"The most pressing issue for the oil industry in Gabon today are currency exchange controls. The new code does little to clarify or address this issue. UPEGA is collaborating with both the Ministry of Economy and Finance and with the Ministry of Oil to bring clarity on the subject. Our ambition for 2020 is to coordinate with the legislature and reach an agreement to disband currency controls; this would make Gabon very attractive for investors."
Could you give us an overview of UPEGA and its role within the sector?
UPEGA, which stands for Union Pétrolière Gabonaise, is the union that brings together both E&P actors and service providers in the hydrocarbons sector. Currently, we represent 69 members. Among our members we have nine production companies and 11 companies engaged in exploration activities; the rest of our members are service providers and subcontractors. UPEGA’s role is to promote the oil sector and defend the interests of its members, especially when it comes to administrative-related burdens. We are liaising with the government on a wide array of issues from economic regulation to permitting. The association acts as a forum from which to coordinate industry efforts. For the past two years, we have been following closely the development of new exploration projects.
What do you identify as the main challenge facing the oil industry in Gabon?
The most pressing issue for the oil industry in Gabon today are currency exchange controls. The new code does little to clarify or address this issue. UPEGA is collaborating with both the Ministry of Economy and Finance and with the Ministry of Oil to bring clarity on the subject. Our ambition for 2020 is to coordinate with the legislature and reach an agreement to disband currency controls; this would make Gabon very attractive for investors. The oil sector must, whilst bound by global petroleum standards, guarantee a return on local investment. I believe the new code should stipulate not only the laws and regulations that are applicable to Gabon, but also recommendations on how negotiations with the BEAC (Bank of Central African States) could be brokered.
The new oil code of 2019 seeks to attract further investment to the country. How has the industry received the new legislation?
The oil code is attractive, but it still has some way to go before it fully meets industry expectations. As pointed before, the main issue that we find is that the oil code makes no provision for BEAC regulations. There is ambiguity on whether earnings can be repatriated and this discourages investment. Nevertheless, the updates to the fiscal framework are attractive and will encourage exploration. The offshore basin of Gabon continues to remain underexplored and there is great potential for discoveries. A few companies have come across gas in the area and the potential for oil discovery is there. There are also great opportunities on conventional onshore fields. Gabon still has vast unexplored assets. We need a stable and predictable fiscal environment. If a contract is signed, both parties should be reassured of their mutual commitment. With that being said, the oil code is no longer a deterrent to the extent it used to be in the past.
What are the most important needs of the industry vis-à-vis the government?
Stability and predictability are two very important aspects required to encourage investment. We want to have a stable framework for business so that contracts are adhered to and the environment allows for a close following of legislation. Matters of taxation in the oil business are key because the industry represents an important source of government revenue. Nevertheless, it is important that the rules remain fixed in order to avoid disrupting deals whose profitability might be endangered from updates to fiscal policy.
How is the under-developed infrastructure in Gabon impacting the industry?
The lack of road infrastructure is a very pressing issue. Infrastructure projects have not been devised in consideration of the heavy rainfall that challenges constructions in Gabon. This has taken a toll on the sustainability of existing production and exploration projects because it keeps operational costs high. UPEGA is working with the government to encourage more and better development. Gabon exited the 2015 crisis and is looking ahead to the future. The development of infrastructure in the way of roads and ports will play a central part in the path towards economic development.
What are your expectations for 2020?
The objective presiding our 2020 agenda is to find an agreement with the BEAC to resolve the current exchange regulation. We are determined to attract more oil companies to Gabon and thus we take all the steps to ensure greater visibility for the country. Oil activities have picked up in recent months, and locals are relying once again on the sector for employment. This is of key importance to the economy of the country. 30% of all jobs were lost between 2015 and 2019 as a result of the crisis. With the boost in the oil sector, we will help reduce unemployment.