Akin Gump Lawyers Pen Article for Petroleum Review on Challenges for IOCs in Africa

Petroleum Review has published the article “The challenges of state and local participation,” written by Akin Gump oil and gas partners Marc Hammerson, John LaMaster and associate Caroline-Lucy Moran, on the various challenges for international oil companies (IOC) facing African governments’ requirements for state and local participation in oil and gas developments.

The authors note that some of these challenges include the following:

  • Requirement of a national oil company (NOC) “The requirement that an IOC carry a NOC or local participant during the exploration phase will significantly increase the IOC’s initial costs.”
  • Corruption with regard to antibribery violations – “The introduction of a NOC as an additional participant increases an IOC’s interaction with the government and with government officials. This may become problematic with newly established or ambiguous regulatory requirements that raise questions surrounding payment arrangements. Notably, officers of NOCs are considered to be ‘foreign public officials’ for purposes of the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act 1977(FCPA).”
  • Regulatory uncertainty – “This risk, which pervades the African oil and gas industry, has been identified by commentators as the greatest constraint (ranking above corruption) to IOC development, particularly in countries that are in the process of developing or revising their petroleum regimes.”

To these challenges, the authors offer potential solutions for IOC investors such as including contractual provisions in petroleum agreements, conducting thorough investigations of local partners and entering into written agreements with local participants, among other recommendations.

They conclude, “As state and local participation become increasingly prevalent, IOCs must employ robust procedural and contractual mechanisms to best address and mitigate the resulting risks. By employing this approach, most IOCs will find the challenges of state participation and local participation to be manageable opportunity costs, rather than barriers to doing business in Africa.”

To read the full article, please click here.