Tunisia oil and gas report - Freshfields

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of Industry and Technology, and the CentralBank. The Ministry of Industry andTechnology is required to seek advice fromthe Hydrocarbons Advisory Committeewhen granting a permit/concession and, ifrequired, for any other hydrocarbonrelatedmatters.National oil and gas companies are keyindustry participants in Tunisia. The mainnational entities are: Entreprise Tunisienned’Activités Pétrolières (ETAP), the stateownedcompany established by legislation in1972 that is responsible for the exploitationand trade of hydrocarbons; SociétéTunisienne d’Electricité et de Gaz (STEG), astate-owned entity that is the exclusivedistributor of gas; and Société Tunisiennedes Industries de Raffinage, a state-ownedoil refinery that also trades refined oil.Licensing regimeThe licensing regime set out in theHydrocarbons Code covers four differenttypes of hydrocarbons rights. These includepreliminary authorisations for limitedseismic and drilling work and then grants ofrights to explore for develop and producehydrocarbons, each as described below.Contractors can either participate inexploration permits and concessionagreements directly as co-holders withETAP or, where ETAP is the party awardedthe permit or agreement, as contractorsengaged by ETAP under a productionsharing contract.• A prospecting authorisation is grantedby the Ministry of Industry andTechnology for a period of one year to oneor more companies for the same area.This authorisation enables the holder(s) toperform preliminary prospecting workwithin the defined area, except forseismic works and drilling wells.• A prospecting permit is granted by theMinistry of Industry and Technology for aperiod of two years (which may beextended for a maximum of 12 months).This permit gives the holder(s) theexclusive right to perform prospectingwork within a defined area, except fordrilling activities that exceed 300 metersin depth and that are not intended solelyfor geological and seismic coring. Theholder of a prospecting permit has apriority right to have its prospectingpermit transformed into an explorationpermit if applied for at least two monthsbefore its expiry.• An exploration permit is granted by theMinistry of Industry and Technology foran initial period of up to five years andmay be renewed twice for a period of fouryears each. A third renewal of a period offour years may be granted if the permitholder discovers oil. The holder of thepermit has the exclusive right to conductexploration activities within the definedblock and the exclusive right toobtain exploitation concessions withinthat block.To be granted an exploration permit, anapplicant must show the necessarytechnical and financial capabilities, have apresence in Tunisia, undertake toimplement an exploration workprogramme (specifying the nature and thesize of the work to be carried out with anestimate of the associated costs) and enterinto a Specific Agreement (ConventionParticulière) with the Tunisian state asdrafted in accordance with a standardmodel approved by Decree No. 2001–1842dated 1 August 2001. This SpecificAgreement and its attachments must beapproved by Decree of the Ministry ofIndustry and Technology and published inthe Official Gazette of the Republic of Tunisia. Itsets out the terms and conditions of therelationship between the Tunisian state,represented by the Ministry of Industryand Technology (referred to in the Tunisian2 Freshfields Bruckhaus Deringer llpTunisiaMarch 2013
Hydrocarbon Code as the GrantingAuthority) and the permit holder duringthe exploration and exploitation concessionperiods.Under the Tunisian Hydrocarbons Code,an exploration permit will not be grantedunless the applicant is acting inassociation with ETAP. Therefore, everycompany must agree to be associatedwith ETAP from the outset of explorationactivities. ETAP and its future associatesmust enter into a joint venture agreement(Contrat d’Association), setting out thenature of ETAP’s participation, and theterms and conditions that will apply to it.The Contrat d’Association and anyaddendum to it is subject to approval bythe Granting Authority.Under the ‘Association Regime’, theassociate of ETAP bears the cost and riskof carrying out the prospecting andexploration activities. However, in certaincases, ETAP may opt to contribute to thecost of such activities subject to approvalby the Granting Authority.Where exploration activities lead to acommercial discovery, the holder of avalid exploration permit may, under theterms of the Specific Agreement, applyfor an exploitation concession.• An exploitation concession may begranted by an order of the Minister ofIndustry and Technology, which must bepublished in the Official Gazette.ETAP has an option to acquire an interestin any exploitation concession, up to amaximum percentage interest, inprinciple 50 per cent, set out in therelevant Specific Agreement. If ETAPchooses to exercise its option to acquirean interest in the concession under theSpecific Agreement, it must reimburse itsassociate(s) for its share of the costsincurred up to the date of notification ofETAP’s participation.In addition to the Association Regimedescribed above, the Hydrocarbons Code alsoprovides for a production sharing agreement(PSA) as the basis for carrying out petroleumactivities. According to Article 97 of theHydrocarbons Code, ETAP in its capacity asholder of an exploration permit can enterinto a PSA with a company (or group ofcompanies) that will act as ‘contractor’. Incase of a commercial discovery, ETAP asholder of the exploration permit will thenbe awarded an exploitation concession.Under the ‘PSA Regime’, the contractorcarries out the exploration and exploitationactivities and bears all costs and risks onbehalf of and under the control of ETAP.National oil company/state participationAs indicated above, under the HydrocarbonsCode, an exploration permit will not begranted unless the applicant is acting inassociation with ETAP or as a contractorunder the PSA Regime. Under theAssociation Regime, ETAP has an option toacquire a participation in any exploitationconcession granted as a result of acommercial discovery under an explorationpermit. Under the PSA Regime, ETAPhas an entitlement to a share ofhydrocarbon production.Fiscal regimeThe fiscal regime applicable to E&Pcompanies operating in Tunisia is governedin particular by the Hydrocarbons Code.Taxes applicable to the upstream oil and gassector are set out below.• Registration fee – payment of a fixed feefor the registration of the SpecificAgreements, Contrats d’Association, PSAs,and any related agreements (20 TND perpage, approx $13).• Royalty (Article 101.2.1 of the TunisianHydrocarbons Code) – a royaltyproportional to the quantity ofhydrocarbons produced by the holder ofan exploitation concession is payableFreshfields Bruckhaus Deringer llpTunisiaMarch 20133
Page 4 and 5: either in kind or in cash to the Gr
Page 6: Stabilisation/equilibrium anddisput

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