Presidential Legislative Decree 8/24, of 20 November 2024, created a Legal and Fiscal Regime applicable to Incremental Production in Mature Oil Blocks and projects in Undeveloped Development Areas. Below is a summary of PLD 8/24:

1. Scope: PLD 8/24 is applicable to the Incremental Production arising:

(i) In a Mature Block;
(ii) From projects in Undeveloped Development Areas.
The above must occur in a block located offshore Angola.

2. Definitions:

“Mature Block” – a block which contains 50% or more of Mature Development Areas. A Mature Development Area is defined as containing 50% or more of Mature Fields. A Mature Field is defined as an oil field where the accumulated production has reached 70% or more of the Total Estimated Volume of 1P Reserves. 1P Reserves must be certified by an independent auditor and approved by the Angolan authority.

“Incremental Production” – positive difference between the crude oil volume produced in a field in a given month and the forecasted volume in the same month corresponding to the Field Reference Curve. The Field Reference Curve or Reference Production is defined as the forecasted production agreed between the National Concessionaire (ANPG) and the Operator taking into account the field’s historical production decline, the approved work program and investment commitments and the certified reserves report.

“Project in Undeveloped Development Area” – project to develop a discovered field in a producing block which warrants the creation of a new development area.

“Large Production Field“ – field located in a Mature Block in water depth up to 750 meters which produces 50.000 or more barrels per day, or in water depth exceeding 750 meters which produces 70.000 or more barrels per day.

3. Production Incentives: The Operator may submit to the National Concessionaire a request for incentives for the Incremental Production in the following cases:

(i) Project in a Mature Blocks with an estimated maximum 25% Internal Rate of Return (IRR) under the existing contractual and fiscal terms;
(ii) Project in an Undeveloped Development Areas in a field without prior commercial production with an estimated minimum 25% IRR (on a standalone basis separate from the adjacent DAs) under the existing contractual and fiscal terms.

The National Concessionaire will set annually (by February) the oil barrel price to be considered to calculate the IRR. The first price set in PD 8/24 is USD 60/barrel.

A number of technical and financial/economic documents must be supplied by the Operator to support the request.

The National Concessionaire will review the request and submit it to the Ministry of Mineral Resources and Petroleum (MIREMPET) for final approval.

The respective petroleum contract covering the block (typically, a Production Sharing Contract (PSC)) will be amended as necessary to reflect the production incentives granted. The incentives are effective from the month following the initial work undertaken under the Development and Production General Plan.

4. Tax Incentives: The following tax incentives may be given to the Incremental Production projects:

(i) Petroleum Production Tax (Royalty) – reduced to 15%;
(ii) Petroleum Income Tax – reduced to 25% in Production Sharing Contracts and 55.75% in Association Contracts.

The tax incentives are only applicable to the Incremental Production (the baseline production remains subject to standard tax). The taxable income assessment and tax compliance obligations of Incremental Production projects are done completely separate from the other Block activities.

As an exception, the Large Production Fields are not eligible for any tax incentives.

5. Cost Oil and Production Sharing: For fields other than Large Production Fields, the Incremental Production share of the National Concessionaire is decreased (and the share of the Contractor Group/Operator is increased accordingly), from the baseline share split set out in the respective PSC, in accordance with a set formula. In addition, the cost oil cap is increased by 15%, up to a maximum of 70%, in the case of:

(i) Projects in Undeveloped Development Areas;
(ii) Mature Blocks where the potential cost recovery exceeds USD 10 per barrel.

For Large Production Fields, when the accumulated production reaches the Reference Production, the cost oil cap is increased as follows:

Provided that the cost oil cap shall not be higher than 75% in any event.

Provided that the National Concessionaire share cannot dip below 20%.

6. Recovery of Exploration Well Costs: The costs incurred with Exploration Wells will be recovered in accordance with the following rules:

(i) All Exploration Well costs, whether they lead to petroleum discovery or not, can be recovered against any existing or future production from any Development Area in the respective block, in the case of a PSC, or de ducted for tax purposes, in case of an Association Contract;
(ii) In the event an Exploration Well is completed as a production or injection well, only the costs related to such completion will be included in the development costs bucket;
(iii) The National Concessionaire must approve any Exploration Well drilling under PD 8/24.

7. Management Committee: The National Concessionaire will set up a dedicated Management Committee to implement the Incremental Production objectives within 30 days of PD 8/24 coming into force.

8. Pending requests: Any requests for Incremental Production incentives in relation to Large Production Fields submitted prior to PD 8/24 shall be considered by the National Concessionaire provided the IRR is less than 25%.

9. Existing Contracts: The existing petroleum contracts shall remain fully valid and effective; however, these contracts may be amended to adjust to the terms of PD 8/24 as necessary.

10. Entry into force: PD 8/24 is applicable from its publication date: 20 November 2024.

For more information about PD 8/24, please contact Rui Amendoeira at rui.amendoeira@onelegal.pt.

Presidential Decree 216/24, of 21 October 2024, approved the Investment Policy of the Angolan Sovereign Fund (Fundo Soberano de Angola, FSDEA). Here is a summary of PD 216/24:

Objectives: The main objectives of the FSDEA are the following:

• Save and transfer wealth to future generations of Angolans;
• Maximize financial returns;
• Manage resources allocated by the state for specific purposes, such as fiscal stability and development of national infrastructure projects.

Investment Principles: The FSDEA shall achieve financial returns while protecting its capital, and its investments shall be aimed at:

• Increasing national wealth through prudent investments based on the best risk/reward balance;
• Creating additional sources of income to Angola and ensure the wealth transfer between generations.

Independence: The FSDEA is totally independent from the state administration and bodies.

Asset Allocation: The FSDSE investment portfolio shall be allocated as follows:

1. Between a minimum of 20% and a maximum of 50% will be invested in fixed income securities issued by sovereign entities of predominantly G7 countries, or companies or financial institutions with investment grade rating;
2. A maximum of 50% will be invested in variable income securities;
3. A maximum of 50% for alternative investments.

Petroleum investments: Investments in petroleum assets shall not exceed 5% of the fund’s assets.

Alternative investments: The fund may invest in alternative investments, including private equity and venture capital.

Hedging: The fund may use hedging instruments, including derivatives, to hedge the risk of its investments.

Leverage: In special cases, the fund may use leverage for its investments up to a maximum of 5% of the fund’s capital.

Reinvestment: Investment returns shall be used primarily for reinvestment. They may also be used for development and social responsibility projects.

Currency: Investments shall be made primarily in US Dollars, although investments in other currencies are also possible.

Risk Management: The Board of Directors of the fund shall approve a Risk Management Policy.

Asset Managers: The fund may hire external asset managers who meet the following requirements:

1. More than 10 years’ experience in at least one G7 economy;
2. Subject to the authority of a regulatory body;
3. Not targeted in any criminal investigation;
4. With assets under management of at least USD 3 billion.

The same asset manager cannot manage more than 30% of the fund’s global portfolio.

By way of Presidential Decree 209/24, of 9 October 2024, the Angolan government has enacted new Regulations on the Sale and Resale of Butane Gas (Butane Gas Regulations). Below is a summary of PD 209/24:

• The sale and resale of butane gas is subject to license to be issued by the following entities:
  
  • The Petroleum Products Institute (“Instituto Regulador dos Derivados de Petróleo”) in case of bulk or wholesale suppliers of butane gas;
  • The local governments in the case of retail sellers of butane gas.
• The license is subject to an initial inspection to be carried out by a technical committee comprised of representatives of the following entities:
  
  • The licensing entity (Petroleum Products Institute or local government, as applicable)
  • Ministry of Commerce
  • Ministry of Health
  • Firefighting department
  • Other concerned public services
• The license is valid for 5 years, and is subject to annual inspections.
• Both wholesalers and retailers must possess installations with the following functionalities:
  
  • A proper warehouse
  • Storage capacity of up to 500 12-kg bottles for retailers, and above 500 bottles for wholesalers
  • A fire and gas leakage emergency plan and appropriate fighting equipment
  • Easy access conditions for loading and offloading, as well as firefighters
  • Personal protection equipment and first aid kit.
• The following are considered administrative offenses:
  
  • The sale/resale of butane gas without a valid license – fine equivalent to 100 to 300 times the minimum wage
  • Lack of fire or gas leakage fighting equipment – fine of 100 minimum wages
  • Lack of first aid kit – fine of 25 minimum wages
  • Absence of proper installations signage – fine of 10 minimum wages
  • Lack of personal protection equipment – fine of 50 minimum wages
• The license may be canceled in the following cases:
  • The licensee has not commenced activity within 180 days of the license date
  • The activity was suspended for 90 days or more
  • The licensee was declared bankrupt
  • The (individual) licensee has passed away or is unable to carry out a commercial activity
  • In case of serious risk to health and safety of the workplace or the environment.

The Hygiene, Safety and Health at Work (“HSH”) services functioning within Angolan companies are subject to new regulations under Presidential Decree 179/24, of 1 August 2024. Below is an outline of PD 179/24:

• HSH services may be provided through:
  • (i) A company in-house department;
  • (ii) Multi-company services;
  • (iii) External service providers.

In any scenario, the HSH services must have appropriate human resources, facilities and equipment to ensure full compliance with Angolan HSH regulations.

• HSH services (in any of the modalities described above) must be authorized by the Labor Inspectorate (Inspeção Geral do Trabalho) of the Ministry of Labor. Authorization is subject to a prior inspection/audit by the Labor Inspectorate. The authorization is valid for a period of 3 years (renewable);
• External service providers of HSH services must provide quarterly reports to the Labor Inspectorate with the following minimum information on their clients:
  • (i) Results of assessments of professional risks;
  • (ii) List of work-related accidents;
  • (iii) Information on absences from work caused by work related illnesses.
• • All HSH employees must be certified by the Labor Inspectorate.
• The occupational health physician must dedicate the following minimum hours to HSH activities within each company:
  • (i) One hour per day for each group of 10 employees, in the case of high-risk industrial facilities;
  • (ii) One hour per day for each group of 20 employee in all other companies.
• The occupational health physician can only be responsible for HSH services in a maximum of 3 companies.
• Medical exams are mandatory for all employees in the following situations:
  • Admission;
  • Regular exams;
  • Return to work;
  • Change of job;
  • Termination of employment.

Exceptions are allowed in certain limited cases.

• Employers must keep a medical report for each employee subject to the following conditions:
  • No information may be included about employee race, nationality, ethnicity or personal habits unless these are related to specific illnesses/diseases;
  • The medical report is confidential, expect it can be disclosed to the occupational health physician and the Labor Inspectorate;
  • The medical report information must be kept by employer for a minimum of 20 years after termination of employment;
  • Employee is entitled to a copy of his/her medical report upon termination of employment.
• Employers who are found to be in breach of PD 179/24 may be subject to a fine/penalty of up to 150 times the minimum wage per offence.

The Angolan parliament (National Parliament) has enacted the Law to Combat Illegal Mining Activity (Law 8/24, of 3 July 2024). The new law criminalizes conduct that stems from the illicit exploitation of mineral resources. The following activities constitute criminal offences and are subject to the following sanctions:

• Participation or facilitation of illegal mining activities – punished with imprisonment from 3 to 8 years and payment of a fine;
• Starting of mining activities, or installation of any equipment therefor, in breach of legal rules – imprisonment from 2 to 8 years and payment of a fine;
• Transportation of illegally extracted minerals – imprisonment from 2 to 6 years and a fine;
• Transportation of equipment or materials to be used in illegal mining activities – imprisonment from 1 to 4 years and a fine;
• Forgery or falsification of a mining title or other document – imprisonment from 2 to 6 years and a fine;
• Use of forged title or document – imprisonment from 1 to 3 years and a fine;
• Fraudulent obtaining or use or a mining title or authorization – imprisonment from 1 to 4 years and a fine;
• Purchase, sale, possess, hide or otherwise transact illegal minerals – imprisonment from 1 to 5 years and a fine.

The above prison terms are increased by 1/3 in certain aggravating circumstances, including (i) when a public officer or official is involved, (ii) a firearm or other form of violence was used, (iii) the crime was committed by a criminal group, (iv) the activity is carried out in an environment protected area, (v) the activity involved deforestation or other serious environmental impact, etc..

Any goods or equipment involved in a criminal activity will be confiscated by the State, unless they belong to a bona fine owner.

Rui Amendoeira, OneLegal Partner.

The Activity Plan and Budget 2024-25 of ANPG, the Angolan oil & gas regulator and Concessionaire, has just been published and approved by Presidential Decree 125/24, of 14 June 2024. This is a key document for the Angolan petroleum industry as it lays down the government’s strategy to revitalize the sector with the goal of increasing production.

The plan contains a significant number of actions and initiatives, but we have selected the following as the most critical:

• ANPG is currently working on developing several regulations, including the following:

1. Technical Regulation of the General Development and Production Plan;
2. Technical Regulation for the Submission of Production Data and Information;
3. Technical Regulation on Use of Third-Party Facilities;
4. Technical Regulation on Well Safety and Integrity;
5. Instruction on Reporting Concession Economic and Entitlement Information;
6. Technical Regulation on Gas Flaring and Leakage;
7. Technical Regulation for Natural Gas Processing Facilities.

• Construction of the ANPG Exploration and Production Data Center;
• Certification of the petroleum reserves estimates presented by the operators;
• Proceed with the development of the New Gas Consortium project (develop Quiluma and Maboqueiro non-associated gas reserves);
• Conduct feasibility studies to build export terminals for the Congo and Kwanza onshore basins production;
• Conduct feasibility studies to expand gas pipeline network;
• Accelerate the program for production (opex and capex) cost reduction/optimization;
• Evaluate the potential of Lower Congo, Kwanza, Benguela and Namibe basins and increase exploration in all free areas;
• Conclude the 2023 Licensing Round process;
• Prepare the 2025 Licensing Round (“permanent offer blocks” and “pre-salt blocks”);
• Award new blocks by direct negotiation;
• Provide additional tax incentives for mature fields and to stimulate exploration in existing development areas as part of the “Incremental Production Project”;
• Develop strategy to award petroleum concessions in 2026-2030.

Rui Amendoeira, OneLegal Partner.

A project-specific Value Added Tax (VAT) regime for the New Gas Consortium was created by way of Presidential Legislative Decree 6/24, of 22 May 2024. Below is an outline of the new VAT regime:

• The regime is applicable to the Petroleum Companies (Azule Energy, Chevron, Sonangol P&P and TotalEnergies) that carry out exploration, production, transport and sale of natural gas in the Concession Area of the New Gas Consortium under the respective Risk Service Contract concluded with the National Concessionaire (ANPG);
• The Petroleum Companies are subject to the section of the VAT Code specifically applicable to the petroleum industry;
• The following operations are exempt from VAT:

                       1- The importation of equipment, raw materials and other products used in the petroleum
                             operations;

                       2- The acquisition in the Angolan market of equipment exclusively and directly used in the
                             petroleum operations.

• The sale of natural gas in the Angolan market made by the Petroleum Companies is equivalent to the exportation of gas for purposes of the right of VAT deduction;
• VAT refunds may be requested by the Petroleum Company 1 month after a situation of overpayment. If refund is not processed within 1 month of request, the tax office must issue a Certificate of Tax Credit within 5 business days;
• A Certificate of Tax Credit may be used against any owed tax (including customs duties, Industrial Tax withholding and Surface Fee), with the exception of the following: (i) Petroleum Income Tax, (ii) Petroleum Production Tax, (iii) Petroleum Transaction Tax, and (iv) Workers Compensation Tax;
• The Petroleum Companies must withhold (and pay to the tax office) the VAT amount included in the invoices for the acquisition of goods and services (captive VAT) in accordance with the VAT Code;
• The captive VAT must be paid in full to the tax office (including VAT relating to operations that grant right to deduct) except in relation to the aforementioned exemptions;
• If deductible VAT is included in the exploration, development, production and abandonment costs of the Petroleum Company, same VAT shall not be deducted against Petroleum Income Tax.

Each Petroleum Company described above must create a separate entity exclusively dedicated to the New Gas Consortium activities.

The New Gas Consortium is Angola’s first non-associated gas development project. It is operated by Azule Energy with a 37.4% interest, and also includes Chevron (31%), Sonangol P&P (19.8%) and TotalEnergies (11.8%).

Rui Amendoeira, OneLegal Partner.

Presidential Legislative Decree 4/24, of 22 May 2024, and Presidential Legislative Decree 5/24, of 22 May 2024 enacted the tax incentives for the concession areas of Blocks 49 and 50, respectively. The list of incentives is as follows:

• “Qualified Marginal Zones” declared in the areas will enjoy the tax incentives set forth in Presidential Legislative Decree 6/18, of 18 May 2018. A “Qualified Marginal Zone” is defined as a deposit that:
                           1) Has recoverable reserves equal to or less than 300 million barrels and a after tax Internal Rate of Return (IRR) of less than 25%; or
                           2) Has recoverable reserves greater than 300 million barrels and a after tax IRR of less than 20%.

• The IRR is to be confirmed by the Ministry of Finance through an annual independent audit. In the event of a dispute on the IRR calculation, the National Concessionaire and/or the Joint Venture may submit the matter to an independent expert;
• The investments and costs incurred in projects aimed at reducing greenhouse gas emissions will be depreciated for tax purposes at the rate of 33.33% per year;
• Any exploration costs incurred may be deducted against revenues generated in any part of the concession area, including in the Qualified Marginal Zones;
• An Investment Premium is given as follows:
• In the amount of 30% for any capital expenditures incurred in the concession area, except in a Qualified Marginal Zone, to be deducted against Petroleum Income Tax;
• In the amount of 20% for any capital expenditures incurred in a Qualified Marginal Zone to be deducted against Petroleum Transaction Tax;
• In the amount of 30% for any capital expenditures incurred in a project aimed at reducing greenhouse gas emissions (except in a Qualified Marginal Zone) to be deducted against Petroleum Income Tax;
• In the amount of 20% for any capital expenditures incurred in a project aimed at reducing greenhouse gas emissions and located in a Qualified Marginal Zone to be deducted against Petroleum Transaction Tax.

In the event a change of law occurs after the signing of the Risk Service Contract for Blocks 49 & 50 which negatively affects the above set of incentives, the National Concessionaire and the Joint Venture must amend the said contract as necessary to restore the initial economic balance.

Blocks 49 & 50 were awarded last January and will be operated by Cabinda Gulf Oil Company Limited – Chevron’s Angolan subsidiary – under a Risk Service Contract to be signed with ANPG (National Concessionaire). The blocks are located in the ultra-deep waters of the Lower Congo Basin.

Rui Amendoeira, OneLegal Partner.

By way of Order 2/24, of 22 March 2024, the Angolan Central Bank (BNA) adopted the regulations (“Regulations”) for implementation of Law 5/20, of 27 January 2020, on the Prevention and Combating of Money Laundering, Terrorist Financing and Proliferation of Weapons of Mass Destruction applicable to financial institutions (banks). Below are some practical highlights of the new Regulations:

• Banks must engage in a risk assessment process every 12 months (or 24 months in certain cases);
• Banks must suspend any operation or freeze an account if:
  1- The operation is considered suspicious;
  2- It involves a person or entity which is part of a blocked, sanctions or restricted list.
• Banks cannot open anonymous accounts or accounts under fictitious names;
• Banks must keep and preserve information for any operation (or related operations) equal to or higher than USD 15.000;
• In case of corporate clients, the ultimate beneficiary owner (UBO) of such client must always be identified;
• In addition to the identity information on the clients/UBOs, banks must also obtain or assess the following additional elements:
  1- Source of client’s funds and wealth;
  2- Proof that the funds were obtained in a legitimate manner;
  3- Client’s reputation and background;
  4- Information on client’s family relatives and business partners.
• Risk management procedures are reinforced for clients/operations involving (i) high  risk jurisdictions, (ii) private banking clients, and (iii) politically exposed persons (PEPs);
• Banks must immediately report to BNA (Financial Information Unit) any operation involving a crime of money laundering, terrorist financing or proliferation of weapons of mass destruction or any other crime;
• Banks must create internal channels for receiving reports and complaints regarding the above crimes;
• Each bank must have a Compliance Officer;
• In case the bank decides to terminate the relationship with a client, it must;
• Immediately stop any operation or transfer related to that client;
• Close the account and request the client to transfer the funds to another bank or withdraw the funds within 30 days.

Banks must submit an annual report to BNA on their policies and procedures to prevent and manage risks associated with money laundering, terrorist financing and proliferation of weapons of mass destruction.

Rui Amendoeira, OneLegal Partner.