Liberia Petroleum Sector: background, reform and prospects Media Workshop July 30, 2012
Feb 25, 2016
Liberia Petroleum Sector:
background, reform and prospects
Media Workshop
July 30, 2012
Background of Liberia Oil and gas development program
Reform Process Draft Policy Paper
Outline
Background to Sector
1960s-1972
1940s 1980s 2011
First petroleum exploration awarded to Mr.Jake Simmons
Chevron, Union Carbide, Reeds and Bets and Crystal Oil drilled four wells but did not engage in production of oil as no discoveries were declared.
AMOCO Liberia Exploration Company signed two successive petroleum exploration agreements and drilled three offshore wells but oil deposit was discovered
First Major Oil discovery in Liberia by African Petroleum
Liberia is not producing oil yet. Oil was only discovered for the first time in Feb 2012
We do not know yet if that discovery is in commercial quantities – enough to produce. It must be analyzed first
If after analysis later this year it is proved to be commercial, production could start in 5 to 7 years
Oil is a finite resource – it is difficult to extract and it runs out eventually
Oil can generate huge revenues, but it also carries risks. It can increase corruption, inequality, damage the environment and even cause war
To benefit a country, it must be managed well. It must be produced and regulated properly, and revenues must be spent transparently on development
That requires the right policies, laws and capacity. That is why the Government is reforming the whole sector, starting with a new petroleum policy
Reason for reform
History of ReformDecember
2011January 2012
April 2012
June 2012
August 2012
President Sirleaf requested the Chair of the HTC (NOCAL) to immediately proceed with the reform process
PAG and HTC convened a round table discussion with different stakeholders to officially commence the reform
NOCAL organized retreat for HTC, PAG and civil society organizations in Buchanan to develop underlying principles for the draft policy
HTC principals agreed on the underlying principles and authorized the drafting committee to develop the first draft policy paper
Nationwide ConsultationConducted by HTC subcommittee and other key stakeholders to generate comments from public
Who is leading the reforms
Hydrocarbon Technical CommitteeNOCAL (Chair)
Ministry of Finance and PlanningMinistry of Lands, Mines and Energy
Ministry of LabourNational Investment Commission
Office of the Legal Advisor to the PresidentEnvironmental Protection Agency
Policy and Law Drafting Team Drawn from subcommittee
(Law Reform Comm. (Chair), NOCAL, MOJ, OLA, MLME)
Policy Advisory Group(Norad, Revenue Watch Institute, ACET)
Technical Sub-CommitteeRepresentatives from same bodies as HTCCivil Society Goups (LEITI, LOGI, LipWatch)
A cross-governmental task force is managing the process:
HTC Principals review proposals of Sub-committee, and make final decisions on policies
Sub-committee does main work of deliberating and generating policyDrafting Committee does detailed draftingExternal PAG advises and supports
Outcomes of the Reform
Development of Petroleum Policy Paper
Revision of the New Petroleum Law 2002
Revision of the Act Establishing NOCAL
Establishing Model Production Sharing Contract (PSC)
Development of a Revenue Management Act
Deadline: Sep 2012
Deadline: December
2012Deadline: December
2012
Deadline: March 2013
Deadline: TBC
Consultation Strategy
1. PublicLocal Communities and
publics across Liberia and in the Diaspora
1. Town Hall Meeting (TH)
- Approx 150 people- Short introduction- Facilitated open
discussion
Divide stakeholders into two broad categories:2. Special Interest
Groups• Associations/
Academia• CSOs/Nos
• Youths/students• IOCs and Businesses• Legislature and
caucusesTwo categories of events to match the stakeholder
types 2. Roundtables (RT)
- Approx 30 people- Closed door session- Detailed discussion
Consultation Strategy
Counties1. Nimba2. Lofa
Counties1. Grand Bassa2. Rivercess3. Sinoe
Counties1. Grand Gedeh2. Grand Kru3. Maryland4. River Gee
Team 1
Team 2
Team 3
Team 4
Counties1. Margibi2. Bong
Team 5
Counties1. Bomi2. Cape Mount3. Gbarpolu
Team 6
County1. Montserrado
9 thematic areas
1. Resource Ownership and Maritime Boundary 2. Legal Framework and Institutional Oversight3. State Participation and Fiscal Regime4. Revenue Management & State – NOC Financial
and Tax Arrangements5. Transparency and Accountability6. Safety, Health and Environment7. Licensing and Contracting8. Work Program and Operations9. Local Content
The draft policy
Policy Goal
“To manage Liberia's petroleum sector in a way that ensures that petroleum resources equitably benefit the people of Liberia now and in the future.”
A. Oil shall be used for the maximum benefit of all Liberians
B. The Constitution says that mineral resources under the ground or sea shall be owned by the State, not by individuals. Land owners shall be compensated
C. The oil sector shall be sustainably managed and seek the maximum Liberian participation
D. The policy recognizes territorial boundaries, and seeks to amicably resolve any maritime boundary disputes
E. It shall not exploit a resource on a boundary without an amicable agreement and unitization plan
1. Resource Ownership and Maritime Boundary
A. The sector shall adhere to international leading practice and separate 3 key institutional roles to avoid conflicts of interest
B. NOCAL shall manage the commercial interests of the State and state equity
C. The relevant Ministry (MLME) shall manage policy-making and forming regulations
D. Regulation shall be managed by a new Independent Regulator. This regulator shall be formed over the coming years, and begin at the start of substantial commercial production of oil
E. Until then, NOCAL shall act as regulator along with other regulatory bodies (eg EPA, LMA)
2. Legal Framework and Institutional Oversight
A. The fiscal regime shall create incentives for responsible investors while providing a fair and equitable return to Liberia
B. The fiscal regime shall include ‘progressive’ elements, so that returns to the country increase with overall returns
C. The overall fiscal regime shall be a coherent whole, balancing different revenue streams and using a range of fiscal tools
D. The fiscal regime shall be transparent and predictable, and available to the public
E. The State shall participate in the sector through carried interest
3. State Participation and Fiscal Regime
A. The Goal of revenue management is to use oil revenues for the benefit of ALL Liberians regardless of region or background
B. The government shall put in place mechanisms to facilitate efficient collection of revenues and auditing
C. Revenues shall be put in designated accounts for intergenerational equity, future investment, and stabilizing oil price fluctuations
D. NOCAL shall eventually be funded through its state equity share. Until that share is actualized, the Government shall ensure it has sufficient budget allocations
E. Revenue Management systems shall strike the balance between investment in development needs like education and infrastructure, and saving for the future.
4. Revenue Management & State–NOC Financing
A. The Government shall operate with complete transparency and accountability in the sector
B. The sector shall adhere to the principles of LEITI and regularly publish information about revenues
C. The Government shall encourage active engagement of civil society organizations in monitoring and reporting
D. The legal framework shall establish the right for citizens to seek legal redress in the judicial system
E. The Government shall commission annual audits of petroleum activities by qualified auditing companies awarded by bids
F. Government shall adhere to recognized principles of gender balance and equality
G. All public officials and civil servants within the petroleum sector shall undergo periodic checks for mismanagement.
5. Transparency and Accountability
A. All petroleum operations will require an Environmental and Social Impact Assessment, including a spill contingency plan and an Emergency Preparedness Response Plan
F. At the end of a petroleum activity, the environment shall, to the extent possible, be brought back to its original state
G. It promote using best practices for prevention and rapid emergency response mechanisms designed to mitigate air and water pollution
H. The Government shall review and update waste disposal standards including inspection, monitoring, evaluation and control mechanisms
I. The holders of a license, its parent, subsidiaries, and contractors shall be strictly, jointly and severally liable for pollution, harm to the environment, property or injury to persons resulting from their operations
6. Safety, Health and Environment
A. The Government shall adopt a hybrid form of Petroleum Sharing Contract
B. The Government shall adopt the principles of competitive bidding, pre-qualification, and publish the bid criteria
C. In the case of a reservoir spanning more than one block, unitization shall be applied
D. The government shall set criteria for transfer of license or operatorship including due diligence and payment of transfer fees. Any transfer shall be subject to Government approval
E. The assets of each license shall be managed independently or “ring fenced”
7. Licensing and Contracting
A. The exploration program shall be divided into 3 phases:i. First exploration period for 3 yearsii. Second exploration period for 2 yearsiii. Third exploration period for 2 years
B. Government shall establish effective systems for monitoring and auditing petroleum operations
C. Work plans shall be subject to Government approvalD. Companies must relinquish non-commercially viable areas to
the GovernmentE. All data shall belong to the StateF. All petroleum companies shall be expected to optimize
productionG. Spare capacity in infrastructure shall be made available to
other users
8. Work Program and Operations
The value created in the Liberian economy by systematic development of capacity and capabilities through the utilization of indigenous Liberian human and material resources, and services.”
A. A Liberian-owned company is defined as: “a company or any business venture where a minimum of 25% of its shares is owned by Liberians.”
B. The Government shall create a local content strategy to protect Liberian business interests and develop Liberians to achieve maximum benefits from petroleum resources
C. The Government shall prioritize local and International Oil and Services Companies with proven track records of support for local content during the bidding process
D. Liberian goods and services shall be used in the conduct of petroleum activities to the extent feasible
9. Local Content
A. Government will enact laws, policies and regulations for inclusion in contracts and other legal instruments that will commit international oil companies to:
i. Prioritize employment of qualified and competent Liberian citizens in the oil and gas and other associate industries;
ii. Train Liberians in relevant fields relating to the oil and gas sector;
iii. Contribute to institutions involved in the training of Liberian citizens to enable them to be eligible and meet the requirements for positions in the oil industry
iv. Contribute to community development programs through joint ventures to transfer technology.
B. The Government shall utilize oil revenue to support, develop and expand public and private entities in order to strengthen their capacity in service delivery.
9. Local Content (cont.)
Questions, Discussion, Input
Thank You!!!