The case of São Tomé e Príncipe

Séminaire régional sur la gestion des contrats pétroliers et gaziers,Libreville, 28-30 avril 2008

Contents

• Introduction

• JDZ

• EEZ

• Revenue Management policy

Introduction

• São Tomé e Príncipe is still on the incipient stage on the petroleum activity and the country should be considered a special case as we have two diferent zones of resource management, namely the Joint Development Zone (JDA) and the Exclusive Economic Zone (EEZ).

The Joint Development Zone

• It is a common Zone with the Federal Republic of Nigeria, established in 2001 by the Abuja Treaty, in the overlapping boundary area of both Countries

The Joint Development Zone

• The management of the Zone is by the Joint Development Authority (JDA), headed by a board of directors, composed by 4 executive directors (2 from Nigeria and 2 from from São Tome and Principe). The Executive Directors are appointed by the respectives Heads of State.

Joint Development Authority

• JDA reports to Joint Ministerial Council(JMC) which oversight politically the activities of the Zone;

• JMC is composed by 8 ministers (four from each country member);

• Minister of Foreign Affairs, Minister of Defence, Minister in charge of Oil Sector and Minister in charge of fishery)

JDZ – Licensing Round

• Two open and public licensing rounds were organised in 2003 and 2004.

• The JMC have awarded 6 blocs out of 9 placed for tender;

• And so far we have signed four production sharing contracts for blocks 1, 2, 3 and 4

JDZ - Developments

• Chevron Texaco operates block1 has commenced the exploration phase drilling the first well in 2006

• Sinopec is the operator of block2 and ADDAX (operator of block 4) will commence drilling last quarter of this year

• Anadarko (operator of block 3) will drill first wells in the first quarter of 2009

JDZ

• The signature bonus are the only revenue obtained so far by two countries on this overlapping claim zone

• Commercial and fiscal terms are attractive, e.g., there is only one tax (incoming tax), flat rate of 40 %; the profit oil is based on ratio factor formula.

EEZ- Exclusive Economic Zone

• No petroleum activity yet in the Zone

• A comprehensive legal framework studies with technical assistence from the World Bank, that includes revised Petroleum Law, Production Sharing Contract Model and Tax Law will be approved soon by the Government and the National Assembly (about May and June 2008)

EEZ

• After the approval of legal framework package it will follow the approval of the EEZ blocks delimitation by the Government

Revenue Management Policy

• São Tomé e Principe have adopted in 2004 the Revenue Management Law (Lei n.º 8/2004, 30th December) which defines the mechanisms for the use of oil resources in a transparent and accountable manner

• The revenues from oil resources will be deposited in special account, hosted abroad, named NATIONAL OIL ACCOUNT.

Revenue Management Policy

• The transfer of funds to finance the national budget must be approved by the National Assembly, on an annual basis, and cannot be more than 20% of the balance from the previous year

• To withdraw the funds it is necessary 4 signatures from different national entities:

• The President of Republic, the Prime Minister, The Director of National Treasury and the Director of Foreign Operations of the Central Bank

• In the law there is a provision to create a Permanent Fund for the future generation.

THANK YOU

OBRIGADO!!