Petroleum Africa
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Friday, July 26, 2013
LONDON, UK (GlobalData), 25 July 2013 – Liberia hopes to increase investment in its upstream oil & gas sector by improving transparency and remodeling the legislation governing the sector, states research and consulting firm GlobalData.
According to the company’s latest report*, a key aim of the new reforms will be to bring the regulations outlined in the New Petroleum Law of 2002 up to date with current practices – increasing transparency of Production Sharing Contracts (PSCs) in the process.
John McCormack, GlobalData’s lead analyst for Sub-Saharan Africa, explains: “Bringing legislation and individual PSCs in line with each other looks set to be part of a more general trend towards better regulation within Liberia’s upstream oil and gas sector.
“Many policies have already been implemented to promote accountability, and the combination of the continued implementation of the Extractive Industries Transparency Initiative (EITI) and development of a Revenue Management Act are likely to further promote transparency and responsible regulation.”
There have been significant differences between the terms set out in the New Petroleum Law of 2002 passed under the government of Charles Taylor, now convicted of war crimes, and those ratified in PSCs since he was forced to step down – particularly in the provision for royalties. The 2002 law sets offshore royalties at 12–15%, which would not be attractive to most investors, while the majority of current PSCs either have no provision for royalties, or set them at a rate of 5% of gross production. GlobalData believes the new royalty range for offshore hydrocarbons will be set at 0–5%.
With these features leading the regulation restructuring, McCormack believes Liberia’s upstream investment prospects will only strengthen:
“The investment climate for Liberia’s upstream oil and gas industry looks set to improve in the foreseeable future. As the government works to rationalize legislation for the country’s fiscal terms, the base regime looks set to become more favorable, reflecting the terms already in force under current PSCs and we may see even more attractive terms offered for higher-risk areas,” says GlobalData’s analyst.
“These moves should create more predictable terms of investment and more adequately fulfill the mission of promoting exploration – which will be the government’s focus in the medium term at least. Given that major oil companies such as ExxonMobil and Anadarko have already invested in the country’s PSCs, the improvements currently in the pipeline could provide a significant boost for the sector.”
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