The item you have requested is not currently available in English and you have been redirected to the next available page. You may use your browser's back button to return to the item you were viewing.
Country desks feature Dentons lawyers in one jurisdiction with a particular focus or experience in another jurisdiction.
Learn more about our Canada capabilities
Learn more about our United States capabilities
Learn more about our Latin America and the Caribbean capabilities
Learn more about our Europe capabilities
Learn more about our United Kingdom capabilities
Learn more about our Central and Eastern Europe capabilities
Learn more about our Russia, CIS and the Caucasus capabilities
Learn more about our Africa capabilities
Learn more about our Middle East capabilities
Learn more about our Central Asia capabilities
Learn more about our China capabilities
Learn more about our ASEAN capabilities
Learn more about our Asia Pacific capabilities
Learn more about our Australia capabilities
At Dentons, we bring together top tier talent found at the intersection of geography, industry knowledge and substantive legal expertise. Start by clicking here
Lexpert recognizes 26 Dentons lawyers as "Canada’s Leading Energy Lawyers”
Dentons is proud to congratulate an impressive 26 lawyers, who are listed as “Canada’s Leading Energy Lawyers” by Lexpert.
It's Never Too Early to Avoid the Year-End Rush on Billing Issues
Often, attorneys may feel tempted to ignore billing issues until the year-end collections push.
Avoid Issues When Practicing Law in Other States
Because many businesses operate on a national (or even global) scale, it is unsurprising that those businesses often want their attorneys to be able to do the same.
Will the trek to an injunction be a more difficult walk in the (Wrotham) Park now?
Negative covenants, also known as restrictive covenants, are contractual obligations not to do certain acts.
What do the EBA's Supervisory Principles on Relocations (SPoRs) mean for BREXIT-proofing of business and for other market participants moving to the Eurozone?
The EBA’s SPoRs share a number of common supervisory aims set out in similar Opinions issued by the EBA’s sister European Supervisory Authorities (the ESAs) during 2017 and the updates issued in 2018.
Starting your career as a student at Dentons exposes you to a world of experience and opportunities
With 167+ locations in 73+ countries, Dentons is home to top-tier talent that is found at the intersection of geography, industry knowledge and substantive legal experience. Working with Dentons, you will have the opportunity to learn from the best lawyers in the industry at the largest law firm in the world.
Dentons named Innovator of the Year
Dentons has been named Innovator of the Year at the Lawyers Weekly Australian Law Awards 2018.
Counsel Alexander Kovalev and Senior Associate Alina Mamaeva join Dentons
Counsel Alexander Kovalev and Senior Associate Alina Mamaeva have joined the team of Dentons’ Russian Life Sciences practice.
Dentons launches premiere Intelligence & Strategic Services practice
Dentons, the world's leading global law firm, today announced the launch of its Intelligence & Strategic Services (ISS) practice.
At a recent Dentons seminar on oil and gas in West and East Africa, panelists discussed the pitfalls of Nigeria’s PSAs and domestic subsidies, and why new frontier regions such as Kenya could do well to copy the example set by Ghana. Partner Danielle Beggs reports.
Perceptions of Africa have changed in the last decade. According to the director of oil and gas at Standard Bank, Charlie Houston, the continent is now considered “the land of opportunity” – not just because there is oil and gas in vast quantities, but also because economic development is extending throughout.
Houston made these remarks at the beginning of an SNR Denton seminar that took place in London in late February, looking at the differences between West and East Africa in terms of energy regulation and the various regimes for making investments.
With over 120 attendees, the seminar sparked engaging discussion on where opportunities lie for those active in Africa; some of the challenges facing the industry; and how players within the industry can gain a competitive advantage over others.
According to Houston, the last decade has seen a change in much of Africa’s economic fortunes. He informed the audience that an average GDP growth rate of 3 per cent across the continent can be explained by various factors including changes in economic ties, investment from developing nations and from within the continent, greater economic diversification across all sectors, and a rise in consumer markets. He provided an analysis of likely funding sources and structures for those looking to develop oil and gas properties in East Africa, and gave a brief summary of the upstream activities and projects at play in both west and east.
Against this backdrop of a prospering continent, the panel, chaired by SNR Denton partner Martin Kitchen, looked at the key differences and differentiators between the east and west.
James Ball, founder and president director of the commercial consultancy Gas Strategies, began the seminar with a discussion of the necessary components for a successful project for getting hydrocarbons to market. Based on his experience of implementing major LNG projects in Nigeria and elsewhere, Ball proposed that critical factors, such as stakeholder, governmental and investor co-operation, a clear and stable regulatory regime, and realistic marketing plans, need to be aligned. The seven-strong panel agreed that Ball’s requirements for success could be extended to oil and gas projects generally in Africa.
In their respective presentations, Tony Djokoto, regional counsel of Tullow Ghana, and Paras Shah, a partner at SNR Denton’s Kenya associate firm Hamilton Harrison & Mathews, focused on regulation and co-operation with investors in Ghana and Kenya.
Djokoto presented Ghana as a stable environment for investment, built upon a sound and well-thought-through regulatory regime. He advocated Ghana as a model for co-operation between state and industry, as evidenced by Ghana National Petroleum Corporation’s history of negotiating solutions with commercial partners in the absence of regulatory answers.
Shah said he saw Ghana as providing a model for the development of Kenya’s petroleum industry, where formal regulatory and legislative changes are currently afoot. The Kenyan Ministry of Energy is proposing a new Petroleum Exploration and Production Act (PEPA), which will replace the existing petroleum legislation, the Petroleum (Exploration and Production) Act dating from 1986. While this bill is only at the drafting stage, the Kenyan government has confirmed that some of the concepts contained include sharply increased licensing fees, higher royalties, increased taxes and tougher penalties on missed exploration schedules.
The full details of what else may follow in the draft PEPA text are yet to be announced. However, it is clear that resource nationalism in Kenya, as in many other African states, is growing, with the government keen to increase the revenue the country will receive from its natural resources. Kenya is not only considering its future regulatory regime, but also scrutinising current transactions through the interpretive lens of existing legislation and tax regimes. It has, for example, recently declined to approve the transfer of the oil and gas exploration interests of Cove Energy Plc to Thailand’s PTT Exploration and Production Public Company Ltd (PTTEP) over a tax dispute. The Ministry of Energy has said that approval will only be granted after Cove pays Kenya tax on sale proceeds realised.
Ball took the audience through a brief comparison of LNG projects in Nigeria and Trinidad & Tobago, outlining the differences that the presence of an attractive and stable regulatory environment can have. He concluded that “a host government can, via its policies, confer a competitive advantage to projects in its country vis-à-vis the policies of competing projects’ host governments”.
Sitting on the panel, this report’s author, Danielle Beggs, highlighted that many host governments have parked the issue in their petroleum agreements of what happens if discoveries of gas are made instead of oil. She pointed towards Nigerian and Tanzanian PSAs, which do not provide clarity on procedures for the finding of natural gas, instead containing an “agreement to agree” what route to take in the future. She noted that this is not legally binding, so it could undermine an oil company’s investment if an agreement with the government cannot be reached – but she said that current regulatory changes in both countries are an encouraging sign.
In Nigeria, these regulatory changes take the form of a new Petroleum Industry Bill. The draft bill seeks to reshape the regulation of the petroleum industry in Nigeria by establishing an institutional framework to oversee and govern the industry. The draft bill is currently being debated by the Nigerian National Assembly, with hopes that it will be passed this year.
Meanwhile in Tanzania, the Ministry of Energy and Minerals is in the process of developing new gas regulations to promote the production, development and realisation of the nation’s substantial gas reserves. The package includes a natural gas policy, a gas utilisation master plan, a natural gas bill, a petroleum policy and an Upstream Act, in addition to amendments to the current petroleum legislation which dates from 1980.
Like Ball, Beggs emphasised that host governments have the opportunity to give their countries a competitive advantage by creating an attractive regulatory regime – and said this was nowhere more evident than in Tanzania and Mozambique. Neighbouring countries, Tanzania and Mozambique both have significant reserves of gas and are both endeavouring to create a domestic gas market in addition to entering the international LNG markets. Beggs gave an insightful comparison of the proposed gas regulation and tax regimes, leaving delegates to consider the fine balance that needs to be struck between governments increasing their production revenues and companies’ need for a stable investment regime.
Looking at the issues from a different angle, Osamede Okhomina, the CEO of Nigerian E&P player Equity Energy Resources, provided some frank views on the state of play in Nigeria.
Okhomina said that, for those interested in doing business in Africa, it is necessary to understand the culture, history and politics of the nation concerned. He warned against treating Africa as one country and emphasised the need to appreciate the diversity within the continent, informing the audience that there are roughly 250 tribes and 50 different languages spoken within Nigeria alone. A lack of continuity of policy and personnel in government and administrative bodies has also made governance of the country – and developing long-term projects – difficult. Okhomina also challenged the view of a rising middle class in Africa, reminding delegates that much of the continent is still underdeveloped.
Looking ahead to Kenya’s general election (which was held around a week after the seminar), Shah emphasised that Nigeria is not the only country whose oil and gas industries can be affected by local politics. The parties of Kenya’s rival presidential candidates, Uhuru Kenyatta and Raila Odinga, both stated that they would focus on the fledgling oil and gas industry, and Shah pondered what the impact might be depending on who succeeded.
The industry is now waiting to see the impact of Uhuru Kenyatta’s victory and is hoping that Raila Odinga’s appeal to the Supreme Court will not cause a protracted dispute over the validity of the election result.
Speaking from the audience, Vitor Da Cruz, a partner in SNR Denton’s Mozambique associate office MC&A Sociedade de Advogados, raised concerns that elections in Mozambique in 2014 could cause delays to some of the projects that are currently pending.
Houston argued that upstream activity within Africa might be constrained by the lack of facilities for midstream and downstream activities. In his view, Africa has traditionally been “characterised by getting crude out of the continent and getting refined products into the continent” owing to a very limited refining capacity. Some countries are now focusing on building refineries to avoid huge amounts of expensive imports.
He commented that gas infrastructure was a high priority for domestic supply as well as for export, and added that development of transport infrastructure is just as necessary, particularly to access crude reserves located in landlocked countries. Houston shared a statistic from The Economist that the costs of transporting a car from Dar Es Salaam to Kampala in landlocked Uganda are the same as, or slightly more than, transporting a car to Dar Es Salaam from China.
On a regulatory note, he highlighted the introduction of greater local content obligations in various forms, from training obligations to resident share requirements, and said we can expect to see these in Mozambique and Tanzania. Vitor Da Cruz informed the audience that in Mozambique labour laws are considered “a severe constraint to oil and gas operations” as foreign companies operating in the country are only authorised to have a low level of foreign employees.
The panel explored several other ways in which host government policies and regulations are decreasing the value of investments within in their oil and gas industries. Beggs gave an analysis of the extraterritorial effect of proposed new capital gains tax regimes in Mozambique, Uganda and Kenya allowing governments to reap benefits from offshore sales of shares in oil and gas ventures. In particular, she highlighted both the Mozambique and Kenya aspects of the sale of Cove Energy.
Cove’s sale gathered significant media interest as it became the subject of a long-running bidding war between PTT Exploration and Production and Royal Dutch Shell. Both companies were attracted by Cove Energy’s 8.5 per cent interest in the Rovuma Area 1 block off the coast of Mozambique and its interest in seven exploration areas in Kenya. In Mozambique, the parties were able to reach a negotiated position on the amount of capital gains tax due in the absence of regulation. However, the Kenyan government is holding up the sale of Cove Energy’s interests by demanding capital gains tax at a level of 30 per cent on the on the proceeds of the sale before it will grant consent.
Despite Kenya aspiring to a stable regulatory regime like Ghana’s, Shah pointed out that changes being made as new blocks are offered may serve to deter investors. A recent decision that 35 per cent of shares in exploration interests will need to be ceded to Kenyan investors has been “a major point of contention for international investors”, he said, not to mention the effects of the announcement that blocks will only be given to companies that have US$100 million cash on their balance sheet. Finally, Shah discussed provisions in Kenya’s new Finance Act, which stipulates offshore sales of shares with underlying assets in Kenya will be subject to a 10 to 20 per cent tax on gross proceeds.
Focusing on development of gas reserves, Ball gave some final advice to African LNG companies, urging sponsors and international investors to give the domestic market due attention. He shared Houston’s view that investment in East Africa’s domestic gas markets is essential and that investors should apply their creative thinking to the domestic market in addition to the export market from the beginning of the project.
On the other hand, Ball warned that host governments fortunate enough to have gas reserves on their doorstep should seek to avoid creating a subsidised domestic market in hydrocarbons. This was a lesson that Nigeria unfortunately had to learn by itself: public reliance upon fuel subsidies and failure to invest in the industry due to artificially low prices for fuel almost crippled Nigeria’s developing economy. In 2011, Nigeria’s fuel subsidies were costing the state an estimated US$6 billion, draining much-needed finance from rebuilding its transport infrastructure and fixing its failing refineries, not to mention depleting health, education and welfare budgets. The Nigerian government’s removal of all fuel subsidies led to public outrage, protests and nationwide strikes at the beginning of 2012. Whether to retain the fuel subsidies still remains a controversial issue in Nigeria and one best avoided by other developing African nations.
This article was first published in Global Energy Review online news, March 18 2013.
The URL of this tweet is below. Copy it to easily share with friends.
Add this Tweet to your website by copying the code below. Learn more