Background

• Côte d'Ivoire is the westernmost of eleven nations bordering the recently identified oil-rich deposits underlying the Gulf of Guinea in the south Atlantic ocean along the continent's eastern coast. The country is estimated to have recoverable oil reserves of 100 million barrels and gas reserves of 1.1 trillion cubic feet. However, Côte d'Ivoire's current oil production is relatively small—at roughly 40,000 bpd.
• Oil resources were originally discovered in Côte d'Ivoire in the 1970s. Several international oil companies secured licences to develop and produce fields until the late 1980s when rising production costs caused the IOCs to terminate their operations. The IOCs returned to Côte d'Ivoire in the 2000s as technological innovation reduced costs of exploration and production. Recent discoveries by Total, Tullow and Rialto, amongst others have caused excitement and the Government has announced it considers production could be increased to 200,000 bpd in the next five years.
• This note provides a summary of the legal and regulatory regime for upstream operations.

Société Nationale d'Opérations Pétrolières (Petroci)

• The state supervises and participates in the oil and gas industry through the national oil company, Petroci Holding (a wholly state-owned company) and its three subsidiaries: Petroci Exploration-Production, responsible for upstream hydrocarbon activities; Petroci-Gaz, responsible for development of the gas sector; and Petroci Industries-Services, responsible for all other related services. Petroci's functions include the development and maintenance of the main database on Cote d'Ivoire's oil assets and participating in offshore oil and gas ventures operated by IOCs (usually through a carried minority interest of between 5% and 15%).

Key legislation and treaties

• The key legislation governing the oil and gas industry in Côte d'Ivoire is the Ivorian Petroleum Code, Ordinance 96-733 of 19 September 1996 relating to the application of the Petroleum Code and the Investment Code. Also relevant to upstream operations are the Tax Code, the Labour Code and the Uniform Act of the OHADA Treaty relating to commercial companies (between 16 mainly francophone African nations).
• Under the Petroleum Code, all hydrocarbons on land, in the exclusive economic zone and in the continental shelf and territorial sea belong to the state. The Petroleum Code regulates the award of petroleum rights to companies under oil contracts by the state. Government approval is required for the award of any contract giving rights to conduct petroleum operations and for the appointment of an operator. Transfers of interests, rights and obligations in respect of petroleum operations are also subject to receiving prior government approval (in the form of a Ministerial Order) to the transfer.
• Côte d’Ivoire is a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York" Convention) of 1958.

Award of rights to conduct petroleum operations

• Rights to conduct upstream petroleum operations are awarded and regulated through production sharing contracts (PSCs) and by some service contracts between the Government and a contractor. Different fiscal regimes apply to companies undertaking exploration and production under a PSC and service contractors. This note only covers PSCs as these are the most common contracts currently used by the Government. The Government is a party to the PSC with the exploration and production companies. Both the minister in charge of petroleum activities and the minister of finance must sign on behalf of the Government.
• The fiscal regime applicable to the petroleum industry in Côte d'Ivoire is mostly contained in the PSC, but also consists of the Ivorian tax law and the Ivorian petroleum code.
• The exploration and production companies finance all exploration and development costs and bear all costs and risks in the event that no oil and gas is found under a PSC. The company carries Petroci's share of the costs. The company is entitled to recover its exploration and development costs from a portion of the produced petroleum agreed with the Government (cost oil); the remaining part (the profit oil) is shared between the Government and the companies. The Government share of profit oil is determined by the terms of the relevant PSC and usually increases in line with specified increases in annual production. Although, there is no specific quantity or percentage required by law.
• The terms of the Ivorian PSC, usually require the companies to pay the following to the Government:
  • bonuses, typically a signature bonus paid at the signing of the contract and a bonus related to quantities of hydrocarbons produced, payable after the last day of the production tests;
  • an annual surface rental tax calculated by reference to the contract area; and
  • royalties paid in cash or in kind on the value of the hydrocarbons produced.

Tax incentives

• Tax incentives are granted under the Petroleum Code for enterprises involved in petroleum activities. The Petroleum Code provides an exemption from VAT and additional tax on imports and purchases to companies involved in exploration or production of oil/gas, which is also extended to their subcontractors providing petroleum-specific services. The tax exemption applies to transactions or purchases directly and exclusively assigned to petroleum.
• The Code also provides specific rules concerning calculation of corporate income for tax purposes. Non-exempt income is subject to a corporate income tax at the rate of 25%.

Investing in Cote D'Ivoire

• Cote d’Ivoire is returning to peace and political stability after an attempted coup in September 2002 resulted in a civil war and a nine-year political/military crisis. The country is now a member of and has been compliant with the Extractive Industries Transparency Initiative since 22 May 2013. However, many foreign investors still see corruption, especially in the judicial system, as a major impediment to investment in Cote d’Ivoire.
• In addition, some foreign investors have described extraordinary difficulty and lengthy delays in establishing investment in Cote d’Ivoire.
• US sanctions are in place in respect of Specially Designated Persons in Côte d'Ivoire, many of whom are associated with the ousted political regime and UN sanctions are also in place in respect of named individuals. The EU sanctions imposed upon Petroci have been lifted.