Petrosen: Understanding the 10% in oil contracts in Senegal

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• • 16/11/2016

OPINION: Understanding the 10% in oil contracts in Senegal

The discovery of black gold in Senegal has nourished and continues to feed many debates.
While some of them have mastered the oil issues perfectly, others do not really understand the subject, especially as regards the Senegalese share of production, many Senegalese think that the country has only 10% of the oil contracts and they ask themselves the question: If this "modest share" can make full use of oil?
By this modest contribution we will try to explain these 10% in order to allow some to better understand the income of the Senegalese state in oil contracts.
To understand these "10%" it is necessary to start from the principle of participation of the national company in the oil projects laid down by article 7 of the law n ° 98-05 of 8 January 1998 on the petroleum code repealing the old law n ° 86-13 of 14 April 1986.
This article provides that "the State has the right to participate directly or indirectly in all or part of the oil operations by associating itself with the holders of a mining title of hydrocarbons or a contract of services .... ".
Thus, when a deposit deemed commercially exploitable is discovered, the Senegalese State will involve its national petroleum company (PETROSEN) created in May 1981, which is the instrument for applying oil policy in petroleum projects by assigning it On a non-costly basis, its 10%.
For example, research and production sharing contracts (CRPPs) granted to Capricorn Senegal on the Rufisque Offshore block and on the Sangomar Offshore block, under this contract PETROSEN holds 10% of the consortium, Capricorn (40%), ConocoPhilips (35%), First Australian Resources LTD (15%).
And in the CRPP granted to Petro Tim on the block of Cayar Offshore Profond and that of Saint Louis Offshore Profond, PETROSEN holds 10% and Petro Tim 90%, in the CRPP granted to Oranto Petroleum on the block of Cayar Offshore, PETROSEN Holds 10% and Oranto 90% to quote only the list of oil permits is available on the site of ITIE Senegal.
It is necessary to understand by these "10%" of the PETRSOEN in these contracts two things:
First, that the 10% "belong" to PETROSEN, it is a party to the CRPP and has 10% of the shares of the consortium.
As a shareholder, it will acquire rights and obligations on the same basis as the other parties (foreign oil companies) to the contract. It will thus form with these foreign companies a contract of association called joint venture contract, to carry out the petroleum activities.
PETROSEN will then obtain, in accordance with the sharing mechanism set up by the CRPP, a share of in-kind production (commonly called in the oil industry) which will be equivalent to its 10% participation in the Oil projects.
In practice, oil shares are divided as follows: a share of the total oil production called "cost oil" is allocated to the reimbursement of petroleum costs and the remainder called "profit oil" is shared Between the State and its contractors.
The sharing of the profit oil is done by allocating a rate to the Senegalese State and a rate to its contractors, namely the foreign oil companies and PETROSEN.
In accordance with Article 24.2 of the CRPP model introduced in 1994 in Senegal, the PETROSEN representative of the State in oil contracts has the right to increase its participation percentage.
In this case, the entities constituting the contractor, namely the foreign oil companies, will each assign to it, in proportion to their participation at that time, a percentage of their participation, the total of which will be equal to the amount of the increase 'she decides.
From that moment, PETROSEN will reimburse the contractor (the foreign company (s), without interest, in proportion to the increase of its participation, the expenses relating to the exploitation. Development and operating expenses in proportion to the increase in ownership.
This is justified by the fact that the CRPP is a risky contract (investments in research and development and exploitation are assumed by foreign oil companies at their own risk and expense), they are only reimbursed for their financing, In the event of a discovery commercially exploitable conversely they lose the sums committed.
Moreover, it is this risk governing the oil contract that makes it necessary for Senegal to appeal to foreign oil companies, which have the technical and financial capacity to carry out the oil activites.
In practice PETROSEN rarely increases its participation rate in view of the fact that petroleum operations are expensive. It does not often exceed 10%.
Subject to what has been said, it should be noted that these "10%" corresponds just to the participation of PETROSEN and naturally to the profit that it derives from this participation in the oil projects with the companies and not to a quota Of the share of production that the Senegalese state derives from oil projects.
This 10% is only indirectly a part of the oil revenues of Senegal, it must not be forgotten that PETROSEN is a public limited company with a majority shareholding, the capital of which is 99% owned by the State of Senegal And 1% by the Société Nationale de Recouvrement, so its share (10%) in the CRPP "belongs" to the State.
The Senegalese state, as the owner of the natural resources of oil, earns more than "10%". Its revenues from petroleum contracts include, among other things, royalties, superficial rents, taxes including corporate taxes, taxes, customs duties, financing to support the training of national executives Oil companies, support for social actions, contributions, the share of production (Profit oil of the State, that is to say the share that belongs to it after the division of production between the contractors) and of course the Share of the production of PETROSEN (Profit oil PETROSEN).
KARDIATOU KA Doctorate Public Law Cotutelle
Burgundy University / Franche-Comté & Cheikh Anta Diop University