Are there any restrictions on export, local content obligations or domestic supply obligations?
Oil & Gas
There are no restrictions to oil exports, with the exception of emergency events, during which ANP may limit the exportation. Such emergency events are those in which the domestic supply of hydrocarbons and their by-products are at risk.
Brazil has local content obligations in place. Local content represents the percentage of local suppliers (goods and services) that a company must use while performing its activities in a given area. This obligation has the goal of fostering the Brazilian O&G industry. The minimum percentage of required local content varies for each ANP Bid Round.
Under the Hydrocarbons Act, the Republic of Croatia has a pre-emption right to purchase the produced hydrocarbons owned by an investor based on market conditions. The current template of the PSA provides for such obligation only in case of natural gas production.
If the hydrocarbons available to the Republic of Croatia are not sufficient for meeting the demand of domestic market, the investor shall be obliged, based on a decision of the Government, to sell to Republic of Croatia the produced hydrocarbons belonging to the investor unless they were already sold by previously concluded contracts.
According to the Croatian Energy Act, in case of a market disturbance due to an unexpected or continuous energy shortage, direct jeopardy to the independence or unity of the state as well as large natural disasters or technological catastrophes (situations of crisis) the Government may enact measures restricting or imposing special requirements regarding the import and export of energy, which includes produced hydrocarbons, mandating delivery of energy to certain buyers, imposing special restriction on certain energy activities, etc.
Under the template PSA, in case of war, possibility of war or grave national emergency, the Government may request in writing all or a part of the crude oil and natural gas produced from the exploitation field(s) and require the investor to increase such production to the extent required.
As to the local content obligations, the template PSA provides that, subject to applicable law, the investor and its subcontractors shall give preference to: i) employment of Croatian and EU workers having necessary skills and competences, and ii) to Croatian and EU companies for their goods, works and services if they can provide them under equivalent conditions in terms of price, quantity, quality, etc.
The law does not provide for any restriction with respect to the exportation of the hydrocarbons by the Lessee. However, in the event of emergency, the Lessee may be required to sell the hydrocarbons to the Greek state.
There are no restrictions on export. However, economic operators who decided to enter the domestic market must keep a “minimum internal stock” the volume of which is calculated on the basis of the volumes input the previous year in the period 1 April – 31 March, and may be reached even adding together the quantity of crude oil with that of other finished products (it is an overall volume). This rule is intended to increase the guaranteed reserves to assure a minimum energy self-sufficiency.
There are no restrictions on export provided that as per the applicable legislation, export of oil requires a special export permit issued by SENER.
Crude oil is usually exported by PEMEX through a subsidiary company, PMI International Commerce. PEMEX is the only company that currently exports crude oil from Mexico, as exploration and extraction contracts have only just been awarded in the past three / four years to private companies. The main exported products are:
- Istmo (light crude oil with 33.6° API).
- Maya (heavy crude oil with 22°API).
- Olmeca (very light crude oil with 39.3°API).
Crude oil is mainly exported to North America and Europe.
Pursuant to the Hydrocarbon Law, companies must comply with minimum percentage requirements for local content. This is determined according to provisions set by the Ministry of the Economy and the contract terms, although there is a requirement to achieve at least 35 per cent local content for all related activities.
Notwithstanding the above, this percentage will not apply to deep and ultra-deep-water activities.
Failure to comply with minimum local content requirements may lead to the imposition of fines or penalties.
As mentioned, the Ministry of Economy sets the criteria to achieve the percentages required under the law and contracts regarding local content requirements, which include, goods, services, personnel, training, transfer of technology and local infrastructure.
Prior contemplating export of its share of production of available crude oil, the holder of a concession must contribute part of its share of production of available crude oil to satisfy the needs of the domestic market.
In addition to the production sharing rules set out under the petroleum tax regime, the Petroleum Law also sets out that the Government should ensure that no less than 25% of the oil and gas produced in the national territory is destined for the national market and to regulate the acquisition, price and other matters inherent to the use of the aforementioned oil and gas quota. We further note that the oil companies are obliged to give the State preference in the acquisition of oil produced in the concession area, according to special legislation, when required for reasons of national interest.
The exportation of petroleum products is subject to licensing. Entities wishing to distribute petroleum products may provide bunker services for the re-exportation of those products, as long as such activities are accompanied by a sale in the national market too.
Entities not based in the country, which seek to carry out bunker activities from Mozambique for the international shipping of products which are located in the country or purchased in a foreign currency exclusively for that purpose, and activities for transporting those products to and from neighbouring countries, must do so through the licensed entities.
In relation to local content obligations, private investors carrying out petroleum upstream operations must comply with the requirements set below.
According to the oil and gas legal framework, holders of oil and gas titles and exploitation rights (upstream or downstream) must give preference to local products and services whenever these are comparable to foreign products and services in terms of quality standards, and whenever the local products and services offered by Mozambican individuals or entities do not exceed the price of imported goods by more than 10% (including taxes).
Also, foreign companies wishing to provide services and goods to oil and gas title holders must have an association with Mozambican natural or legal entities in order to be able to do any business. This means that Mozambican companies must always be included in the projects as providers of services or products, whether directly or through an association with foreign entities.
As for the employment of foreign workers, it is important to reiterate that the basic principle is that Mozambican workers must be hired preferably, and extensive and well-detailed training programmes must be but in place by the operators to develop the local workforce.
Except in relation to reinsurance or captive insurance relating to petroleum operations, construction or facilities, the concessionaires shall give preference to Mozambican insurance companies, if the insurance available locally is comparable to international standards and the prices do not exceed the price of comparable insurance coverage by more than 10% from international markets, inclusive of taxes and related fees.
Besides promoting the Mozambican business community in the oil and gas sector, the Government should ensure that no less than 25% of the oil and gas produced in the national territory is destined for the national market, and should regulate the acquisition, price and other matters integral to the use of the aforementioned oil and gas quota.
In relation to the regime applicable specifically to the Rovuma Basin, it is important to identify the following local content requirements:
- the acquisition of goods and services shall be carried out in conformity with the State's objective of giving preference to national companies, with such companies being held by Mozambican citizens or legal entities and/or owned by Mozambican citizens or Mozambican legal entities in partnership with foreign companies, in order to facilitate the gradual transfer of operational capacity and empower the local economic private sector;
- the concessionaires and specific purpose entities (“SPEs”) shall, individually, draw up a local content plan for each Rovuma Basin Enterprise, which shall be approved by the Government; and
- each local content plan shall establish the participation of singular or legal Mozambican entities and of Mozambican citizens in the supply of goods and services intended for a particular Rovuma Basin Enterprise, which shall be updated every three years so that it can be readjusted to the growth of the Mozambican petroleum and gas industry.
The Local Content Plan shall be drawn up in conformity with the following principles:
- preference in the supply of goods and services shall be given to singular or legal Mozambican entities;
- preference shall be given to goods, materials, services and equipment available in the Republic of Mozambique, provided that such goods, materials, services and equipment are competitive in terms of quality and availability, and that they comply with international standards for the industry and their price does not exceed the price of such items if imported, including import duties, by more than 10%;
- in relation to goods and services requiring specialised know-how, preference shall be given to singular or legal Mozambican entities or to foreign companies associated with singular or legal Mozambican entities by any means permitted by law, including subcontracting or partnerships of an associative or non-associative nature, independent of the level of participation of each of their Mozambican or foreign associates; and
- as regards main contracts and/or contracts for the supply of goods or the rendering of services related to technology, patents or the provision of special requisites – including, namely, those related to the construction, operation and maintenance of the Rovuma Basin Project infrastructure – the contracting entity may freely acquire such goods or services either from foreign companies or from singular or legal Mozambican entities.
The concessionaires and SPEs may adopt different rules in connection with the acquisition of goods and services in respect of projects totally or partially financed by an agency providing credit for exports, insofar as the adoption of different rules is expressly provided for as a condition in such financing contracts.
There are primarily no restrictions on exportation of Oil and Gas Producing Companies in Nigeria. However, these companies are mandated by the Domestic Supply Obligation (DSO) Regime, under the National Domestic Gas Supply and Pricing Regulations (2008) to supply a particular amount/ quota to the Nigerian economy before exporting the residue to other countries.
Equally important is that exporters are required to have a petroleum products export clearance permit in line with the stipulated regulatory guidelines before they can export any such product.
The Nigerian Oil and Gas Industry Content Development Act ("NOGICDA"), establishes a framework by which Nigerian content is significant. Nigerian companies and indigenous operators are given first consideration in the award of Oil blocs, licenses and other significant allocations with regards to the Petroleum Industry.
With respect to employment as well, the International Oil Companies (IOCs) have quotas of expatriates they can have at time. This is set in place to control the influx of foreign employees in this sector and to also promote or engage local expertise.
With respect to domestic obligation, i.e. for Gas, Companies are obligated to have some percentage of their gas for domestic supply for crude oil export, we have what is called the technical allowable rate, this is obtained technically through the assessment of the wells by the upstream division. Each company is therefore given a rate which they cannot exceed. because the life of the well is protected so it can last for long. Also note that the technical allowable rate given to companies will sum up to our export quota by OPEC.
Being a member of the European Union, Bulgaria has to abide by the general principles of free movement of goods and services across borders and non-discriminatory treatment with the common market. Therefore, there are no export or local content obligations.
Upon obtaining the requisite export approvals, a Contractor can export its production entitlement, subject to its Domestic Market Obligation (DMO), under which 25% of the Contractor’s production entitlement must be allocated for the domestic market.
Government Regulation No. 1 of 2019 regarding Export Proceeds from the Exploitation, Management and/or Processing of Natural Resources (“GR 1/2019”) requires foreign exchange proceeds deriving from the export of natural resources, including oil and gas, to be placed in the Indonesian financial system through a special account in an Indonesian foreign exchange bank, which must be licensed by the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”). The Indonesian branch offices of overseas banks do not qualify as Indonesian foreign exchange banks. The placement of the export proceeds in a special account must be carried out no later than the end of the third month after the Registration of Export Declaration (Pemberitahuan Ekspor Barang). The funds in the special account can only be utilized by the PSC Contractor for certain payments, such as customs, loans, imports, profits/dividends and other purposes permitted by the Indonesian Investment Law (Law No. 25 of 2007 regarding Capital Investment). Such special accounts are eligible for a tax incentive in the form of the reduction of deposits tax (ranging from 0-10%), as opposed to the normal deposit tax of 20%.
To implement GR 1/2019, the Indonesian central bank, Bank Indonesia (“BI”), issued BI Regulation No. 21/3/PBI/2019 regarding Foreign Exchange Receipts from Exports from the Exploration, Management and/or Processing of Natural Resources, which revokes BI Regulation No. 16/10/PBI/2014, as amended by BI Regulation No. 17/23/PBI/2015 regarding the Receipt of Export Proceeds in Foreign Exchange and the Withdrawal of Offshore Loan Foreign Exchange.
PSC Contractors are required by law and contract to reserve 25% of their oil and gas production for the domestic market.
In general, there are no such restrictions or obligations. The Government has certain emergency powers under the Energy Act 1976 to control the production and distribution of energy, including oil and gas, in exceptional circumstances, but these powers are intended to be used very rarely. Certain oil and gas companies also have compulsory oil stocking obligations to fulfil the requirements of the EU and the International Energy Agency.
Turkey demonstrates lower figures in export of oil and gas when compared to import of oil and gas due to lack of domestic production. In 2018, 673,28 million Sm3 of natural gas was exported by BOTAŞ which was the only active licence holder among licensed 8 export companies and the amount of exported natural gas decreased by 6,76 % compared to 2017. The scenario does not differ in export of petroleum which decreased by 12,04 % to 8.875.016,246 tonnes by the end of 2018 compared to the figures in 2017.
Petroleum right holders are entitled to export a certain amount of the petroleum and natural gas which is 35% for onshore and 45% for offshore that they produce in fields discovered after 1 January 1980. However, the remaining part and the whole petroleum and natural gas produced in the fields discovered before 1 January 1980 must be reserved for domestic use by the petroleum right holders. The authority to regulate the procedures and principles on the redetermination and implementation of these ratios has been granted to the Council of Ministers by law.
Legal entities that wish to export the natural gas imported or generated within the country abroad must obtain an export licence from the EMRA subject to the Natural Gas Market Act No. 4646 dated April 4, 2001 (“Natural Gas Market Law”). The applicant company must prove and fulfil certain conditions listed below in order to be granted with the export license:
(I) Technical and economical capability of the company,
(II) Information on which country and by which transportation vehicles it shall export the natural gas,
(III) Guarantee to the effect that the export process will not intervene in operation of the system nor satisfaction of the natural gas demand of the country and towards recovery of any loss or damage which may occur if the system security is violated by the company, and
(IV) Insurance coverage as compulsory for the loss and damage
The Tamar and Leviathan leaseholders are obligated under the Framework to invest in "local content", by investing US$ 500 million over the course of eight years in such content. "Local content" is defined to include, inter alia, purchase of goods and services from Israeli registered entities, investment in research and development, and professional training and donations in the area of social responsibility. Up to US$ 80 million may be spent on engagements with Israeli employees. Reports shall be provided on a yearly basis to the Authority for Industrial Cooperation at the Ministry of Economy regarding previous and planned investments.
The Framework also provides a domestic supply obligation, namely that gas exports are restricted to a predetermined quantity of natural gas calculated as a pro rata percentage of all natural gas resources available for the domestic market, in order to ensure an aggregate minimum quantity of at least 540 bcm for local consumption. Further restrictions provide that set percentages of natural gas derived from individual reservoirs are reserved for the local market as well (50% for reservoirs of 200 bcm or greater, 40% for reservoirs of 100 bcm or above, and 25% for reservoirs in the range 25-100 bcm).
On December 16, 2019, the Energy Minister approved the first export permits to export a maximum quantity of about 85 bcm from Israel to Egypt for a period of 15 years. Under the agreement between the Tamar Partners, Leviathan Partners and Dolphinus (an Egyptian gas company), Tamar and Leviathan would each supply Dolphinus with total gas volumes of about 25 bcm from the Tamar reservoir and about 60 bcm from the Leviathan reservoir. The Energy Minister conditioned approval of the export permit on an undertaking from Delek Drilling and Nobel Energy (two of the major partners in Tamar and Leviathan) that domestic pricing would never exceed the export pricing.
In the U.S., there are no local content obligations or current domestic supply obligations; crude oil demand in the U.S. is met through domestic production and a relatively small amount of net imports. However, there are some export restrictions in the U.S. under Section 3 of the Natural Gas Act (NGA). One such restriction requires the prior approval from the Department of Energy (DOE) in the import or export of natural gas (including liquefied natural gas (LNG)) from or to a foreign country. Any entity who wishes to enter into a natural gas transaction with foreign sellers or buyers must follow the procedures found in DOE’s regulations and file for an import and/or export authorization.