Equatorial Guinea - Afrikan Heroes

Equatorial Guinea Year of Investment Advances, Despite Challenges By Caty Hirst

May 1, 2020

Minister of Mines and Hydrocarbons, H.E. Gabriel Mbaga Obiang Lima

COVID-19 has slowed global trade, but Equatorial Guinea is not relenting in its drive for investment and downstream diversification, said the country’s Minister of Mines and Hydrocarbons, H.E. Gabriel Mbaga Obiang Lima. Equatorial Guinea’s Year of Investment 2020 campaign continues to move ahead. “Definitely the Year of Investment is still very important,” said the Minister during a webinar hosted by Africa Oil & Power on Monday. “2019 was the Year of Energy, and the Year of Energy was to show to the world Equatorial Guinea … 2020 is the Year of Investment. It is the year that we put our money where our mouth is. And we are definitely going to continue.”

Projects already moving ahead include the backfill of gas supply to gas processing facilities as part of the Gas Megahub project, which is in the works with partners Noble Energy and Marathon Oil, as well as preliminary work on a modular refinery. These projects will move forward, despite the low oil price environment caused by COVID-19, largely because they were already in progress. The pipelines for the backfill project are already complete, and gas feed from the Alen field to backfill the EG LNG plant at Punta Europa should come on stream by November 2020.

The Year of Investment, planned to last throughout 2020 and include several in-country conferences and a global investment roadshow, is adapting to the new restrictions under COVID-19. Webinars and video conferencing are just one way technology is keeping the country connected with investors. “By this time, everyone was supposed to be here in Equatorial Guinea. We were supposed to be having a conference. We were supposed to be signing a lot of contracts. But I am still signing contracts,” Lima said on Wednesday.

Webinars and virtual roadshows will continue throughout the year, and will culminate in a Malabo conference on November 25-26, 2020. The Africa Oil & Investment Forum will attract regional and international investors to Malabo, as the country continues to engage at the regional and international level.

The Year of Investment is laying the groundwork for 2021, which will be the country’s year to focus on petrochemicals, the Minister said. Equatorial Guinea has been addressing downstream diversification efforts in recent years, with a focus on gas monetization and building refining capacity. 2020 and 2021 will be “lost years” for upstream oil and gas, he said, as projects are put on hold and cancelled in the short term.

“Downstream is the future of our industry. It is king. It will create jobs and enable us to use the entirety of our entire resources to be processed in-country,” Lima said. “Clearly, one of our solutions [to COVID-19] is going to be diversification within oil and gas.” New projects and investments are expected to be announced in the fourth quarter of this year, including the groundbreaking of Equatorial Guinea’s first refinery.

In addition, the country is developing liquified natural gas for LNG-to-power scenarios, for domestic and international use. Equatorial Guinea is on track to complete the country’s first LNG regasification plant by the end of 2020.

Caty Hirst, Director of Programming at Africa Oil & Power

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Oil is a Blessing to Equatorial Guinea —- Leoncio Amanda Nze

April 15, 2020

Founder & CEO of APEX Industries, Leoncio Amada Nze

Recently, the African Energy Chamber appointed

as its new Executive President for the CEMAC region. The appointment coming at a time the global oil and gas industry is passing through a very disruptive phase became imperative as there are high expectations that Amanda Nze will bring his wealth of experience to bear on providing advice and directions to both government and businesses. In this interview, he addresses key topics including the inclusion of women in the energy industry, the importance of local content policies. He examines the current state of the Equatoguinean energy industry amid the COVID-19 pandemic and the oil price war. He addresses key topics including the inclusion of women in the energy industry, the importance of local content policies and the creation of enabling environments that are attractive to foreign investors. Excerpts.

For many years, Equatorial Guinea has been exploiting its resources and exporting them. What is the importance of the country focusing on developing its midstream in order to add value to its industry?

Oil has been and remains a blessing for Equatorial Guinea. Revenues from oil exploitation have allowed the country to build basic economic infrastructures such as airports, ports, highways, power plants, drinking water systems, social housing, etc. However, upstream activities are capital intensive. Although they generate a lot of money for the companies involved and the host governments, they do not generate many jobs as most of the operations are automated.

Hence the importance of promoting and developing the midstream segment in order to locally process and transform part of the crude oil and gas that the country produces. In doing so, related sectors and industries are created, generating more local jobs and encouraging the creation and entry of local companies in the value chain.

Last year, the Department of Local Content launched its first ever CSIR book in order to highlight the socio-economic contributions of the oil and gas industry over the last 25 years. How can Equatorial Guinea build on the contributions of projects such as the Bioko Island Malaria Elimination Project, the Bioko Biodiversity Protection Program and the Baney District Hospital Project which covered malaria reduction, healthcare, access to clean water and infant mortality rates?

Equatorial Guinea’s oil and gas industry has been very instrumental in supporting the national government in the realization of projects with a social impact throughout the national sphere. This includes the construction of educational centers, hospitals, playgrounds, drilling of water wells and more. The Malaria elimination project in Equatorial Guinea, financed by the Ministry of Mines and Hydrocarbons together with the oil companies and implemented by the Ministry of Health, is also of great importance to the country.

Furthermore, with the support of the government, the laboratory in the city of Baney (also financed by the oil sector) has become the spearhead in the strategy for the fight against COVID-19. The center has been certified by the WHO and has the capacity to carry out more than 150 COVID-19 tests per day.

These type of social policies and projects must be equally supported, financed and accompanied by national companies in the oil sector. To do this, it is necessary to look further into local content policies and encourage the creation of dynamic, efficient, and profitable local companies that are capable of competing at the international standards levels required by the sector in which we operate.

Through its Gas Mega Hub project, Equatorial Guinea plans to deliver on expectations of successful cross-border gas cooperation. How do you foresee the COVID-19 pandemic impacting these plans?

The Mega Hub Gas Project is an ambitious and innovative project within the policy of zero gas flaring promoted by the Ministry of Mines and Hydrocarbons. Its conception, planning, and execution are being carried out within the framework of the expectations that the parties involved agreed upon. The destruction of global oil demand caused by the COVID-19 pandemic, combined with the oil price war between Russia and Saudi Arabia, have brought oil prices to very low levels in the international markets. This dynamic can jeopardize certain investment projects that many companies have in their portfolio. The current situation will force many companies to cut investment projects to try to navigate the crisis that is plaguing us if the host governments do not activate supportive mechanisms in favor of the oil sector. We trust that this is not the case of the Gas Mega Hub project, since it is of great significance for Equatorial Guinea and the subregion.

The Ministry of Mines and Hydrocarbons announced that it was waiving fees for oil and gas services companies operating in the country amid the oil price war and the ongoing COVID-19 pandemic. How does this move encourage further investment and continued relationships with major companies?

We are facing an unprecedented crisis with disastrous and unpredictable consequences to the oil industry, in combination with the historical fall in crude oil prices in the international markets to levels only seen during the Gulf War. The measures adopted by the Ministry of Mines and Hydrocarbons come at a time when both the service companies and the oil industry in general are going through very difficult times.

The Ministry of Mines and Hydrocarbons has been very proactive. However, we believe that other institutions and departments of the public administration should adopt similar reactions and initiatives to support the oil and gas sector as a whole. This could occur through production and service companies safeguarding the operations and stability of the oil sector, on which the country’s GDP depends at 91%. This is a task that appeals and requires the sense of responsibility of all the actors involved.

Governments play a key role in seeing through the growth and development of the sector. What can African governments do more to support oil and gas companies in order to increase the pace of exploration and production?

In any sector or economic activity, foreign and local investment are directed to those areas and places where the returns on investment are acceptable for people who decide to risk their capital. The same is true in the oil sector. African governments need to be much more flexible when it comes to fiscal terms of oil contracts, especially in the exploration and development phases to attract investment. To maintain the production plateau over time, investment in exploration is required. For this to be possible, the fiscal terms of oil contracts must be even more flexible in these times of crisis.

In encouraging investors to enter African markets for the development of the oil and gas industries, what is the role of policy certainty in creating enabling environments and boosting investor confidence?

Foreign investment is directed to places where there is a perception that the invested capital is protected, and the rules of the game are transparent, respected, and applicable to everyone. It is in this sense that African countries must insist and work on the consolidation of the rule of law, transparent, stable and predictable fiscal frameworks, and finally, respect for the sanctity of contracts. All these factors contribute to the creation of a stable business environment that attracts foreign investment and generates confidence.

Where does change need to begin in order for us to see more women in senior-level positions in Africa’s energy industry?

A society that marginalizes half of its population cannot reach its full potential. We can extrapolate the same analysis to the oil and gas industry. We believe and know that women have a lot to offer to our industry. There are talented women on the African continent, capable of holding positions of leadership and direction in the African oil industry. We have started to see few women in management positions, but we believe that is not enough. We might need to have a local content policy based on women empowerment in the oil and gas sector. More can and should be done.

We men in the African oil industry are fathers of women, sons of women, and husbands of women. We would like our daughters and spouses to access leadership positions in any sector as long as they have the necessary skills and experience for such a position. Men have a responsibility to model this change.

Africa still lags behind the rest of the world in education and skills development, how can the continent utilize its hydrocarbons industry to foster wider economic growth?

The African oil sector can and has the necessary capacity and resources to improve and promote quality education, the use of new technologies, and the promotion and incentivization of private initiative. All of this is possible through the implementation of a rigorous and coordinated local content policy to ensure technology transfer.

As the climate change debate continues, what does global pressure to move towards a renewable energy focused energy mix mean for countries across Africa that are still plagued with energy poverty?

The debate on climate change is very important and with far-reaching socio-economic implications for all countries and continents. From my point of view as an African businessman in the hydrocarbon sector, I would say that climate change is undoubtedly real and affects us all. Arguably, we all have a moral obligation to do something to reverse the situation.

We also have to be aware of our socioeconomic reality. Africa is the continent that pollutes the least. Yet, it is the least industrially and technologically-developed continent. It is also the continent with the least financial resources to invest considerably in renewable energy in such a way that they have a real impact on our energy basket. Oil and gas continue to be the main source of income and engine of development for African countries. We can be asked to contribute to the fight against climate change, but we do not believe that it is reasonable to ask our governments and people to compromise or risk economic development under the pretext of fighting against climate change.

We have to strike a pragmatic balance between the efforts we have to make in the fight against climate change and the real needs of our people

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Equatorial Guinea: Salary difference, The Black Hole in the Pocket of Oil and Gas Companies

December 12, 2019

By Pablo Mitogo Akele

With large projects under negotiation, 27 blocks in the last round of oil and gas licenses added to the Gasmegahub project, is most likely that several companies are going to need to hire new staff or expand their current workforce in the next two years. In the same way the mining projects that are potentially going to be developed in the country will necessarily create not only a new sector of activities that is not currently contemplated in the salary decree, but will create a whole range of new jobs and new professionals that neither are in the salary decree of 2011.

Why do we talk about salaries? Many companies in the oil sector have had problems of salary differences in the past, because foreign workers had previously been paid more than to locals performing the same job. This has ended in court trials that have led to huge losses for companies, sometimes between 400 and 1200 million Franc CFAs. Most of these cases, could have been avoided.

What is salary difference?

In a very simple way; when two people do the same job, but receive different salaries for whatever reason, the salary difference occurs. The law requires that wages be equated. One of the common causes occurs when hiring non-local staff. It is important to keep in mind that there are other situations in which the salary difference can occur if the legal requirements are not observed. For example, errors in the calculation of the salary, or for the duality of functions, or even for the transfer of the worker to another work centre or country.

How the salary is calculated in Equatorial Guinea:

The legal minimum wage according to Decree No. 121/2011 of September 5 2019, establishes the interprofessional minimum salary of the national private sector is 117,304. (around 180 euros) equal for all those who work for others in the private sector. Except the informal sectors, domestic workers, work with friends and work with family members. However, that does not mean that it is what you must pay. This salary is multiplied by what we call “coefficient” and that coefficient varies according to the professional category and the sector of activity. For example, an accountant from sector A (oil sector) and an accountant from sector B (industrial sector, banks and insurance agencies) have the same legal minimum wage: 117,304. However, the oil sector accountant has a legal coefficient of (11) while the other has a coefficient of (4.4.).

If you multiply the minimum wage by the coefficient assigned to a category or profession, you will get the base salary. In the case of the oil sector accountant, for example, the result would be 1,290,345 XAF per month (1,985 euros). You cannot pay less than this, because it is the monthly legal minimum wage for this category in this sector. If you pay less than this, the salary difference occurs. The central idea here is that, if you pay a worker less than they should earn, you will have to pay the remaining difference. This difference does not always exist.

On the 29th of November, the Minister of Mines and Hydrocarbons of Equatorial Guinea announced the winners of the EG RONDA 2019 licenses, so many companies unfamiliar with the legal environment of Equatorial Guinea are preparing to enter the market. Centurion Law Group has previously worked with many of them and we are willing to help our clients and new companies looking to avoid the mistakes that other oil and gas companies have made when hiring non-local staff. There are some things you should be careful with:

The difference in wages.

You can generally hire “non-local staff” to carry out your operations in Equatorial Guinea if you respect the criteria of local content. However, you should keep in mind that, in Equatorial Guinea, if two people do the same job, they should be paid the same as long as that contract is a labour contract. The mistake that many companies have made is that, when setting salaries to their non-local staff, they paid differences of more than 6 times what local worker that does the same job earns. Judges have interpreted this as salary discrimination and many companies have been heavily sanctioned and have ended up adjusting salaries after paying those remaining differences. We have seen this happen repeatedly, when analysing some cases, we have realized that , there was no adequate justification as to why non-local workers were paid more.

In Equatorial Guinea the law allows additional salary benefits to all those who move from their country to provide their services in another. Such benefits include:

Payment of transportation expenses to their place of destination and back to their place of origin.
Installation costs.
If the worker is permanent or whose contract must last at least one year, the employer must pay a salary plus based on the cost of living which cannot be less than 50% of the employee’s base salary.
From the third month of service or at the request of the worker, the employer must pay the round-trip transfer of the family in charge of the worker.

The law does not discriminate on grounds of nationality. However, what a company should know is that, well-structured and correctly justified, a foreign worker can earn more, not because he is a foreigner but because the same benefits that the law grants to an Equatoguinean when he must work outside the country, apply to foreigners whenever the employment contract is governed by the labour legislation of Equatorial Guinea. When it is not structured properly, then it seems that some are paid more than others and the judges interpret that there is discrimination against the locals and the differences in wages must be paid from the first day of work.

Job descriptions.

Another source of problems with wage differences arises when the Job descriptions are not clear enough and a worker ends up doing functions that correspond to two categories according to the salary decree. This small error can create problems for the company because a law prior to the current labour legislation interprets this situation as a duality of functions and forces the employer to make a 35% increase on the salary. The problem is that it is very difficult to realize when there is a duality of functions, so that companies that in the past have had to pay 35% more calculated since the first day of work of the worker that had no intention of performing duality of functions. They simply did not take into account the structure of functions set by the salary decree.

Employment contract vs civil contract of service provision. The legislation in Equatorial Guinea differentiates very well between an employment contract and a civil contract of service provision. Having the right contracts can mean the difference between a big economic loss or not. Make sure you have the right contracts because the difference may be in small details, enough to overlook a new company. If you have signed a contract for the provision of services with a non-local worker, it is normal for him to earn much more where there would be no salary difference because what he earns technically is not salary and consequently he is not subject to the salary decree. However, both your company and that worker will have other types of tax obligations and different benefits. That is why we insist on clarity and transparency with contracts and especially with what happens in practice. Small things like paying by invoice to a worker and not by payroll completely change the type of contract.

We address this situation because although the obligations under a service provision contract could be economically higher, keep in mind that, if this is the situation, there is no longer an obligation to match what a non-local contracted person earns with a local one Basically because they are not linked to the company under the same contractual form. In our experience, we have seen cases in which there was in practice a contract for the provision of services, but by paying the non-local worker by means of a payroll instead of an invoice, technically his income becomes a salary and the obligation to match his salary with local workers legally begins.

How to avoid these problems?

If you are a new company or you plan to venture into Equatorial Guinea to do business, especially if you are an oil and gas company, you should review both the way you contract, the types of contracts you sign with people you hire, the way you set salaries and how you pay those who work for your company. Here are some tips on how you should address some of these problems:

Hire a labour audit. The only way to know if you have any of the problems we have mentioned, is to perform an audit. A labour audit consists of a review of compliance with labour legislation analysing very specific points in both contracts and the way in which they are applied in practice. When we performed audits in the past, even the most orderly companies that acted with full transparency and good faith realized that they had serious problems. A labour audit simply offers you a panoramic view of compliance with labour legislation. In our experience, many of the problems are usually in the contracts. For example, a situation that is repeated a lot in addition to the salary difference itself is the duality of functions. We have had to recommend to companies to change many job descriptions or restructure the functions of their employees because sometimes just one more function gave the worker the right to a 35% increase in his salary. A company can use this system to save on hiring new staff, if it pays 35% more, but if it is not what it wants, it is better that this be reviewed.

Follow the recommendations in the audit report. The audit report is written in a very simple and practical language. It contains specific instructions on how to solve the problems that have been detected. We always offer the option to regulate everything. We review the contracts, adjust the job descriptions, review the functions that workers perform in practice and suggest changes. We have even written new internal regulations for companies because those they had left them unprotected, etc.
Check your payroll sheet. You must justify that the reason why the non-locals earn more is due to the payment of the additional rights that the same law already establishes. Consult with a lawyer so that this process is clarified with the support of the labour authority. You must find a way to do it and be very transparent with this. Above all, for mining companies whose categories the law does not yet include, it is very important to work with the labour authorities following the procedure established by the salary decree for those functions that are not contemplated.
Integrate ADRs in resolving conflicts with employees. If you get a demand and the object is the salary difference, we always recommend resolving it by agreement. Mediation or negotiations are perfect tools to close these types of cases. We have reduced significant amounts in the past through negotiations that have sometimes resulted in 60% less than the total amount. The labour law in Equatorial Guinea does not allow employees to renounce their rights. They cannot legally decide not to collect them and any agreement about that will be invalidated by the judge. However, they can negotiate the amounts and a judge can validate the agreement.
Organize seminars and workshops. Invite your lawyer to give talks, it is convenient for workers to understand what they are entitled to and the things to which they are not entitled. Having uninformed workers will not help you because you run the risk that they can initiate unfounded complaints and because it is the company that must prove in most cases that workers are not entitled to what they ask for, we have seen many cases in which a company ends up paying minute complaints because it could not provide evidence against what the workers were asking for. A famous case is that of a worker who was cleaning and managed to take a picture as a mechanic with mechanic uniform, under a car, performing a reparation process. The company could not provide evidence that the man was not a mechanic because they (the company) had not even signed a formal contract with that employee. Guess what? The judges ruled that, although the photo does not imply working effectively as a mechanic, the employer had not been able to dispel the doubt of the court as to whether he was a mechanic or not. Then, in case of doubt, they (the judges) applied the principle of in dubio pro-operario, according to which, the doubts are interpreted in favour of the workers.

Many companies that have had to pay for salary differences in the past have made mistakes; But there have also been cases where there really was a difference despite the additional legal benefits. In both cases, we have realized that most of the companies did not intend to pay the locals less. To get out of doubt, there is nothing better than hiring an audit, believe me, the time and money you can lose in these types of problems is much greater.

Pablo Obama Mitogo Akele is a Legal Advisor at Centurion Law Group specialising in Alternative Dispute Resolution and Contract Negotiation.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Equatorial Guinea Promotes Corporate Social Responsibility in Oil & Gas Sector

November 29, 2019

Ahead of the 2nd Gas Exporting Countries Forum taking place in Malabo, Equatorial Guinea starting tomorrow, the country launched a handbook on corporate social responsibility highlighting key achievements in corporate social responsibility projects within Equatorial Guinea’s oil and gas sector. The book which will be circulated free to delegates at the gas summit captured notable projects in the country including the Bioko Island Malaria Elimination Project, Bioko Biodiversity Protection Program and former Program for Education Development of Equatorial Guinea. Government sources say that apart from distributing the book at the Gas Exporting Countries Forum International Gas Seminar, it will be further distributed throughout the 2020 Year of Investment international events and roadshows.

Director of Local Content for the Ministry of Mines and Hydrocarbons Jacinto Owono

The Book which was launched by the country’s Ministry of Mines and Hydrocarbons documented the country’s key corporate social responsibility projects, spearheaded by public-private partnerships.

Equatorial Guinea: Achievements in Corporate Social Responsibility in Oil & Gas highlights the impact of investment in social projects on malaria reduction, healthcare, access to clean water and infant mortality rates. Notable projects include the Bioko Island Malaria Elimination Project – which recently received the P3 Impact Award at the 2019 Concordia Summit for its high impact and degree of success; the Bioko Biodiversity Protection Program; the Baney District Hospital Project; the Ver Bien project; Tuberculosis Control Project and the construction of water wells throughout the country.

Speaking at the book presentation earlier today, the Director of Local Content for the Ministry of Mines and Hydrocarbons Jacinto Owono said that the book demonstrates the contributions of the oil and gas sector to the people of Equatorial Guinea, who continue to remain the country’s highest priority. He further noted that what has been done in the past 25 years, in terms of the elimination and prevention of malaria on Bioko Island, teacher training and access to education, the Program for Education Development of Equatorial Guinea, distribution of clean water to rural communities, the construction of schools and parks throughout the country, and more “speaks to what we can and will accomplish in the next 25 years”.

The book also focuses on efforts in education and sustainability activities, including training and giving scholarships to students in and outside of the country, as well as the construction of an education infrastructure. Key projects include the former Program for Education Development of Equatorial Guinea; the construction of the National Technological Institute of Hydrocarbons of Equatorial Guinea; the construction of primary schools throughout the country and the Books for Bioko project.

Under the official endorsement of the Ministry of Mines and Hydrocarbons, the book includes commentary from H.E. President Teodoro Obiang Nguema Mbasogo, Minister of Mines and Hydrocarbons H.E. Gabriel Mbaga Obiang Lima and Jacinto Owono, Director of Local Content for the Ministry of Mines and Hydrocarbons.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

How to Avoid Sanctions for Breach of Local Content in Equatorial Guinea

November 1, 2019

News Analysis

In this analysis, Pablo Mitogo provides readers and investors the key steps to ensure they scale through their local content compliance in Equatorial Guinea, especially those who hope to invest in oil and gas sector of the economy.

The common problems that companies have with local content in Equatorial Guinea

In 2018, the Ministry of Mines and Hydrocarbons of Equatorial Guinea informed operators Exxon Mobil, Noble Energy and Marathon Oil that they should stop doing business with several companies because they were not in compliance with local content regulations under the country’s hydrocarbons law and the clauses of their PSCs. The truth is that it was not the first time that happened. In 2015 and 2016, there were also economic sanctions for the breach of local content requirements. With the local content Ministerial order covering only 20 pages, it seems surprising that companies could be risking their operations and contracts over something very straightforward. To understand the catch, read on.

Between 2015 and 2016 in our offices in Malabo, we had the opportunity to assist the Government in a plan that was unprecedented to audit oil and gas companies and verify their compliance with their local content obligations. We were very surprised to see how the legal departments of large oil companies did not know exactly how to protect their organizations against these demands. Because the number of companies that did not comply was very high, the Ministry decided to adopt a more collaborative than penalty approach, without which all operators and contractors would have been sanctioned in some shape of form.

Reserving the confidential client information, we observed that most of the in-house local content departments of these companies have three common problems: 1. determining who is obligated to do what under local content regulation; 2. knowing what local content includes; and 3. correctly developing a local content plan that meets very specific points required by applicable laws.

To examine these common problems, it is necessary to briefly clarify what the local content is according to the legislation of Equatorial Guinea. The keyword of the local content is “privilegio.” This is a set of privileges that companies or physical entities have and whose purpose is to obtain preferential treatment with respect to other companies and people from other places when obtaining contracts in oil & gas and mining. These privileges belong to local companies, companies of the CEMAC community, or African companies.

The local content regulations in Equatorial Guinea are broader than just those set out the ministerial order. They can be found in five main legal documents: the famous decree 127/2004 (amended in April 18 of 2018 by the decree 72/2018) that ensures local participation in the oil industry, the Law No. 8/2006 of November 3rd regulating Hydrocarbons in its articles 88 to 93, the Ministerial order 4/2013 regulating petroleum operations in articles 156 and 157, the Ministerial order 1/2014 on local content. Lastly, all PSCs have very specific local content clauses. The Labor Code also contains laws such as Law No. 6/1992 on national employment policy that also affects companies in the sector, and the list goes on. The question is, how do we put together all the requirements of those laws to get a unique list that tells a company what exactly it should do to comply with local content? While complex, the exercise is feasible and quite straightforward when you know where to start and what to consider.

Because the circumstances and needs of each company are different, local content laws are also flexible. Flexibility in the terms of the law does not mean an exemption from compliance, but compliance mechanisms that can be negotiated with the authorities. For example, you can get more time to meet a specific obligation.

Now that we have outlined the basic frame of local content, we can explore the common problems that companies in the oil and gas sector have when they deal with a local content audit in Equatorial Guinea.

Operators or contractors: who is obligated under local content regulations?

The oil and gas industry is governed by agreements, and many companies have to form alliances and joint-ventures to operate together. This may create doubts about who is obliged to comply with local content laws. According to article 2 of Ministerial order 1/2014 on local content all companies that carry out activities in the petroleum and mining sectors are obliged to comply with local content requirements. This includes: operators, explorers, contractors, sub-contractors and their associates even if they are local businesses. According to this, a) you have to have a contract in the sector and b) you have to operate in Equatorial Guinea. However, despite this clarity, there are many doubts that may arise, for example: what happens to companies that have contracts in the sector but are only licensed to provide material from abroad? Equally, if two companies are linked by a joint-operation agreement, must they comply individually or jointly? Another question that may arise is on whether a local company has to comply with all obligations or if it must simply comply with some. For example, it makes no sense that a local company would be forced to transfer technology just because it is from the oil sector. For such questions that require an interpretation, companies must work with the local content authority to obtain their interpretation in writing. It should never be assumed that a certain obligation is not applicable to a company. This is part of what we consider being flexibility in the local content laws.

The main obligations that any company should pay attention to

Local content is much more than building a primary school in a village or drilling a small water well in a local community. In our experience, it is very common for companies to present small works carried out in the villages as being works of compliance with local content. While the value of such efforts should not be minimalized and corporate social responsibility should be encouraged, a company could still be sanctioned for lack of local content compliance despite having spent money and time on CSR.

Local content mainly includes five obligations that must be structured in detail in a local content plan. These obligations include:

Procurement of goods and services. All necessary goods and services must be hired in order of preference established by the local content regulations. To prove it, companies must keep their invoices or any other document proving that they hired local services. However, it should be clarified that there are limitations to guarantee that the local procurement obligation does not cause prejudice to a) quality (local goods and services must meet international quality standards) and b) price (local goods and services cannot cost more than 10% of what the same good or service would have cost if it had been brought from abroad). That is why we insist that companies should take advantage of this flexibility to adapt each obligation to their particular needs.

Qualified workforce. All workforce must be hired in the order of preference (local, regional and continental). Foreign workforce can be hired only with an authorization, after demonstrating that the company has made substantial efforts to find specialized local workforce and has not found it. However, the authorization to import foreign labor only gives you an extension of time, because the obligation to train local labor prevents you from keeping your foreign workforce over a long period of time. If you have proven your inability to find local manpower for a specific position, you are still obligated to train local talent to fit that role so that you are able to gradually replace your foreign labor.

Technology transfer. This is another common problem for companies. We know that nobody is going to transfer the tools they can earn a profit from, and which gives them an edge on the market. Technology is the greatest power a company can have and today IOCs dominate the market because of their technology, and their edge over NOCs is not only financial but above all technical and technological. Forcing foreign companies, be them IOCs or oilfield services, to transfer their know-how is very complicated to achieve. However, the spirit of the law is not that business or industrial secrets are transferred to local premises. So how do you know that a company transfers technology within the framework of local content legislation? That question is also not easy to answer. However, the practice followed by the authorities is to verify if the company has a plan to ensure that its local resources are technically capable of carrying out their work with the international quality standards generally accepted in the industry.

Training. The clearest and most difficult clause to ignore is that pertaining to the training of local employees in order to enhance their skills. Although this obligation is already included within labor laws, the object and spirit of both laws (labor and local content) must not be confused. What is the difference? If in the labor laws it is envisage that an apprentice gains experience or acquires the skills of a profession or trade, the purpose of the local content is to specialize these in very specific tasks within the petroleum industry so that they are able to carry them out in the future autonomously with the same technical competence as a foreign expert. So, complying with one doesn’t mean that you don’t have to comply with the other. Basically, the local content laws requirements of training start where the labor laws reequipments ends. With the right advise and the correct approach, both laws can be easily complied because there is not necessarily a conflict between them.

Social Infrastructures development. What does the local content regulation refer to when they impose the obligation to run infrastructure in the communities, and is any particular infrastructure expected to be developed by oil companies and their contractors? Article 93 of the hydrocarbons law says verbatim that “they must (the infrastructures) be of the widest impact on the public.” In other words, infrastructure must be meaningful and of the quality that a community would need. It’s very important to make sure that the Infraestrure is also sustainable to the community; You don’t want to build a school without a plan to provide teachers nor learning materials or build a health center in a poor community without any nurse. The community needs a school or a health center operational, not an empty building. Practical requirements in this regard have to do with a) sustainability over time b) the importance and quality of the infrastructure to substantially improve the life of as many people as possible in a local community.

What should be in your local content plan?

The local content regulations oblige all oil and gas companies to have a detailed, long-term local content plan and implement it. Companies must also demonstrate that they are reasonably executing the plan they themselves have prepared. The important thing about this plan is that: a) it is flexible, b) it is a plan that can be adapted to the individual circumstances of each company and c) must be approved by the General Directorate of Local Content. The design of the local content plan, its evaluation and presentation to the authorities when undergoing an audit is the most critical part. Almost all companies that have been sanctioned have breached some of the essential points of their own plan. We can organize these into four large groups: i) Documentation related to the incorporation of the company; ii) Documentation related to the procurement of goods and services; iii) Documentation related to technology transfer and training of personnel; and iv) Documentation related to infrastructure development. Although we do not intend to address all these aspects in details, the following according to our experience are the ones that can create the most problems for a company.

a. Documentation related to the incorporation of the company:

· Notary deed duly legalized and registered in the Commercial Registry,

· Certificate of Tax Identification Number (NIF),

· Registration of company in the MMIE.

b. Documentation related to the acquisition of goods and services.

· List of all partners and suppliers of the company, as well as the contracts, offshore and onshore signed with them,

· National Content Development Program and its evaluation plan,

· Detailed report on contracts awarded to local companies,

· Proof of semi-annual shipments of the updated list of services that the company needs to contract,

· Proof of payment of social shares to local partners.

c. Documentation related to technology transfer and staff training:

· Detailed reports on job vacancies and jobs to be created,

· Training plan for local employees,

· List of local staff and their evaluation and promotion system,

· Annual internship program for students of the National University of Equatorial Guinea.

d. Documentation related to infrastructure construction (with social impact)

· Detailed report on Social Work Projects and their degree of compliance.

How serious is the local content compliance issue?

The highest penalty for breaching local content standards is that the government can order operators to terminate contracts or prohibit them from renewing contracts they have with a company that does not comply; and this has already happened in the past. Other sanctions include financial sanctions that in the past have reached anywhere between $500,000 to $3 million, sometimes more if we analyze the full impact of the consequences of a sanction. Other much lighter sanctions have included a warning with the company being given a short amount of time to meet very specific requirements.

Furthermore, if a company demonstrates a track record of non-compliance, they will lose the confidence not only of the government but of the operators, because every time a company is sanctioned, all its partners are affected in some way.

Conclusion. So far, three things must now be clear: a) failure to comply with local content requirements may jeopardize not just a company’s contracts, but its very existence in Equatorial Guinea and its ability to renew or obtain new contracts b) local content is a complex issue but c) managing its compliance is not a big deal providing the right steps are taken early on.

Pablo Mitogo is Associate Attorney, Centurion Law Group

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Equatorial Guinea aims to boost opportunities for African services companies

July 23, 2019

In order to strengthen cooperation amongst African companies, encourage the development of strong African content and promote joint-venture opportunities, Malabo will be hosting the Oil & Gas Meeting Day on October 1-2, 2019. The summit is part of Equatorial Guinea’s Year of Energy and will focus on exploring opportunities and deals amongst services companies, which are central to the development of strong African capabilities across the oil & gas value chain.

The African Energy Chamber (EnergyChamber.org) strongly supports the National Alliance of Hydrocarbons Service Companies (NAHSCO) in the organization of this upcoming Oil & Gas Meeting Day. We invite all our partners, especially national oil companies and public and private services companies, to come to Malabo in October. This will be a key platform for dialogue and deals with international, technology and services companies.

“Equatorial Guinea is rapidly becoming a hub for African service companies, driving a regional approach to local content based on partnerships and oil industry cooperation,” said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

“The development of a strong African oil services industry is crucial if we want to get value out of our natural resources and create jobs. The way to build African capacities is to work together and create jobs, and we are happy Malabo is bringing everyone together.”

The Oil & Gas Meeting Day will offer opportunities for African services companies to make deals with regional and international partners and drive global transformations within the oil services industry.

More importantly, it will provide a platform to share experiences on local content and advocate for regionalization of local content development within African oil markets. “With this meeting, African services companies and national oil companies have the chance to not only be part of the game but change it to their benefits,” added Nj Ayuk.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

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Equatorial Guinea’s to boost Opportunities for African Services Companies with Upcoming Oil & amp; Gas Meeting Day

July 18, 2019

In order to strengthen cooperation amongst African companies, encourage the development of strong African content and promote joint-venture opportunities, Malabo will be hosting the Oil & Gas Meeting Day on October 1-2, 2019.

The summit is part of Equatorial Guinea’s Year of Energy and will focus on exploring opportunities and deals amongst services companies, which are central to the development of strong African capabilities across the oil & gas value chain.

The African Energy Chamber strongly supports the National Alliance of Hydrocarbons Service Companies (NAHSCO) in the organization of this upcoming Oil & Gas Meeting Day.

We invite all our partners, especially national oil companies and public and private services companies, to come to Malabo in October. This will be a key platform for dialogue and deals with international, technology and services companies.

“Equatorial Guinea is rapidly becoming a hub for African service companies, driving a regional approach to local content based on partnerships and oil industry cooperation,” said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

“The development of a strong African oil services industry is crucial if we want to get value out of our natural resources and create jobs. The way to build African capacities is to work together and create jobs, and we are happy Malabo is bringing everyone together.”

The Oil & Gas Meeting Day will offer opportunities for African services companies to make deals with regional and international partners and drive global transformations within the oil services industry.

More importantly, it will provide a platform to share experiences on local content and advocate for regionalization of local content development within African oil markets. “With this meeting, African services companies and national oil companies have the chance to not only be part of the game but change it to their benefits,” added Nj Ayuk.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.