Angola Upstream Fiscal and Regulatory Report – Government Introduces Incentives to Spur Upstream Recovery

Pages: 40 Published: June 29, 2018 Report Code: GDGE0142UFR

The overall structure of Angola’s upstream fiscal and regulatory regime has remained relatively stable since a legislative overhaul in 2004. However, faced with declining production, the government has recently introduced a number of significant incentives aimed at promoting new developments, particularly for gas and marginal fields. It is expected that the government will continue it its efforts to drive recovery in the sector, including through the opening of new licensing opportunities. The government has stated that a new licensing round is possible in late 2018 or early 2019.

“Angola Upstream Fiscal and Regulatory Report – Government Introduces Incentives to Spur Upstream Recovery”, presents the essential information relating to the terms which govern investment into Angola’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Angola’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Angola

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Angola

Reasons to Buy

Understand the complex regulations and contractual requirements applicable to Angola’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 3

1.2. List of Figures 4

2. Regime Overview 5

3. State Take Assessment 9

4. Key Fiscal Terms – Production Sharing Agreements 11

4.1. Royalties, Bonuses and Fees 11

4.1.1. Bonuses and Contributions 11

4.1.2. Surface Fees 11

4.1.3. Training Fee 12

4.2. Cost Recovery 12

4.2.1. Cost Recovery Limit 12

4.2.2. Recoverable Costs 12

4.2.3. Investment Allowance (Uplift) 12

4.3. Profit-Sharing 13

4.3.1. Rate of Return Mechanism 13

4.3.2. Cumulative Production Mechanism 14

4.3.3. Price Cap Excess Fee 15

4.4. Natural Gas 16

4.5. Direct Taxation 16

4.5.1. Petroleum Income Tax 16

4.6. Indirect Taxation 16

4.6.1. Consumption Tax 16

4.6.2. Customs Duties and Fees 17

4.7. Incentives for Marginal Developments 17

4.7.1. Criteria and Application 17

4.7.2. Incentivized Fiscal Terms 17

4.8. State Participation 18

5. Key Fiscal Terms – Risk Service Agreements 19

5.1. Royalties, Bonuses and Fees 19

5.2. Payment in Kind 19

5.3. Taxation 20

5.3.1. Petroleum Production Tax (PPT) 20

5.3.2. Petroleum Transaction Tax 20

5.3.3. Petroleum Income Tax 20

5.3.4. Deduction and Depreciation 21

5.3.5. Production Allowance 21

5.3.6. Investment Allowance 22

5.4. Incentives for Marginal Developments 23

6. Key Fiscal Terms – Concession Agreement 24

6.1. Royalties, Bonuses and Fees 24

6.1.1. Bonuses and Fees 24

6.1.2. Petroleum Production Tax 24

6.2. Taxation 25

6.2.1. Petroleum Income Tax 25

6.2.2. Petroleum Transaction Tax 25

6.2.3. Deductions and Depreciation 25

6.2.4. Allowances for Petroleum Transaction Tax (PTT) 25

6.3. Incentives for Marginal Developments 26

6.4. State Participation 27

7. Regulation and Licensing 28

7.1. Legal Framework 28

7.1.1. Governing Law 28

7.1.2. Contract Type 29

7.1.3. Title to Hydrocarbons 29

7.2. Institutional Framework 30

7.2.1. Licensing Authority 30

7.2.2. Regulatory Authority 30

7.2.3. National Oil Company 30

7.3. Licensing Process 31

7.3.1. Licensing Rounds 31

7.3.2. Prequalification 31

7.3.3. Bidding 31

7.4. License Terms 32

7.4.1. Duration 32

7.4.2. Work Obligations 32

7.4.3. Purchasing Rights 33

7.4.4. Local Content 33

7.4.5. Management of Operations 35

8. Outlook 36

9. Appendix 37

9.1. References 37

9.2. Contact Us 39

9.3. Disclaimer 39

List of Tables

1.1. List of Tables

Table 1: Regime Overview 5

Table 2: Angola, Additional Contributions (US$ million), Blocks 20 and 21 11

Table 3: Angola, Profit-Sharing Framework, Block 20/11 13

Table 4: Angola, Profit-Sharing Framework, Block 05/06 14

Table 5: Angola, Profit-Sharing Framework, Blocks12 and 13 (2008) 14

Table 6: Angola, Profit-Sharing Framework, 2015 Onshore Model (Blocks CON 1, CON 5, KON 8, KON 9, KON 17) 14

Table 7: Angola, Profit-Sharing Framework, 2007/8Onshore Model (Cabinda Central Block) 15

Table 8: Angola, Profit-Sharing Framework, 1979 Model (Block 2) 15

Table 9: Angola, RSA Payment in Kind, Block 9 19

Table 10: Angola, RSA Payment in Kind, Block 21 20

Table 11: Angola, Production Allowance, Block 9 21

Table 12: Angola, Production Allowance, Block 21 22

Table 13: Angola, Production Allowance, Block 48 22

Table 14: Angola, Production Allowance under Marginal Development Regime 23

Table 15: Angola, Petroleum Production Tax Rates, Concession Agreements 24

Table 16: Angola, Investment Allowance (Deduction from PPT) 26

Table 17: Angola, Production Allowance (Deduction from PPT) 26

Table 18: Angola, Production Allowance under Marginal Development Regime 27

Table 19: Angola, Representative Contract Periods 32

Table 20: Angola, Local Procurement Regimes (Decree 127/03) 34

Table 21: References 37

List of Figures

1.2. List of Figures

Figure 1: Regime Flow Chart – Production Sharing Agreements 6

Figure 2: Regime Flow Chart – Risk Service Agreements 7

Figure 3: Regime Flow Chart – Concession Agreements 8

Figure 4: Angola, Indicative NPV10/boe, IRR and State Take Comparison – Regional 9

Figure 5: Angola, Indicative NPV10/boe, IRR and State Take Comparison – Regional 10

Figure 6: Angola, Institutional Framework 30

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