Saturday, 28 April 2018  Applicable laws Ghana Constitution, 1992 Petroleum (Exploration and Production) Act, 2016 (Act 919 Ghana National Petroleum Corporation Act, 1983 (PNDC Law 64) Petroleum Income Tax Act, 1987 (PNDC Law 188) Petroleum Commission Act, 2011 (Act 821) Model Petroleum Agreement Saturday, 28 April 2018  Ownership Article 257(6) of the Ghana Constitution, 1992 provides the legal basis for ownership of mineral resources in Ghana. Read Article 257(6) Section 3 of the Petroleum (Exploration and Production) Act, 2016 (Act 919) also creates ownership of all petroleum resources in the Republic of Ghana and same is vested in the President on behalf of the people. Saturday, 28 April 2018  Ownership 2 Obligation of conducting petroleum operation rests with the government through the GNPC No person other than the GNPC shall be engaged in petroleum exploration, development and production without an agreement with the GNPC or the Republic – S.2(1) of PNDCL 64 Saturday, 28 April 2018  Petroleum Terms Petroleum Agreement is valid for a period not exceeding 25 years – s. 14 of Act 919 Two main phases to the Petroleum License – Exploration Phase – Production Phase Seven (7) year Petroleum Exploration Term The Exploration Phase has three (3) periods: – The initial – First Extention Period and – Second Extention Period See s. 21 of Act 919 Saturday, 28 April 2018  Relinquishment Acreage is surrended at the end of each exploration period – Section 21 of Act 919 The amount of surrender is negotiable, but based on the work obligation of the succeeding period Relinquished areas could be repackaged and surrended to other interested investors Saturday, 28 April 2018  Regulatory Architecture The Ministry responsible for Petroleum is in charge of licensing The Petroleum Commission – management of the industry – Health, safety and environment in conjunction with other agencies Is there a conflict of interest problem? Saturday, 28 April 2018  Work Programme and Financial Obligations Work programme defines the amount of work that the investor is expected to achieve in the Contract Area during the Exploration Period Financial obligation is the amount to be expended on the programme Saturday, 28 April 2018  Work Programme and Financial Obligations (2) The law provides for a minimum work programme and expenditure obligations to be fulfilled by the investor for each period of exploration – Section 23 (1) of Act 919 Failure to achieve the status quo may attract sanctions including revocation of license. see s. 23(2) of Act 919 Saturday, 28 April 2018  Assignation of Interest Transfer of interest in hydrocarbon resources must be with the consent of the Minister. – Section 16 of Act 919 Consent must not be unreasonably withheld The consent clause is clearly a discretionary power exercised by the Minister See Article 296 of Ghana Constitution on guidelines for exercise of discretionary power. Saturday, 28 April 2018  The End Thank You Saturday, 28 April 2018