Cape Town — Gabon has revised its hydrocarbon code including withdrawing corporate tax in a bid to attract foreign investment to its beleaguered oil sector.
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The biggest draw of the revised code is the removal of corporate tax for oil companies producing in Gabon, the country's petroleum minister, Pascal Houangni Ambouroue, said at the Africa Oil Week event in Cape Town.
"The new hydrocarbon code is to put a new philosophy for Gabon and Africa generally... to improve corporate governance and encourage corporate investment decisions," he added.
Under the new legislation, which will come into place in December, corporate tax will be zero compared with 35% previously and the state will only hold a minimum 20% stake in oil projects.
Ambouroue hopes this initiative, which has "more flexible advantages in tax income," will help inject some much-needed money and enthusiasm in the Central African country.
The revised hydrocarbon code will be competitive for international oil firms with more flexibility depending on the different oil and gas plays and field sizes, the minister said. He also said that the new law has been adjusted to handle greater oil price fluctuations.
OPEC's second smallest producer, Gabon has suffered a drought of exploration and drilling in the past five years, significantly hurting oil output.
Gabonese crude oil output has slumped to around 180,000-200,000 b/d this year from around 250,000 b/d in 2016. Production reached a peak of 365,000 b/d in 1996 but has declined steadily since due to maturing fields. The minister said the current oil production was 200,000 b/d.
Last year, oil majors Shell and Total divested assets in the country in a sign that some international oil companies were losing interest in the country. Gabon, like other West African oil producers, had been hit hard by falling oil prices between 2014 and 2017, with oil accounting for about half of government revenues and 80% of national exports.
NEW LICENSING ROUND
The announcement coincides with the launch of the country's 12th offshore licensing round open which consists of 11 shallow and 23 deepwater blocks.
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The minister said the round will close in April next year and the final list of winners should be announced by November 2019.
Gabonese crude attracts a fairly broad and eclectic customer base, including refiners in Australia, France, Malaysia, and Trinidad & Tobago.
Gabon rejoined OPEC in July 2016 after a gap of more than 20 years. The country's powerful oil workers union ONEP has had longstanding conflicts with the government and oil companies on employment terms and strikes are common, also hurting output.
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