Angola halves tax rates to develop its marginal oil fields

In a bid to drive investment and increase crude production, Angola has decided to cut tax rates for marginal oil fields.

Tax for marginal fields will be halved to 10 percent from the usual 20 percent, while petroleum income tax was reduced to 25 percent from 50 percent. Marginal fields is a discovery with reserves of less than 300 million barrels of petroleum production, Angolan law states.

This is a part of a series of presidential decrees published in the Official Gazette on Friday and made available by the oil ministry on Monday. The publication outlines new legislation for the development of marginal fields, the creation of a regulator for fuel products and natural gas rights, Reuters reported.

Prior to this development, Africa’s second largest crude producer did not have any specific legislation covering the exploration and production of natural gas.

According to government data, Angolan oil production is set to decline 36 percent by 2023. President Joao Lourenco has been making efforts to spur investment in the sector that accounts for 95 percent of the country’s exports.

Commenting on Lourenco’s effort to rekindle investment in the sector, the managing director of Cabinda Gulf Oil Company, John Baltz, in an interview with TOGY, said the president “has really set a strong tone that says we are interested in working with the industry and changing the investment climate in Angola, and I think that is very important for us in 2018 and beyond.”

Though it started in 2016 under the Eduardo dos Santos administration, the legislation for marginal fields is part of the Angolan government’s ongoing petroleum reforms, which is structured in two main parts. The first covers the procedure for declaration of a marginal discovery; and the second covers the incentives for the adjustment of the contractual and fiscal terms applicable to concessions including marginal discoveries.

Asides recent decrees, a separate decree published at the same time called for a flexible approach to concession boundaries, with reserves that spread beyond the original limits being rolled into current blocks as long as they did not cross into an area already under contract.

The decree outlined a tax regime on predominantly gas fields of 5 percent on production and 25 percent on income. This legislation guarantees for the first time in Angola,the provision of a specific legislative framework to explore, develop and sell natural gas for oil companies.

A new body to be based in the capital Luanda has been created by the series of decrees. The body known as the Regulatory Institute for Oil Derivatives (IRDP) is charged with the responsibility of regulating the oil derivatives market, including the import and distribution of fuels.The head of the body will be chosen by the minister for oil and mines, Reuters reported.