Energy: Oil & Gas 2020

Last Updated August 10, 2020

Senegal

Law and Practice

Authors



Houda Law Firm was founded in 1977 in Dakar (Senegal) and has a staff of 42, half of which are specialised and highly qualified lawyers and legal advisers working to assist clients such as private companies, public entities and individuals, with all of their legal needs in Senegal and WAEMU (West African Economic and Monetary Union) member states. The firm opened a branch in Abidjan, Ivory Coast, which made it the first foreign law firm from the WAEMU region to establish in the country. The team works on matters related to investment, employment law, taxation, oil and gas, mining law, business litigation and arbitration. The firm is in the process of finalising ISO 9000-2015 Certification.

According to the provisions in Article 5 of Law No 2019-03 of 1 February 2019 on the Petroleum Code (the Petroleum Code or PC), all petroleum resources belong to the Senegalese people.

The Minister in charge of Hydrocarbons and the Société des Pétroles du Sénégal (PETROSEN), which is the national petroleum company, are the governmental bodies responsible for the implementation of the Hydrocarbons Policy, in addition to the Institution for the Promotion of the National Sedimentary Basin. They also represent the interests of the State in the hydrocarbons sector (Articles 3 and 4, PC).

However, in October 2016, the government created by decree the Oil and Gas Strategic Policy Committee (Comité d’Orientation Stratégique du Pétrole et du Gaz – COS-PETROGAS), whose purpose is to support the optimal exploitation of oil and gas resources for the benefit of the population.

The Minister in Charge of Hydrocarbons

This is the supervisory entity in charge of the implementation and monitoring of the government's policy for the oil and gas sector. According to the Petroleum Code, the Minister is responsible for the operations of the oil and gas sector and is in charge of:

  • granting exploration and exploitation permits;
  • authorising all construction works for the transport of oil and gas;
  • opening oil and gas exploration zones to competition;
  • accepting or refusing requests for oil exploration zones; and
  • signing oil agreements, including production sharing contracts, following the recommendations of the Minister of Finance on financial and fiscal requirements.

The National Petroleum Company Known as PETROSEN

PETROSEN is responsible for implementing the oil policy of Senegal. In collaboration with the Hydrocarbons Directorate, PETROSEN prepares and negotiates all oil contracts with petroleum companies that apply for mining titles or service contracts. These companies subsequently negotiate and sign a Partnership Agreement with PETROSEN.

In addition, it ensures the technical follow-up and control of oil operations related to the Directorate of Hydrocarbons.

COS-PETROGAS

This committee is responsible for providing strategic guidance and defining and overseeing policies regarding the development of hydrocarbons. It is integrated within the Office of the President of the Republic of Senegal. Its main roles and responsibilities include defining, monitoring and verifying the implementation of the national oil and gas policy, implementing hydrocarbon project development programmes, approving local content, mobilising funds and ensuring compliance with good governance practices.

http://www.energie.gouv.sn

http://www.cospetrogaz.sn/concertation/

The Petroleum Code provides that the State will undertake oil operations on its own account, either directly or through the national oil company, or through several persons or companies of its choice.

To this end, in May 1981 Senegal established the national petroleum company known as PETROSEN, with a 99% State participation.

PETROSEN is under the supervision of the Ministry of Energy and is charged with the implementation of Senegal's oil and gas policy. It is active in the upstream, midstream and downstream oil and gas sectors. In the upstream oil and gas sector, its mission is to evaluate the country's hydrocarbon resources, to promote the expansion of these resources by international petroleum companies, to supervise oil exploitation and to monitor compliance with contracts. PETROSEN is therefore in charge of the elaboration and negotiation of all oil agreements that are signed by the Ministry of Energy and the petroleum companies. PETROSEN is entitled to a contributory participation in any exploitation project within a range of 10%, up to the maximum rate stipulated in the petroleum agreements (generally 20%). To this end, it is a signatory to the Joint Exploitation Agreement (JOA) concluded with the oil companies. In the downstream oil and gas sector, PETROSEN is a strategic player in the refining process.

PETROSEN's website is currently "under development": www.petrosen.sn.

The Petroleum Code has reconsidered all the positive aspects of the previous code of 1998 and has made other improvements, regarding the following in particular:

  • the transparency requirements in the governance of extractive resources, in accordance with the Extractive Industries Transparency Initiative (EITI) standard;
  • the definition of a new regulation on oil operations to be annexed to the 2019 code;
  • the strengthening of regulations relating to the transport from production sites to areas of high consumption, and to the storage and wholesale marketing of pre-processed or liquefied oil and gas products (midstream), in particular by introducing authorisation applications for natural gas storage and liquefaction operations;
  • taking into account the law on the distribution of income from the hydrocarbons exploitation;
  • the extension of provisions relating to local content to allow private national investors with technical and financial capacities to participate in oil risks and operations; and
  • strengthening environmental regulations in line with international oil industry norms and practices.

Moreover, on 24 January 2019 the national assembly adopted Law No 2019-04 relating to the local content in the hydrocarbons sector. This Law refers to all the initiatives taken to promote the use of national goods and services, as well as the development of the participation of national labour, technology and capital in the entire value chain of the oil and gas industry.

However, some fields related to the oil sector, namely labour, environment and health and safety, are governed by specific regulations that are independent of the Senegalese Petroleum Code.

The most important legal source for the upstream oil industry is the Petroleum Code and its application decree, although the decree is not yet available.

According to Article 3 of the Petroleum Code, the Minister in charge of Hydrocarbons is the competent authority to issue contracts regarding petroleum.

Subject to compliance with the provisions of the Petroleum Code, the State may authorise one or more natural or legal persons of its choice to undertake the first upstream phases through a prospecting authorisation or an exploration permit.

The hydrocarbon prospecting authorisation grants its holder the non-exclusive right to carry out preliminary hydrocarbon prospecting work, within the limits of its zone, excluding drilling at a depth of more than 200 m, unless otherwise provided for in the prospecting authorisation (Article 15, PC).

As the rights associated with the prospecting authorisation are subject to the limit of non-exclusivity, several prospecting authorisations or a mining title may thus be granted concurrently in the same area (Article 16, PC).

The hydrocarbon exploration authorisation grants its holder the exclusive right to carry out all work, within the limits of its zone, including drilling, for the purpose of searching for and discovering hydrocarbon deposits, in accordance with the terms of the petroleum contract attached to said authorisation (Articles 17 and 18, PC).

Hydrocarbon deposits are exploited in the territory of the Republic of Senegal by means of a temporary exploitation authorisation granted by order of the Minister in charge of Hydrocarbons, or an exclusive exploitation authorisation granted by decree (Article 26, PC).

The provisional operating authorisation issued by the Minister in charge of Hydrocarbons authorises one or more legal entities to operate the productive wells on a temporary basis for a maximum period of six months, during which it continues the delimitation and development of the predetermined deposit (Article 27, PC).

The exclusive exploitation authorisation issued by the State allows one or more legal persons to carry out hydrocarbon exploitation activities in a given area on an exclusive basis – the exclusive exploitation zone. Any commercial discovery of hydrocarbons made by the holder of a hydrocarbon exploration licence shall give him the exclusive right, in the event of an application before the expiry of that licence, to be granted an exclusive exploitation licence covering the area of the commercial discovery.

The exclusive exploitation authorisation shall be granted to the holder for an initial period not exceeding 20 years. Upon the expiry of that initial term, the authorisation may be renewed once only, by decree, at the request of the contractor, for an additional period of not more than ten years. Renewal will not be automatic (Article 29, CP).

The granting of mining titles for hydrocarbons is accompanied by the signature of an oil contract that sets out the rights and obligations attached to the mining titles for hydrocarbons. The holder of an oil contract is subject to the payment of a signature bonus, to the benefit of the State, which is not recoverable in respect of petroleum costs and corporation tax, the terms and conditions of which are set out in the contract (Article 7, CP).

The oil contract must take the form of a production sharing contract or a service contract.

On the one hand, the service contract constitutes a contract between the State, via the national oil company (in this case PETROSEN) to which is delivered the mining titles of hydrocarbons necessary for the oil operations, and a contractor who carries out activities in an exploration zone or one or more exploitation zones, in the name and on behalf of the State, at its exclusive risk and financial and technical expenses. In the event of the discovery of a commercial deposit, the contractor will receive a specified or determinable amount as remuneration, payable in cash or in kind.

On the other hand, a production sharing contract allows the contractor to carry out, in the name and on behalf of the State, activities in a given area at its exclusive risk and financial and technical expenses. It receives in remuneration a portion of the production from any commercial hydrocarbon deposit located within each exploitation zone for which it has been granted an exploitation permit.

Depending on the case, the production sharing contract may take the form of an exploration and production sharing contract or an exploitation and production sharing contract (Article 2, PC).

The allocation of blocks opened by decree to oil operations on which hydrocarbon mining titles may be granted is carried out by means of a call for tenders or direct consultation. The terms and conditions of implementation are laid down by decree. The petroleum contract for the allocation of blocks is negotiated by the Minister in charge of Hydrocarbons (Article 12, CP).

Authorisation for hydrocarbon prospecting is granted by order of the Minister in charge of Hydrocarbons in areas not covered by a hydrocarbon mining title for a maximum period of two years.

Authorisation for hydrocarbon exploration is granted to the holder by decree for an initial period not exceeding four years.

At the request of the holder, the hydrocarbon exploration licence may be renewed, at most twice, by decree, for a period not exceeding three years each time. At the end of the initial period or of the first renewal and by way of exception, the holder may benefit, by decree, from an extension not exceeding one year, provided that he has begun work and has provided the required technical evidence. The second renewal period may be extended, by decree, for the time required to continue work on the evaluation of a discovery (Article 19, PC).

The provisional operating permit is issued by the Minister in charge of Hydrocarbons for a period of six months. The provisional exploitation authorisation becomes automatically null and void upon the expiration of the exploration authorisation, unless an application for an exclusive exploitation authorisation is filed. The procedures for processing applications for provisional exploitation authorisations and for withdrawal shall be laid down by decree (Article 27, CP).

Moreover, the granting of the provisional or exclusive exploitation authorisation is subject to a nationality criterion, since such authorisations are issued only to one or more legal persons under Senegalese law (Article 7, CP).

The production sharing contract, attached to the exploration authorisation, is transmitted by the Minister in charge of Hydrocarbons to the Minister in charge of Finance, for advice on the fiscal and customs financial provisions. The latter shall be deemed to be in conformity if no action has been taken on the request by the end of a period of 21 days from the date of receipt of the request. The production sharing contract shall be signed by the Minister responsible for Hydrocarbons, PETROSEN and the applicant(s) for the hydrocarbon exploration licence. The contract is approved by decree and published in the Official Gazette (Article 20, CP).

Typical tax conditions for upstream licences include the following:

  • the payment of a signing bonus for the benefit of the State – this is applicable to any holder of an oil contract, which stipulates the terms and conditions;
  • the payment of processing fees, in a single payment of USD50,000, which is non-refundable and non-recoverable as oil costs. These fees are due for any application for the granting, renewal or extension of mining titles for hydrocarbons;
  • the payment of a superficial rent – provided for by Article 47 of the 2019 Petroleum Code, the superficial rent is due as from the signature of the petroleum contract, the renewal of the mining title of hydrocarbons or the extension of its period of validity. The terms and conditions of its recovery are provided for in the oil contract;
  • social expenditure commitments – during the exploration and production period, oil contract holders are subject to social expenditure commitments for the benefit of the population, which are not recoverable. The amounts of these funds are fixed in the oil contract concluded with the holder; and
  • minimum research expenditure obligations – the holder of a hydrocarbon exploration authorisation must undertake to carry out a minimum programme of exploration work provided for in the petroleum contract during the initial period and, if applicable, during each renewal period. Exploration and production sharing contractsmay provide for expenditures of USD37 million for the initial exploration period, USD20 million for the first renewal and USD20 million for the second renewal. These amounts may vary. Also, the holder puts in place a guarantee from an internationally renowned bank covering the minimum work commitments for the exploration period.

The tax regime applicable to income from upstream transactions is as follows:

  • Corporate income tax – according to Article 43 of the Petroleum Code, the holder of an oil contract and its associated companies are subject to corporate income tax on their oil revenues. The corporate tax rate is set at 30% and is not recoverable as oil costs. The resulting tax is calculated separately for each prospecting, exploration or exploitation zone. Since the Amending Finance Act for 2019 came into force, capital gains resulting from the transfer of social rights abroad relating directly or indirectly to hydrocarbons in Senegal are subject to corporate income tax.
  • Other taxes and duties – upstream operations carried out by the holders of mining titles of hydrocarbons and the companies associated with them bear the other taxes and duties provided for in the General Tax Code, under the conditions of ordinary law.
  • The royalty on the value of hydrocarbons produced – under the terms of Article 42 of the Petroleum Code, the holder of a provisional or exclusive authorisation to exploit hydrocarbons is subject to the payment of a royalty calculated on the basis of the total quantities of hydrocarbons produced (crude oil and natural gas) in the area of exploitation and not used in oil operations. The rates are as follows:
    1. liquid hydrocarbons exploited onshore: 10%;
    2. shallow offshore liquid hydrocarbons: 9%;
    3. deep offshore liquid hydrocarbons: 8%;
    4. ultra-deep offshore liquid hydrocarbons: 7%; and
    5. gaseous hydrocarbons exploited onshore, shallow offshore, deep offshore and ultra-deep offshore: 6%.
  • The new Petroleum Code also provides for an export tax of 1% on production intended for export.

Exemptions

The Petroleum Code and the General Tax Code provide for a number of exemptions and other tax and customs benefits, such as an exemption from the Lump-sum Contribution payable by the employer, the Lump-sum Minimum Tax, the Land Tax, and the Local Economic Contribution. There is also an exemption from VAT on imports, supplies and services carried out for the benefit of the holder of the petroleum title or his subcontractors.

With the exception of the statistical royalty and community levies, the holder of an oil contract and his subcontractors are exempt from all customs duties and taxes during exploration, evaluation and development periods, including the levy of the Senegalese Shippers' Council (COSEC), for the importation of certain goods listed in Article 49 of the Petroleum Code. They also benefit from the suspension of import duties and taxes for goods that can be re-exported or transferred after use.

PETROSEN acts in its own name or on behalf of the State in the field of hydrocarbons. Its tasks include the following, among others:

  • to undertake, at the request and on behalf of the State, activities of prospecting, research, exploitation, transport and marketing of liquid and gaseous hydrocarbons in their raw state, alone or jointly with any other company, subsidiary or not, within the framework of an association, or any form of possible grouping; and
  • to hold, at the request and on behalf of the State, the State's interests in hydrocarbon deposits and in the capital of companies holding oil contracts (Article 4, CP).

Regarding this last point, the State, through PETROSEN, reserves the right to participate in all or part of the oil operations, by associating itself with the holders of an oil contract or an exploration licence.

The modalities of participation are specified in the petroleum contract or the prospecting authorisation. However, the shares of the national petroleum company are of a minimum of 10%, carried by the other co-holders of the mining title of hydrocarbons, in exploration and development phases, including redevelopments, with an option to increase this participation up to an additional 20% in development and exploitation phases not carried by the other co-holders of the mining title of hydrocarbons (Article 9, CP).

The Petroleum Code provides for the possibility for national private investors with technical and financial capacities to participate in oil risks and operations as well as in all subcontracting, supply and service contracts relating to oil operations.

Senegalese companies will also be able to benefit from the oil operations as oil contract holders, and companies working on their behalf under local content provisions are subject to:

  • a technology transfer through an annual training programme defined in the applicable oil contract; and
  • a preference for all contracts for construction, supply or the provision of services, under equivalent conditions in terms of quality, quantity, price, delivery and payment terms.

Senegalese employees with equal qualifications may be recruited on a priority basis for carrying out oil operations on Senegalese territory.

In addition, oil contract holders must provide a security deposit to a first-rate financial institution for the rehabilitation and restoration of the sites, under the conditions set out in the oil contract (Article 59, CP).

All these provisions are developed by Law No 2019-04 dated 24 January 2019 relating to local content in the hydrocarbons sector.

The mining title for hydrocarbons shall be issued exclusively to legal persons demonstrating the required technical and financial capacity (Article 10, CP).

Any commercial discovery of hydrocarbons made by the holder of a hydrocarbon exploration authorisation shall give said holder the exclusive right to be granted an exclusive authorisation to exploit the area of the commercial discovery, if applied for before the expiry of the hydrocarbon exploration authorisation (Article 29, CP).

The application for an exclusive exploitation authorisation must be accompanied by a plan for the development and exploitation of the commercial discovery in accordance with the model of the development plan report defined by decree. The development plan submitted by the operator is approved by order of the Minister in charge of Hydrocarbons.

The holder of an exclusive exploitation authorisation shall also undertake to diligently carry out development work on the commercial discovery concerned, and to exploit the discovery in accordance with international standards and practices in use in the oil industry and in accordance with the petroleum operations regulations in force in Senegal (Article 32, CP).

Where the limits of a commercial deposit straddle several exploration authorisations, the holders who each have their own exclusive exploitation authorisation on the part of the deposit zone shall sign a unitisation agreement, which shall be communicated to the Minister in charge of Hydrocarbons with the related programmes within 15 days from the date of signature. The holders of exploitation authorisations have a period of one year to draw up a joint exploitation programme (Article 60, CP).

The holder of an exploration authorisation may waive his rights at any time, in whole or in part, subject to giving three months' notice and in accordance with the terms of the production sharing contract.

The holder must carry out any abandonment work required to protect the environment. If the contractor renounces his rights to the entire exploration area without carrying out the entire minimum work programme, the contractor shall, within 15 days of the renunciation, pay compensation to the State for the cost of the work yet to be carried out during the current exploration period.

The holder of an exclusive operating licence may waive it in whole or in part, after giving one year's notice. In the event of a partial or total waiver, the holder of a production sharing contract shall carry out the abandonment work. It shall take all necessary measures to safeguard the environment in accordance with the environmental and social impact assessment (Article 33, CP).

The products resulting from the exploitation of hydrocarbon deposits are intended either for local consumption or for export. Under the conditions set out in the oil contract, holders of exclusive exploitation authorisations must allocate, as a matter of priority, the proceeds from their exploitation to cover the needs of the country's domestic consumption. In this case, the transfer price reflects the international market price (Article 59, CP).

The Petroleum Contract may include a clause to stabilise the legislative and regulatory context on the date of entry into force, allowing the contractors and the State to require either the non-application of financially aggravating new legal provisions, or an adjustment of the contractual provisions. This stabilisation clause does not cover additional costs caused by a change in regulations concerning the safety of persons, environmental protection, the control of oil operations or labour law, unless such changes are not in conformity with international practice or are applied to a contractor in a discriminatory manner (Article 72, CP).

Under the conditions laid down in the Petroleum Code, mining titles for hydrocarbons are transferable and transmissible to legal entities that have the technical and financial capacity to carry out oil operations. Deeds of assignment or transfer of mining titles are transmitted to the Minister in charge of Hydrocarbons for approval.

In the transfer of a participating interest of one of the members of the contracting group to a company affiliated to said member, only a prior declaration addressed to the Minister in charge of Hydrocarbons is required (Article 61, CP).

Any transfer of shares of a member of the contracting group or of a company directly or indirectly controlling a member of the contracting group shall be treated as a transfer of interests for the purposes of this Code if it results in a change of control, unless the change of control is the direct result of a transaction on an official stock exchange. Any change of control shall be notified to the Minister in charge of Hydrocarbons within ten days of its effective date (Article 62, CP).

There are no legal or regulatory restrictions on production rates. However, there are restrictions on the allocation of production in the sense that the obligation to supply the local market specified in Article 59 gives priority to the local market for the products of exploitation by holders of exclusive authorisations.

The legal framework applicable to the midstream and downstream sectors in Senegal is regulated by Law No 2020-06 of 7 February 2020 on the Gas Code (the Gas Code) and by Law No 98-31 of 14 April 1998 relating to the activities of importing, refining, storage, transporting and distributing hydrocarbons.

The Petroleum Code of 2019 only governs the upstream activities of the oil and gas sector. Only a few midstream provisions relating to transport are included in this code.

Hydrocarbons

The activities of importing, refining, exporting, storing, transporting, distributing and marketing hydrocarbons are regulated by Law No 98-31 of 14 April 1998.

The provisions of the Petroleum Code also specify conditions of nationality and capacity to access to the Senegalese midstream and downstream market.

The hydrocarbon transport authorisation provided for in Article 35 of the Petroleum Code is issued by order of the Minister in charge of Hydrocarbons, exclusively to any legal entity under Senegalese law that can demonstrate the technical and financial capacity to carry out hydrocarbon transport activities.

The Gas Sector

The Minister in charge of Hydrocarbons implements the policy defined by the Head of State for activities in the intermediate and downstream segments of the gas sector (Article 4, Gas Code).

A licence must be obtained in order to carry out import, export, re-export, aggregation, transformation, storage or supply of natural gas, and for the transport and distribution of liquefied and compressed natural gas (Article 7, Gas Code).

This licence is also granted only to any legal Senegalese entity that can demonstrate the necessary technical and financial capacity.

The licence is awarded to legal persons governed by Senegalese law to tender or direct consultation by order of the Minister responsible for hydrocarbons according to rules to be laid down by decree.

The licence is granted by order of the Minister in charge of Hydrocarbons and is accompanied by specifications defining the operator's obligations (Section 8).

A concession must be granted for the transport or distribution of natural gas by pipeline (Article 10, Gas Code).

This licence is also granted only to any legal entity governed by Senegalese law that can demonstrate the necessary technical and financial capacity.

There is no national monopoly on downstream activities.

The Gas Code provides for a licence or concession regime, depending on the gas operations envisaged. Such licences or concessions are granted by order of the Minister in charge of Hydrocarbons.

The procedures for implementing the call for tenders and direct consultation are set by decree, as are the conditions of admissibility of the application. These decrees have not yet been published.

The granting of a licence or concession for downstream gas activities, including the construction of gas infrastructure, is subject to the completion of a prior environmental assessment and the obtaining of an operating permit under the regulations on facilities classified for environmental protection.

With regard to gas, downstream activities require a licence to be obtained from the Minister in charge of Hydrocarbons.

The downstream distribution activity is subject to obtaining a licence if it concerns liquefied and compressed natural gas (Article 7, Gas Code), or subject to obtaining a concession if it concerns natural gas distribution by pipeline (Article 10, Gas Code).

For hydrocarbons, Law No 98-31 of 14 April 1998 provides for an obligation to obtain a licence to this effect from the Minister in charge of Hydrocarbons for downstream activities.

Downstream distribution activity to supply the national market also requires a licence to this effect to be obtained from the Minister in charge of Hydrocarbons.

Unlike upstream operations, typical tax terms are not provided for midstream/downstream operations. Article 2 of the Petroleum Code defines "petroleum operations" as all activities and operations for the prospecting, exploration, evaluation, development, production, storage, transport or marketing of hydrocarbons, including the processing and liquefaction of natural gas, but excluding operations for the refining, distribution and marketing of oil and gas products. Thus, it can be inferred from this definition that the refining, distribution and marketing of oil and gas products would constitute a second phase, which is the downstream phase.

With regard to commercial arrangements, Article 38 of the Petroleum Code provides that the holder of a hydrocarbon transport authorisation must accept the passage of hydrocarbons from other deposits, against payment of an amount fixed by order of the Minister in charge of Hydrocarbons.

The Petroleum Code does not provide for a special regime for downstream operations, so the ordinary law regime remains applicable. As a non-exhaustive example, the following taxes and duties may be cited:

  • corporate income tax – the holder of an oil contract and its associated companies are subject to corporate income tax on their oil revenues. The corporate tax rate is set at 30% and is not recoverable as oil costs (Article 43, CP);
  • tax on petroleum products – provided for by Articles 443 and following of the Tax Code, the tax on petroleum products is levied on super fuel, regular gasoline, canoe gasoline and diesel; and
  • other taxes and duties – upstream operations carried out by holders of mining titles of hydrocarbons and associated companies bear the other taxes and duties provided for in the Tax Code, under the conditions of ordinary law.

No special right is given to domestic companies regarding downstream activities.

Activities in the intermediate and downstream segments of the oil and gas sector are subject to compliance with the rules set forth in the Law on Local Content in the Hydrocarbon Sector and its implementing decrees.

Indeed, the law relating to local content in the hydrocarbons sector applies to all activities on the territory of the Republic of Senegal that are related, directly or indirectly, to the transport and storage of hydrocarbons, and to the transformation and valorisation of hydrocarbons, as well as the distribution of oil and gas products.

Under these provisions, the use of national goods and services is prioritised, such as services and supplies from Senegalese companies and Senegalese personnel when they have the required skills, and residents of local communities or those surrounding oil and gas operations for unskilled jobs.

In addition, the local content plan of each contractor, subcontractor, service provider and supplier shall specify the measures taken to enable Senegalese nationals to acquire the necessary qualifications and expertise to gradually replace non-national employees (Article 7).

Goods and services related to oil and gas activities are provided by Senegalese companies if there are companies able to do so; otherwise, a foreign company may be hired.

Any investor wishing to act as a subcontractor, service provider or supplier is obliged to register with the Trade and Personal Property Credit Register.

If activities are subject to prior licensing, such licences are granted by order or approved by decree in the case of a concession.

The applicant for a licence or concession must provide information on the beneficial owners of the company.

Accordingly, the granting of a licence or concession for intermediate and downstream gas activities is subject to the completion of a prior environmental assessment and the obtaining of an operating permit under the regulations on facilities classified for environmental protection.

Pursuant to the Gas Code, the licence may be renewed by the Minister in charge of Hydrocarbons, after receiving advice from the Regulatory Body, and the concession may be renewed by decree at the request of its holder.

Licence or concession holders may assign or transfer their licences or concessions to legal entities that have the required capacities under Senegalese law (Article 18, Gas Code).

There is no provision on "condemnation/eminent domain rights" in Senegal other than those applicable in the event of expropriation for reasons of public utility.

However, the Petroleum Code does contain provisions on the regulation of relations with owners. Thus, relations with owners and occupants of the land are governed by the regulations in force in Senegal.

However, no holder of an oil contract may occupy or carry out oil operations without the prior authorisation of the competent authority on lands that are:

  • located less than 200 m from a cemetery, religious buildings or sites used for religious or cultural purposes;
  • within 100 m of dwellings, buildings, reservoirs, streets, roads, railways, water pipes or sewers or, generally, in the vicinity of any public utility works and engineering structures;
  • situated less than 1 km metres from a frontier, airport, aerodrome or security establishment; or
  • declared a military domain, or a classified domain, including nature reserves, national parks and areas of hunting interest.

The Gas Code contains provisions on third party access to infrastructure.

It is thus provided that operators of gas transmission and distribution networks and storage facilities must guarantee freedom of access for third parties and comply with the principles of tariff transparency, equal treatment and non-discrimination (Article 27, Gas Code).

The holder of a hydrocarbon transport permit must accept the passage of hydrocarbons from other deposits, subject to compatibility with the conditions of use of the transport infrastructure referred to in Article 35 of the 2019 Petroleum Code and within the limit of available surplus capacity.

The use by third parties of the transport infrastructure held by a transport authorisation holder gives rise to the payment of a tariff fixed by order of the Minister in charge of Hydrocarbons.

A case of joint installation has also been anticipated. Indeed, if several hydrocarbon discoveries are made in the same geographical area, the operators join forces for the construction and/or joint use of installations and pipelines for the disposal of all or part of the production from these discoveries.

In the absence of an agreement, the Minister in charge of Hydrocarbons asks the operators to join together for the execution of such activities (Article 38, PC).

Senegalese law provides for restrictions on the sale of gas products, with priority to be given to domestic consumption.

Under Article 59 of the Gas Code, there is an obligation to supply the local market.

Although the proceeds from the exploitation of hydrocarbon deposits may be intended either for local consumption or for export, holders of exclusive exploitation licences must allocate, as a priority, the proceeds from their exploitation to cover the needs of the country's domestic consumption.

The transfer price must reflect the international market price.

Once the domestic needs of the country have been met, free export is possible after the payment of an exit customs duty, set at 1% of the value of said production share.

Any legal entity planning to carry out export activities must first obtain a licence from the Minister in charge of Hydrocarbons, which is granted for a period of five years (Article 38, Gas Code).

Re-export activities are also subject to obtaining a licence from the Minister in charge of Hydrocarbons.

The Petroleum Code provides that the share of production accruing to the holders of exclusive exploitation authorisations, after satisfaction of the country's domestic needs, may be freely exported after the payment of an exit customs duty, set at 1% of the value of said share of production, deductible for the determination of the profit subject to corporate income tax (Article 59, CP).

Licensees or concession holders carrying out activities in the intermediate and downstream segments of the gas sector are subject to the taxes, duties and fees for which they are liable in accordance with the provisions of the General Tax Code (Article 63, Gas Code).

In addition, licensees or concession holders carrying out activities in the intermediate and downstream segments of the gas sector are subject to the payment of taxes in accordance with the provisions of the Customs Code (Article 64, Gas Code).

Law No 98-31 of 14 April 1998 also provides that any company planning to carry out petroleum storage activities to supply the national market or for export purposes must first obtain a licence from the Minister in charge of Hydrocarbons.

The Gas Code contains provisions relating to the assignment or transfer of licences or authorisations for downstream activities.

According to Article 18 of the Gas Code, licence or concession holders may assign or transfer their licences or concessions to legal entities under Senegalese law that have the required capacities in accordance with the provisions of this Gas Code.

The acts of assignment or transfer, accompanied by all the agreements agreed between the parties, are transmitted to the Minister in charge of Hydrocarbons for approval, by decree, after advice from the Regulatory Body.

The Minister in charge of Hydrocarbons may refuse to approve any assignment or transfer that may directly or indirectly affect the general interest or public security.

The taxation applicable to assignments and transfers is governed by the provisions of the General Tax Code.

Any assignment or transfer concluded in violation of the provisions of this Article shall be null and void.

Incentives and investment protection measures in general are taken to support investors, particularly in the extractive industries sector.

Measures under the Investment Code

Investment incentives under the Investment Code include the following:

  • economic and competitive freedom;
  • enjoyment of full ownership of all movable and immovable property, and a guarantee against any measure of nationalisation, expropriation or requisition throughout the national territory, except in the public interest, as provided for by law. Provision shall be made for compensation if this is not the case;
  • no restrictions, in particular with regard to the settlement, transfer and movement of capital;
  • freedom to transfer income or proceeds of any kind resulting from the operation, any transfer of assets or its liquidation (guarantee benefiting foreign investors, entrepreneurs and partners, whether natural persons or legal entities);
  • guarantee of treatment equal to that accorded to nationals, subject to reciprocity or any other special measures; and
  • guarantee of access to raw materials.

The process of granting advantages to foreign investment is as follows:

  • an application is submitted for approval to the national agency in charge of the Promotion of Investment and Major Works (APIX) or to the competent authority for this purpose;
  • the file contains precise information on the investor and his programme, and the fiscal discharge of the company in case of extension; and
  • the approval is issued in two phases (a first phase covering the advantages granted during the implementation phase and a second phase relating to the advantages granted during the operation phase).

Disputes arising from investment contracts can be settled through international arbitration or conciliation, as provided for in agreements between the parties or in bilateral investment treaties.

An investor has free choice of jurisdiction and laws within the framework of its individual agreements with its partners.

Benefits granted include the following:

  • a customs exemption covering a period of three years on equipment and materials that are neither produced nor manufactured in Senegal and intended specifically for production or exploitation under the approved programme;
  • austoms exemptions on commercial vehicles; and
  • the possibility of concluding fixed-term contracts with workers for a limited period of five years.

The investor is obliged to do the following:

  • comply with Senegalese legislation;
  • observe the rules and standards already required for products in its State of origin;
  • provide any information deemed necessary for the control of its obligations;
  • facilitate the control and monitoring of activities by APIX or the competent authority on the level of implementation of the project;
  • keep the company's accounts in accordance with the West African Accounting System (SYSCOA);
  • strictly observe the investment programmes and require the authorisation of the competent authority for any substantial modification; and
  • communicate financial statements at the end of each financial year to the Single Information Collection Centre (CUCI).

Benefits Arising from the Petroleum Code

The following benefits arise from the Petroleum Code:

  • the right to contract abroad for the loans necessary for the performance of activities in Senegal;
  • free movement of funds relating to payments on current operations;
  • the right to transfer the sums necessary for the contractual amortisation of debts in connection with operations in Senegal;
  • exemption from customs duties and taxes, and from the levy of the Senegalese Shippers' Council during the period of exploration, evaluation and development;
  • the right to transfer revenues, in particular interest and dividends from invested capital, subject to prior validation of the commercial scheme by the Minister in charge of Hydrocarbons and the Minister in charge of Finance, with the exception of the transfer of operations between subsidiaries of the same company;
  • the opening of accounts in foreign currency abroad or in the books of approved intermediaries in respect of financial flows resulting from activities in Senegal;
  • foreign personnel resident in Senegal may transfer to their country of origin all or part of their salary savings as well as contributions to pension schemes paid on their behalf, subject to the payment of taxes and miscellaneous contributions; and
  • a stabilisation clause.

Incentives and Benefits under the Tax Code

Incentives and benefits under the Tax Code include the following:

  • VAT exemption on imports, supplies and services carried out for the benefit of holders of an authorisation for the prospecting or exploration of hydrocarbons, or holders of a permit to search for mineral or petroleum substances;
  • exemption from the lump-sum contribution payable by the employer (CFCE); and
  • exemption from the local economic contribution.

Senegal's environmental regulatory framework is mainly based on two texts:

  • Law No 2001-01 of 15 January 2001 on the environment code; and
  • Decree No 2001-282 of 12 April 2001 implementing the environment code.

In addition to these two main texts, Senegal has put in place a number of decrees that complete the legal framework in the environmental sector, such as:

  • Order No. 9469/MJEHP/DEEC on the functioning of the technical committee;
  • Order No. 9470/MJEHP/DEEC setting the conditions for issuing a permit to carry out activities related to EIA (environmental impact assessment);
  • Order No. 9471/MJEHP/DEEC on the content of the EIA terms of reference;
  • Order No. 9472/MJEHP/DEEC on the content of the EIA report;
  • Order No. 8998 dated 17 October 2008 on the creation of a National Commission for Sustainable Development; and
  • Order No. 009468/MJEHP/DEEC, regulating public participation in environmental impact assessments.

The environmental regulatory bodies are as follows:

  • The Ministry of Environment and Sustainable Development (MEDD) prepares and implements the policy defined by the Head of State in terms of environmental monitoring, pollution control and the protection of nature, fauna and flora. It is also the authority responsible for environmental protection and, as such, it takes measures to prevent and combat pollution of all kinds. It also ensures the safety of potentially polluting installations.
  • The Environment and Classified Installations Directorate (DEEC) operates under the authority of the Minister of the Environment, Nature Protection, Retention Basins and Artificial Lakes, and is in charge of implementing the government's policy on the environment, particularly the protection of nature and people against pollution and nuisances. The DEEC comprises several divisions, including the Environmental Impact Division, which is in charge of the following:
  • validating the terms of reference of environmental impact assessments of projects, strategic environmental assessments of policies and programmes, and audits;
  • evaluating the admissibility of environmental impact assessments;
  • monitoring the implementation of Environmental Management Plans;
  • giving a technical opinion on the projects submitted, and preparing the decision on the environmental compliance certificate for the Minister of the Environment; and
  • acting as the secretariat of the Technical Committee for Environmental Assessments, Public Hearings and the Commission of Accreditation for the performance of activities related to environmental assessments.

The Directorate for the Environment and Classified Installations is represented at the regional level by the Regional Directorates for the Environment and Classified Installations (DREEC).

Any development project or activity likely to harm the environment will require an environmental assessment, as will policies, plans, programmes, and regional and sectoral studies.

This environmental assessment, which is necessary and mandatory, makes it possible to anticipate and manage the negative impacts of the project, but also to examine the consequences, both beneficial and harmful, that a proposed development project or programme will have on the environment, and to ensure that these consequences are duly taken into account in the design of the project or programme.

It includes environmental impact assessments, strategic environmental assessments and environmental audits.

The impact study is prepared at the expense of the promoter and submitted by him to the Ministry in charge of the Environment, which issues a certificate of authorisation after receiving technical advice from the Directorate of the Environment and Classified Establishments.

The certificate of authorisation signed by the Director of the Environment is sent to the operator and the authorisation order is signed by the Minister in charge of the Environment, after receiving the opinion of the ministerial departments concerned, and bearing authorisation to operate the Classified Installations.

The purpose of this procedure is to obtain a certificate of environmental compliance (a Ministerial Order) issued by the Minister for the Environment after the technical committee (administration and management unit of the environmental impact study) has given its opinion.

Environmental impact studies are carried out by approved engineering and design offices.

After receiving the project, the Technical Committee has ten days to reply to the promoters on the nature of the studies to be carried out (impact notice or terms of reference for a comprehensive study) through the examination of the environmental impact assessment report for the project in question.

If the environmental impact assessment report conforms with the specifications, the Directorate for the Environment and Classified Establishments organises a public hearing in co-operation with the project proponent and the administrative authority of the locality concerned.

Following this public consultation, a report on the public hearing is prepared by the secretariat. The project proponent examines the public concerns and submits a final report to the technical committee, which integrates the environmental and social management plan.

The order on the certificate of conformity is submitted for ministerial signature with the endorsements of the public inquiry report, the opinion of the investigating officer appointed by order of the Governor, the opinion of the Regional Development Committee (CRD) and the inspection report of classified facilities, and is intended for the examination of the authorisation application file.

Offshore development falls within the regime of Installations Classified for the Protection of the Environment (ICPE).

ICPE are industrial, artisanal or commercial installations operated or owned by any natural or legal person, public or private, and all other activities, factories, workshops, depots, construction sites and quarries that present either dangers to health, safety, public health, agriculture, nature and the environment in general, or inconveniences for the neighbourhood.

Installations classified for the protection of the environment (ICPE) are divided into two classes. The first class includes facilities whose operation can only be authorised on the condition that measures are taken to prevent hazards or inconveniences to health, safety, public health, agriculture, nature and the environment in general, or inconveniences to the neighbourhood. Such facilities must be located away from dwellings.

The second class includes installations that do not present serious inconveniences as mentioned above, so are subject to general requirements designed to ensure the protection of such interests.

Thus, ICPE are subject to the supervision of the administrative authority and to the ICPE-specific regime of declaration and authorisation.

The application for authorisation of a first-class facility must be subject to a public inquiry.

Class 1 facilities defined as presenting a risk of "serious danger or disturbance" with regard to "health, safety, public sanitation, agriculture, nature and the environment in general" are subject to the permit system. A thorough environmental assessment study is carried out to determine the environmental consequences in the economic analysis of the project.

Offshore is subject to the authorisation regime of ICPE, Class 1 / A1100 and A1200.

Facilities classified for environmental protection are subject to duties and taxes.

Oil operations are also conducted in accordance with the Environmental Code, as well as other national and international texts relating to the hygiene, health and safety of workers and the public and environmental protection.

The companies carry out their work using proven oil industry techniques and take the necessary measures regarding the following:

  • the prevention and control of environmental pollution;
  • waste treatment;
  • preservation of the flora and fauna heritage;
  • preservation of soil and subsoil water; and
  • the applicable hygiene and health regulations.

The costs of work necessary for the protection of the environment are the responsibility of the holder of the petroleum contract in accordance with the regulations in force (Article 53, CP).

In accordance with Article 64 of the Petroleum Code, if the State does not take over the installations and equipment upon the expiry and termination of the petroleum contract, the holder must carry out the dismantling and removal of such, at its own expense, as well as all other work of abandonment and rehabilitation of the sites. Failing this, the Minister in charge of Hydrocarbons shall order the necessary steps to be taken at the expense of the holder out of the deposited funds.

In the same way, in the case of partial or total renunciation, the holder of a production sharing contract shall carry out the abandonment works, taking all necessary measures to safeguard the environment in accordance with the environmental and social impact assessment.

The main laws on climate change are as follows:

  • Law No 2001-01 of 15 January 2001 on the environment code and its application decree;
  • Law No 2016-19 of 6 July 2016 authorising the President of the Republic to ratify the Paris Agreement under the United Nations Framework Convention on Climate Change, adopted on 12 December 2015;
  • the Agro-sylvo-pastoral policy law of 4 June 2004;
  • Decree No 2000-73 regulating the consumption of substances that destroy the ozone layer; and
  • Law No 2018-25 of 12 November 2018 on the Forestry Code.

However, these laws do not contain specific provisions on petroleum operations.

As far as is known, no limits are imposed by the authorities on the exploitation of oil and gas.

However, all oil operations in Senegal require the authorisation of the Senegalese authorities; the regime for such authorisations is defined in the Petroleum Code.

As yet, there are no regulatory texts relating to the regulation of non-conventional upstream interests. Consequently, there is no special regime relating to it.

The Gas Code regulates the activities, on the national territory, in the intermediate and downstream segments of the gas sector, including the following:

  • the aggregation, transformation, storage, import, export, re-export and supply of natural gas in gaseous or liquid form;
  • the transport and distribution of natural gas through pipelines;
  • the transport and distribution of liquefied natural gas; and
  • the transport and distribution of compressed natural gas.

This law also regulates the conditions for obtaining licences for the operation, production and marketing of liquefied natural gas.

The Local Content Law is also applicable to this sector (see 3.7 Local Content Requirements Applicable to Midstream/Downstream Operations)

In its perspective of development, the Republic of Senegal wishes to attract investors, especially foreign investors. To this end, incentives and advantages are provided to facilitate the installation, research, exploitation and marketing of oil and gas resources throughout the country. It is in this context that the Petroleum Code, the 2019 Local Content Act and, most recently, in February 2020, the Gas Code have been introduced. Senegal has joined the Extractive Industries Transparency Initiative (EITI).

The oil sector has a social policy consistent with the implementation of a collective agreement specific to the sector and measures to ensure that companies and workers observe the rules on safety at work and respect for the environment.

One major recent change is the entry into force of Law No 2020-06 of 7 February 2020 on the Gas Code.

Houda Law Firm

66 Boulevard de la République
Seydou Nourou Tall building
1st floor
Dakar
Senegal
BP 11 417

(+221) 33 821 47 22/35

(+221) 33 821 45 43

houda@avocatshouda.com www.avocatshouda.com
Author Business Card

Trends and Developments


Authors



Houda Law Firm was founded in 1977 in Dakar (Senegal) and has a staff of 42, half of which are specialised and highly qualified lawyers and legal advisers working to assist clients such as private companies, public entities and individuals, with all of their legal needs in Senegal and WAEMU (West African Economic and Monetary Union) member states. The firm opened a branch in Abidjan, Ivory Coast, which made it the first foreign law firm from the WAEMU region to establish in the country. The team works on matters related to investment, employment law, taxation, oil and gas, mining law, business litigation and arbitration. The firm is in the process of finalising ISO 9000-2015 Certification.

Significant oil and gas discoveries were made in Senegal between 2014 and 2017, accompanied by a revision of the Constitution in 2016 to reiterate that hydrocarbons are the property of the Senegalese People, and to improve the legislative framework for hydrocarbons. To this end, three laws were promulgated: Law No 2019-03 dated 1 February 2019 on the Petroleum Code, Law No 2019-04 dated 24 January 2019 on local content in the hydrocarbons sector (Local Content Law) and Law 2020-06 dated 7 February 2020 on the Gas Code (Gas Code). Although they have been adopted, these three laws are not yet accompanied by the implementing decrees that should set out the procedures for their homogeneous implementation. For the sake of concision and since Law No 2019-03 dated 1 February 2019 on the Petroleum Code is studied in depth in the Law & Practice section, only the Local Content Law and the Gas Code will be studied in this section, as well as the restructuring of the national oil company Société des Pétroles du Sénégal (PETROSEN).

Local Content Law

Defined by Section 1 of the Local Content Law as "the set of initiatives taken to promote the use of national goods and services and the development of participation of national labour, technology and capital in the entire value chain of the oil and gas industry”, the local content refers mainly to the additional share of hydrocarbon revenues recovered in the Senegalese economy through the participation of the national private sector in one or more stages of operations and the employment of local populations.

Local content corresponds to an important component of public or large-scale projects that has long been overlooked in favour of royalties, taxes and tariffs.

In order to create a balance between the interests of the Senegalese people and respect for the standards of the oil and gas industry, the Local Content Law has been guided by the following principles:

  • equity in the sharing of revenues from oil and gas activities;
  • respect for international norms and standards of the oil and gas industry; and
  • non-discrimination, transparency and realism in the implementation of local content obligations.

The Local Content Law extends its scope beyond the upstream activities of exploration and production, since it also concerns the transportation, storage and distribution of hydrocarbons. It also classifies oil and gas activities into three regimes: exclusive, mixed and non-exclusive.

The exclusive regime applies to activities for which the State of Senegal reserves the right to grant an exclusive licensing service, with the aim of reducing the quantity of imported goods and services, subject to a guarantee of service quality and price control.

The mixed regime extends to activities requiring the association of a foreign company with a local company, while the non-exclusive regime concerns activities with a low potential for local content. The classification of activities in the three schemes referred to above will be established by decree.

For its implementation, the Local Content Law establishes a National Committee for Monitoring Local Content, which is responsible for co-ordinating with the competent authorities regarding the preparation of the local content strategy document, which defines the procedures for implementing the State's guidelines in this area. The rules for the organisation and operation of the Committee are set out in a decree, which is not yet available. This National Committee is in charge of receiving the local content plan compulsorily established by the contractors, subcontractors, service providers and suppliers that are directly or indirectly involved in oil and gas activities, which describes the activities of the company as well as the goods, services and skills necessary for their realisation.

Furthermore, for additional support and the upgrading of Senegalese companies whose participation in oil operations has become an obligation under the Petroleum Code under certain conditions, the Local Content Law provides for the creation of a Local Content Development Support Fund.

The classic rules are also included in the Law, such as the national preference for the provision of goods and services and for the employment of Senegalese natural persons, as well as the transfer of skills to Senegalese companies through an annual training programme defined in the applicable oil contract.

The priority given to local populations applies mainly to companies in the hydrocarbons sector, in order to:

  • prioritise recruiting a Senegalese person with equal skills;
  • prioritise offering unskilled jobs to residents of local communities; and
  • provide training to local populations so that they can acquire the necessary skills and expertise to gradually replace non-national employees.

The Local Content Law also provides for rules for the procurement of goods and services in the hydrocarbons sector, with the establishment of an online platform centralising calls for tenders for goods and services, the organisation and operation of which is specified by decree. Subcontractors or service providers or suppliers must be companies incorporated under Senegalese law whose capital is open to Senegalese investors in accordance with terms and conditions laid down by decree (decree not yet available).

Finally, the Local Content Law imposes an obligation to use Senegalese intellectual service providers, banks and insurers, within the limits of their capacities.

Failure to comply with the obligations relating to local content, as provided for by law or implementing decrees, is subject to the following sanctions:

  • termination of the contract;
  • application of the fine penalty provided for in Article 70 of the Petroleum Code;
  • for contractors, non-payment of the cost of the activities concerned; and
  • for sub-contractors, suppliers and service providers, exclusion from the competitive bidding platform and prohibition to conclude contracts related to oil and gas activities.

Gas Code

The new Gas Code is the logical continuation of the policy implemented by the government in recent years with regard to the governance of gas resources. Indeed, this Gas Code is part of the national "Gas-to-power" strategy defining the policy for the development of electricity production from natural gas through the establishment of a legal, regulatory and institutional framework conducive to its development and the optimisation of the gas value chain. The objective for this strategy is to strengthen the energy mix, reduce electricity costs and develop gas for the development of the national economy.

Thus, the purpose of the Gas Code is to establish "regulations relating to the development of gas resources, in compliance with standards of natural gas quality, safety, preservation and protection of the environment, with a view to sustainable development" (Article 1, Gas Code).

To this end, the Gas Code's scope of application covers activities on the national territory in the intermediate and downstream segments of the gas sector, which include:

  • the aggregation, transformation, storage, import, export, re-export and supply of natural gas in gaseous or liquid form;
  • the transport and distribution of natural gas through pipelines;
  • the transport and distribution of liquefied natural gas; and
  • the transport and distribution of compressed natural gas.

The institutional bodies of the gas sector are as follows:

  • the Minister in charge of Hydrocarbons, whose mission is to define the standards applicable to the intermediate and downstream segments of the gas sector, in accordance with the provisions of this Code. The Minister ensures that the general interest is safeguarded by facilitating, in particular, the construction of gas infrastructure in accordance with regional planning objectives, which will be operated by all the players in optimal economic and safety conditions. He also ensures compliance with local content requirements; awards licences, by decree, after an advisory opinion from the Regulatory Body; signs concession contracts, after an advisory opinion from the Regulatory Body, which are approved by decree; and draws up in conjunction with the institutional players concerned and implements, after an opinion from the Regulatory Body, the gas development plan, drawn up for a period set by decree; and
  • the Regulatory Body to be created by decree and responsible for regulating the activities of the intermediate and downstream segments of the gas sector, in accordance with the policy guidelines set by the Government. In this respect, it ensures the promotion and rational development of the natural gas supply; the economic and financial viability of the natural gas sector; the promotion and exercise of free and healthy competition in the natural gas sector; and the protection of the rights and interests of the consumer in terms of access to good quality natural gas under the best economic and technical conditions, among other missions. The Regulatory Body draws up the structure of the natural gas price, from the producer price to the price of transfer to the final consumer. This price structure shall integrate all relevant cost elements of the applicable supply chain. Prices are set in accordance with the regulations in force. Without prejudice to the prerogatives granted to the Public Prosecutor's Office and the competent administrations, the activities of the intermediate and downstream segments of the gas sector are subject to supervision and control by the Regulatory Body. The authorised and sworn agents of the Regulatory Body are responsible for ensuring the application of this Code, the texts adopted for its application, and valid licence and concession contracts. They shall seek out, record in minutes and report on any shortcomings observed.

Licences and concessions are the necessary authorisations for gas activities governed by the Gas Code.

Licences are granted or renewed by order of the Minister in charge of Hydrocarbons after the Regulatory Body has given its notice to any legal entity governed by Senegalese law that can demonstrate the technical and financial capacity to carry out import, export, re-export, aggregation, processing, storage, natural gas supply, and liquefied and compressed natural gas transport and distribution activities.

The licence is awarded following a bidding or direct consultation process, the implementation terms of which are set by decree, and is accompanied by specifications defining the operator's obligations.

Concessions are granted to any legal entity governed by Senegalese law that can demonstrate the technical and financial capacity to carry out the activities of transporting or distributing natural gas by pipeline. They are approved by decree and published in the Official Gazette.

The natural gas transmission or distribution concession is awarded to legal entities governed by Senegalese law following a tendering procedure or direct consultation, the implementing rules for which are laid down by decree.

The concession contract is signed by the Minister in charge of Hydrocarbons and the applicant(s) for the concession.

The Minister in charge of Hydrocarbons grants or rejects the applications for concessions provided for in this Code, after having received the notice of the Regulatory Body. At the request of its holder, the Concession Contract may be renewed by decree.

In addition to the nationality requirement, the award of a licence or concession for intermediate and downstream gas activities involving the construction of gas infrastructure is subject to the completion of a prior environmental assessment and the obtaining of an operating permit under the regulations on facilities classified for the protection of the environment.

Licence or concession holders may assign or transfer their licences or concessions to legal entities under Senegalese law with the required capacities. Deeds of assignment or transfer, together with all the agreements agreed between the parties, are transmitted to the Minister in charge of Hydrocarbons for approval, by order, after receiving the opinion of the Regulatory Body. The Minister in charge of Hydrocarbons may refuse to approve any assignment or transfer that may directly or indirectly affect the general interest or public security.

If the holder has seriously and manifestly violated his legal or contractual obligations, the Minister in charge of Hydrocarbons shall withdraw or suspend the licence or concession, by order, after obtaining the opinion of the Regulatory Body.

If a licence or concession is suspended or withdrawn, the Minister in charge of Hydrocarbons shall provide the holder with reasons for the withdrawal, which must be objective, non-discriminatory and documented.

The holder whose licence or concession is suspended or withdrawn may exercise any judicial remedy he deems appropriate.

With regard to the modalities for carrying out activities in the intermediate and downstream segments of the gas sub-sector, licensees or concession holders must conduct their activities in accordance with the texts in force and in accordance with international standards, particularly those relating to environmental protection, hygiene, health, social aspects and safety.

Serious and manifest breaches by licensees and concession holders of their obligations may be subject to sanctions pronounced by the Regulatory Body. These sanctions may be pecuniary and, in some cases, in addition or as an alternative to these pecuniary sanctions, a measure forbidding the managers of the legal entity in question from acting as managers or directors of a legal entity may be imposed.

Sanctions may also be extended to a decision by the Minister in charge of Hydrocarbons, after the opinion of the Regulatory Body, which shall interrupt the operator's activities for a period not exceeding six months due to faults committed in the performance of its operations or repeated failure to comply with the obligations provided for in the Code and the texts adopted for its application.

Where an operator who has been fined or suspended persists in the exercise of his activity in violation of the rules and principles laid down in the Code and the texts adopted for its application, the Minister in charge of Hydrocarbons may withdraw the concession or licence concerned, after consulting the Regulatory Body. The Minister  may also declare the forfeiture of any operator or operator in the event of a decision of early dissolution, judicial liquidation with or without an authorisation to continue the company or bankruptcy, after consulting the Regulatory Body.

Restructuring of PETROSEN

In the wake of the first barrels expected in 2023, the Senegalese government is also looking for ways to increase and diversify the revenues that can be generated from oil and gas resources. As such, the national oil company PETROSEN began a restructuring process in October 2019, which resulted in January 2020 in the formal restructuring of PETROSEN into three separate entities: PETROSEN Holding, which will oversee all operations, and its subsidiaries PETROSEN E&P SA and PETROSEN AVAL SA, which will be responsible for exploration and production and the downstream sector respectively.

PETROSEN E&P will retain its mission of promoting the Senegalese sedimentary basin.

The objective is to strengthen the role of the national oil company through these three companies in order to give it a much more important place among operators at each stage of the oil process, both upstream and downstream.

It is thus planned that the downstream company PETROSEN AVAL SA will set up several service stations in order to penetrate the distribution sector, in which the Senegalese State does not currently operate.

Houda Law Firm

66 Boulevard de la République
Seydou Nourou Tall building
1st floor
Dakar
Senegal
BP 11 417

(+221) 33 821 47 22/35

(+221) 33 821 45 43

houda@avocatshouda.com www.avocatshouda.com
Author Business Card

Law and Practice

Authors



Houda Law Firm was founded in 1977 in Dakar (Senegal) and has a staff of 42, half of which are specialised and highly qualified lawyers and legal advisers working to assist clients such as private companies, public entities and individuals, with all of their legal needs in Senegal and WAEMU (West African Economic and Monetary Union) member states. The firm opened a branch in Abidjan, Ivory Coast, which made it the first foreign law firm from the WAEMU region to establish in the country. The team works on matters related to investment, employment law, taxation, oil and gas, mining law, business litigation and arbitration. The firm is in the process of finalising ISO 9000-2015 Certification.

Trends and Development

Authors



Houda Law Firm was founded in 1977 in Dakar (Senegal) and has a staff of 42, half of which are specialised and highly qualified lawyers and legal advisers working to assist clients such as private companies, public entities and individuals, with all of their legal needs in Senegal and WAEMU (West African Economic and Monetary Union) member states. The firm opened a branch in Abidjan, Ivory Coast, which made it the first foreign law firm from the WAEMU region to establish in the country. The team works on matters related to investment, employment law, taxation, oil and gas, mining law, business litigation and arbitration. The firm is in the process of finalising ISO 9000-2015 Certification.

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