Erik Watremez, partner at EY's Gabon office, talks to TOGY about Gabonese oil and gas regulations on corporate tax and local content as well as their impact on the industry. He also addresses the impact of low oil prices on upstream strategies and the industry's reaction to the possibility of persistent low prices.
Do you agree with International Monetary Fund managing director Christine Lagarde’s analysis that prices could remain under USD 50 for a couple of years?
Global events and tension are affecting oil production in Iran, Libya, among other countries. Things may change once the conflicts stop.
Demand is also a factor. If China is not doing well, it damages everything. No one in the industry plans on oil prices recovering to USD 100 per barrel or more in the next two years. They plan to save more and keep a low profile.
How effective is the 35-percent corporate tax for oil and gas companies in Gabon?
This tax brings stability. Companies know the rate and take it into account when deciding to invest by including it in their business model. If they realise it’s unprofitable, they might try to negotiate, but without disturbing the competition, otherwise the state would lose credibility.
The big issue is not the 35% in itself, but all the constraints in the Hydrocarbons Code make it difficult for some people. However, as everything is stated in the code, from local content to site rehabilitation and pollution, there are no surprises.
Do you think a local content regulation of 80% is reasonable for companies in Gabon?
Companies cannot immediately reach 80%. It is a good goal to have in mind, as it encourages international companies to invest in the development of the Gabonese people.
Likewise, oil and gas companies in Gabon sign a profit-sharing contract with the government. The Gabonese government can either agree or disagree with an operator’s budget, development and investment plan. The ultimate sanction is for the government to take control of the permit. It’s really a partnership. Companies investing in Gabon do so for the long term.
For more news and features on Gabon, click here.
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