Cameroon: Energy – Oil & Gas

Oil and Gas Industry

There is a well-established upstream oil and gas industry in Cameroon, supervised and regulated by the Ministry of Mines, Industry and Technological Development (hereinafter the “MINMIDT”) and carried by the Société Nationale des Hydrocarbures (hereinafter the “SNH”).

Current Production Level

Following a report from the SNH on the 2022 statistics key figures from the 1st January to the 30th April[1], oil production was evaluated at 8.196 million barrels (-2.65% compared to the same period last year). Whereas gas production was estimated at 30,947.43 million cubic feet or 876.33 million m3 (+13.49% compared to the same period the previous year).

Oil and Gas Reserve Level

In 2021, Cameroon’s proven petroleum reserves were estimated at 200 million barrels[2].

[1] https://www.snh.cm/index.php/en/hydrocarbons-in-cameroon/key-data
[2] https://fr.countryeconomy.com/energie-et-environnement/petrole/reserves/cameroun

Oil and Gas Exploitation and Exploration Rights

Exploitation or exploration operations may only be carried out following a prior authorisation by the State be it by national or foreigners, owners or non-owners of land.

In Cameroon, hydrocarbon exploration and exploitation rights are granted through Petroleum contracts and Authorisations.

Oil and gas regulatory regime

The oil and gas sector in Cameroon is regulated as follows:

• The Petroleum code (Law N°2019/008 of 25 April 2019 to Institute the Petroleum Code);
• The Implementing Decree of the Petroleum Code: the implementation Decree of this Law has not been published to date, thus for the modalities of implementation of the Petroleum Code, it is still referred to the Decree n°465/PM/2000 dated June 30, 2000 which laid down the modalities of implementation of the Law N°99-013 dated December 22, 2019;
• The General Tax Code;
• The Law on Environmental Management (Law N°96/12 of 05 August relating to Environmental Protection);
• The Decree on the Procedures for Carrying out Environmental and Social Impact Studies (Decree No. 2013/0171/PM of 14 February 2013 to Lay Down the Terms and Conditions for Conducting Environmental and Social Impact Assessments);
• The Order fixing the Categories of Operations Subject to an Environmental Impact Study (Order N°0069/MINEP of 08 March 2005 Fixing the Different Categories of Operations requiring Environmental Impact Studies);
• Uniform Acts adopted by the Organisation for the Harmonisation of Business Law in Africa (OHADA);
• Exchange Control Regulations applicable within the Economic and Monetary Community of Central Africa (CEMAC).

The Cameroonian legislator did not provide a separate regulation for onshore and offshore oil and gas activities in the country. The regime therefore applies for both onshore and offshore activities without distinction.

The exercise of petroleum exploration and exploitation activities is done under a petroleum contract (A) and an authorisation (B).

Main characteristics of oil exploration and exploitation contracts

• Concession contracts

It is an agreement concluded prior to the granting of a hydrocarbon exploration authorisation[1].

• The production sharing contract

It is an agreement by which the State, directly or through a duly mandated public body, hire the services of a holder to carry out exclusively on its behalf exploration and exploitation activities in a specific area in the event of the discovery of commercially exploitable hydrocarbon zones[2].

• The risk service contract

It is an agreement whereby the State or a mandated public body grants exclusive rights to explore for and exploit hydrocarbons in a specific area to a holder who takes financial risks[3].

Main features of exploration and exploitation authorisations

• Prospecting authorisation

It is an authorisation granted by MINMIDT which gives its beneficiary, within a defined area, the non-exclusive right to carry out preliminary prospecting work. It does not constitute a hydrocarbon mining title and is neither assignable nor transferable[4].

• Exploration authorisation

Granted by decree of the President of the Republic for a maximum initial period of three (03) years, it confers on its holder the exclusive right to carry out, at his own risk and expense within the limits of the perimeter which is the subject of the authorisation, all hydrocarbon exploration and research work, except where excluded by the law[5].

• Provisional exploitation authorisation

It gives its holder the right to carry out prolonged production tests and/or to exploit productive wells on a provisional basis for a period not exceeding two (02) years8[6]

• Exploitation authorisation

It is granted by a decree of the President of the Republic with an initial period of twenty-five (25) years for liquid hydrocarbons and thirty-five (35) years for gaseous hydrocarbons and is renewable only once at the request of the holder for a maximum additional period not exceeding ten (10) years[7].

• domestic transportation Authorisation

It confers on the holder of an exploitation authorisation the right to transport in its own installations or to have transposed in its installations of third parties within the territory while retaining ownership, the products resulting from its exploitation activities or its share of the said products, to any collection, export, processing, refining or storage point[8].

[1] Article 15 of the Petroleum Code.
[2] Articles 16 et seq. of the Petroleum Code.
[3] Article 18 of the Petroleum Code.
[4] Article 27 of the Petroleum Code.
[5] Articles 30 et seq. of the Petroleum Code.
[6] Article 39 et seq. of the Petroleum Code.
[7] Article 40 et seq. of the Petroleum Code.
[8] Article 49 et seq. of the Petroleum Code.

No, to date, the exploitation of unconventional hydrocarbon resources is not yet regulated separately in Cameroon.

The main regulators of the oil and gas industry are:

• The Ministry of Industry, Mines and Technological Development (MINMIDT);
• The National Hydrocarbons Corporation of Cameroon (Société Nationale des Hydrocarbures du Cameroun) (SNH);
• The Committee for the follow-up of Cameroon Extractive Industries Transparency Initiative (EITI);

The Cameroonian state is directly involved in the oil and gas industry. Through MINMIDT, it controls and monitors the activities of the upstream oil and gas sector. This ministry also supervises SNH which is a public company whose activities include the promotion, development and monitoring of petroleum activities throughout the national territory.

• On requirements

Operators in the upstream hydrocarbon sector in Cameroon must comply with the following requirements[1]:

• Carry out all operations in accordance with the current standards in the international petroleum industry;
• Submit to the validation of the Minister in charge any intention to subcontract when the value exceeds the floor amount spelt out in the contract;
• Give preference in the award of contracts to Cameroonian companies for any contract of construction or supply when the terms are competitive;
• Employ in priority qualified personnel of Cameroonian nationality and subscribe to insurance policies with local insurance companies for purposes of their operations;
• Ensure compliance with standards of hygiene and safety during their operations; and
• Allocate in priority when the MINMIDT so requires, the share of production to meet the Cameroonian domestic market in case of hydrocarbon commercial production[2].

• On restrictions

As a restriction, it should be noted that any foreign company wishing to operate in the upstream oil sector in Cameroon must have a permanent establishment in the territory.

[1] Part 4 Chapter 1 of the Petroleum Code.
[2] Article 84(1) of the Petroleum Code.

1. Environmental regime applicable to upstream oil and gas activities
   Where petroleum operations are likely to have an impact on the natural environment, the operator carrying out the exploration/exploitation operations must take responsibility for a detailed environmental impact assessment of the area[1], but before that an application for its realisation should be made before the Minister in charge of Hydrocarbons and the environment for their approval[2]. Failure to realise or wrongly an environmental impact assessment when necessary, is punishable by fines.
2. Health and safety regime applicable to oil and gas activities
   The oil and gas operators in Cameroon are required to ensure compliance with standards of hygiene and safety during their operations in accordance with the rules and regulations in force in Cameroon and the practice in the international petroleum industry.

[1] Article 92 of the Petroleum Code.
[2] Article 7(1) of the Decree on the Procedures for Carrying out Environmental and Social Impact Studies

In Cameroon, the government benefits from oil and gas resources through various mechanisms: various royalties, production sharing with operators, and taxes[1].

1. Production sharing Under a production sharing contract, hydrocarbon production is shared between the State and the holder of oil contract, in accordance with the stipulations of the contract.
2. Royalties The holders of oil contracts as well as the companies associated with them are subject to the payment of a certain number of royalties due to their research and exploitation activities on Cameroonian territory[2].
3. Taxes and duties The holders of oil contracts as well as the companies associated with them are subject to the payment of a certain number of taxes:
   1. Corporate tax: the corporate tax rate applicable to oil and gas operations is set at 35%[3].
   2. Miscellaneous taxes: the holder remains subject to all obligations of assessment and payment relating to taxes and duties deducted at source on behalf of the public treasury, with the exception of all taxes and duties on interest paid to non-resident lenders for funds relating to development investments[4].
   3. Ordinary taxes: under the conditions of ordinary law, holders of oil contracts are subject to registration, stamp, toll, land registration and motor vehicle taxes, with the exception of registration fees relating to loans, guarantees and contracts directly linked to oil operations[5].
4. Tax deductions and exemptions
   Oil and gas exploration and exploitation operations are exempt from the imposition of certain taxes, as indicated below:
   • Holders of shares in operators are exempt from any tax or duty on profits and dividends (withholding tax) paid to them subject to tax treaties signed by Cameroon (if any);
   • Petroleum operations carried out on behalf of the State, local authorities and any legal person under public law are exempt from any direct tax on revenues;
   • All export duties and taxes for activities carried out by oil operators and their subcontractors;
   • The supply of all types of goods and services, including studies directly related to the conduct of oil operations, is exempt from value added tax (VAT);
   • The supply of all types of goods and services, including studies directly related to the conduct of oil operations, is exempt from the special tax on oil products or similar taxes;
   • In the context of the conduct of petroleum exploration and exploitation operations, the holders and their subcontractors are exempt from the payment of the special income tax. However, this exemption is limited in scope.
5. Investment incentives in the upstream oil sector
   Oil contract holders carrying out oil operations on the territory of Cameroon are authorised to keep their accounts in US dollars[6].The other incentives that may be granted by the State include[7]:
   • Exemption from payment of the signature bonus for oil contracts;
   • Exemption from the payment of corporate tax for a limited period;
   • The adjustment of the economic parameters of the oil contract;
   • The possibility of recovering, from any production from a given exploitation perimeter, seismic acquisition and dry exploration drilling expenses incurred on any other contractual perimeter in which the applicant carries out oil operations;
   • The tax consolidation of research expenditure.

[1] Part 4 Chapter 1of the Petroleum Code.
[2] Article 102 of the Petroleum Code.
[3] Article 107 of the Petroleum Code.
[4] Article 111 of the Petroleum Code.
[5] Article 110 of the Petroleum Code.
[6] Article 107(3) of the Petroleum Code.
[7] Article 129 of the Petroleum Code

There are no restrictions on the export of oil and gas products extracted in Cameroon.

The local content requirements in Cameroon are as follows[1]:

• With equal competence and in priority, to recruit qualified Cameroonians in all socio-professional categories and in all positions for the conduct of their oil operations;
• Award contracts for construction, insurance, supply of goods and services directly or indirectly related to oil operations to Cameroonian companies meeting an internationally recognised standard;
• Establish and finance vocational, technical and other training programmes for Cameroonians to increase their skills in oil-related occupations.

With regard to domestic supply obligations, it is provided that it is only after the needs of the Cameroonian domestic market have been met that the oil contracts holders are free to dispose of the share of the hydrocarbon production to which they are entitled.

[1] Article 6 and following of the Petroleum Code.

Unless otherwise decided by MINMIDT, the holder undertakes, when surrendering part of the contractual perimeter, or when the abandonment of a well or a deposit is made necessary for technical or economic reasons and at the end of the petroleum contract, as the case may be to remove from the surrendered part or the contractual perimeter, the equipment, installations, structures and pipelines used for petroleum operations, to carry out site rehabilitation works in accordance with the provisions of an abandonment plan and in conformity with the standards of the International Maritime Organization and the practices in force in the international petroleum industry[1].

[1] Article 78 of the Petroleum Code Implementation Decree.

Offshore equipment installations related to Petroleum Operations shall be constructed, located, marked, equipped and maintained in such a way as to ensure the safe operation of the shipping lanes. These installations shall comply with the navigation rules approved by the competent maritime authorities. The Holder shall apply to MINMIDT for authorisation before commencing any construction, alteration or operation of a pipeline, pumping station, storage facility and other related equipment intended for the transportation or storage of Hydrocarbons[1].

[1] Articles 82 et seq. of the Implementing Decree of the Petroleum Code.

Regulatory regime

LNG liquefaction is considered by Cameroonian legislation as a processing operation[1]. Liquefaction operations are carried out following the issuance of a licence[2] delivered by the Ministry of Water and Energy (hereafter “MINEE”), in charge of the downstream gas sector.

Processing licences are granted for a maximum period of twenty-five (25) years. This period also applies to gas storage and the production of liquefied natural gas.

In Cameroon, any application for the grant, renewal or transfer of the processing licence, shall be subject to the payment of a fixed fee whose rates are legally prescribed[3].

In addition, the operator of the downstream gas sector involved in processing operations is subject to the payment of a fee at a rate of 5% of its annual turnover.[4]

Liquefaction Terminals in Cameroon

In 2018, a new liquefaction installation became operational in Cameroon. This is the Floating Liquefied Natural Gas (FLNG) Hilli Episeyo, the liquefaction plant installed off the coast of Kribi[5].

[1] Article 3 of the Gas Code.
[2] Article 18 of the Gas Code.
[3] Article 60 of the Gas Code.
[4] Article 61 of the Gas Code.
[5] SNH Annual Report of 2018.

Regulatory regime

Storage of gas in Cameroon can only be done following the grant of a licence by the Minister in Charge of the Downstream Gas Sector.

The installation of materials and equipment for setting up gas storage centres are subject to authorisation of the Minister in Charge of the Downstream Gas Sector[1].

Holders of storage licences are required to comply with the laws and regulations in force concerning establishments classified as dangerous, unhealthy or inconvenient.

The operator of the downstream gas sector involved in processing operations is as well required to the pay a fee set at a rate of 5% of its annual turnover for his storage activities.

Storage facilities in Cameroon[2]

Since 2018, SNH has been operating a domestic gas storage and loading depot in Bipaga, in the outskirts of Kribi. It’s the only source of local supply since June 2020. The gas supplied by SNH is delivered by tankers to marketers, who bottle it up in cylinders before putting it on the market.

[1] Article 25 of the Gas Code.
[2] www.snh.cm LPG storage

Gas transmission and distribution system in Cameroon

In Cameroon, natural gas is collected by the SNH from various producing companies and further transported to various industries, electricity producers, other eligible customers, gas distribution companies and processing sites for exportation.[1]

Gas distribution and transmission infrastructure ownership and regulation

All activities linked to gas transmission and distribution in Cameroon is subject to obtaining a concession granted by the Minister in Charge of the Downstream Gas Sector for a maximum period of twenty-five (25) years renewable. The concession grants its holder permit to own transmission and distribution infrastructures.[2]

The normal practice is for concession holders to be selected and granted concession through a competitive bidding. But it might happen in case of necessity and under certain conditions for concessions to be granted without a bidding process.[3]

The construction and operation of a transportation network for supply to distribution networks, other transportation networks, storage facilities or eligible customers is subject to obtaining a transportation concession[4].

In addition to the concession, the importation and the installation of materials and equipment used in setting up gas transportation and distribution network are subject to an authorisation granted for a maximum period of three (03) years renewable.

Third party access regime

In Cameroon, the principle of free access of third parties to transportation and distribution networks is aimed at easing the supply of gas to eligible end customers which as a result will enhance the efficiency of the transportation and distribution networks[5]. However, third parties are not granted access to gas transportation by pipelines used to supply gas processing plants.

[1] Rapport Final Cameroun : Cameroun – Contribution à la Préparation du Rapport National pour la Formulation du Livre Blanc Régional sur l’Accès Universel aux Services Energétiques Intégrant le Développement des Energies Renouvelables et de l’Efficacité Energétique, Dr TCHATAT Gabriel 2014, Page 57.
[2] Article 12 of the Gas Code.
[3] Article 14 of the Gas Code.
[4] Article 16 of the Gas Code.
[5] Article 35 of the Gas Code.

There is a competitive and privatised downstream gas market in Cameroon. Various suppliers share the market and customers are free to choose any of them.

In Cameroon, the downstream gas market is regulated by the following texts:

• Law N°2012/006 of 19 April 2012 on the Gas Code: the purpose of this law is to promote and develop the downstream gas sector.
• Law N°96/141 of 5 August 1996 on the regime of pipeline transport of hydrocarbons from third countries: this law defines, with regard to pipeline transport of hydrocarbons from third countries, the particular regime applicable to the construction, operation and maintenance of pipelines intended for the transport of these hydrocarbons;
• Law No. 2011/25 of 14 December 2011 on the development of associated gas: this law aims to limit the phenomenon of flaring and to recover gas in order to boost the gas potential and meet intense energy demand;
• The General Tax Code: this law determines the tax regime applicable to the downstream gas sector.

The end of the year 2021 marks the expiry of several concession contracts signed between the State of Cameroon and some oil companies under the 1964 laws governing oil exploitation in Cameroon. This has called for discussions with other interested partners to examine the terms and conditions of their conversion into production sharing contracts.[1]

The completion operations on two (02) gas wells drilled in the Kribi-Batanga Field ended on November 28, 2021.

Early this year, the SNH put on promotion eight (08) blocks located in the hydrocarbons rich Rio del Rey Basin (RDR) and in the highly prospective Douala/Kribi-Campo (DKC) Basin.

[1] SNH Infos N° 71-72. Page 4.

1. Challenges identified in the oil and gas industry
   • Domestic gas shortage: Since some months, there have been a shortage of gas of several brands in several localities in Cameroon due to a logistical problem. In an attempt to curb the difficulty, the storage station of Bipaga makes the supply of gas to the city of Yaoundé and its surroundings possible[1];
   • Fuel shortage: In July, the government revealed that the fuel shortage was due to the growing burden of the State subsidy dedicated to maintain the prices of petroleum products. It is not excluded that this problem also affects domestic gas. The subsidy for this product is borne by the Caisse de stabilisation des prix des hydrocarbures (CSPH);[2]
2. Covid-19 pandemic aftermath The aftermath of the Covid-19 pandemic has led to an increase in the global demand of hydrocarbons. The International Energy Agency, in its January report, forecasts a 0.9% increase in global gas demand in 2022, compared to 2021. Following this, measures have been taken to by the SNH aimed at satisfying this demand. An increase in the production of hydrocarbon is a reflection of the measures taken.

[1] Pénurie de gaz domestique au Cameroun : des problèmes administratifs et de devises indexés Investir au Cameroun.
[2] Ibid.

Following the adoption of the United Nation Convention on Climate Change in 2015, Cameroon submitted its ratification instruments on July 29, 2016.

In addition, a National Observatory on Climate Change (ONACC) was created in Cameroon having as mission the monitoring and assessing of the socio-economic and environmental impacts of climate change.