Page 6 - DMEA Week 26 2022
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DMEA                                          COMMENTARY                                               DMEA




       Towards a new





       gas tax regime





       for Angola LNG






       The National Assembly authorises Angola’s president to reduce tax rates on purchases
       of natural gas, which is currently a less attractive feedstock than associated gas.




        AFRICA           LAST week, Angola’s government took a step  plant, and in 2013, they brought the $12bn
                         towards authorising a new tax regime for the  Angola LNG plant on stream in Soyo.
                         Angola LNG project. It did not do so directly, via   The plant is now operated by a consortium
       WHAT:             the adoption of new tax legislation, but through  that includes subsidiaries of Chevron (US), BP
       MPs have given President   the passage of a bill that gives the country’s pres-  (UK), Eni (Italy), TotalEnergies (France) and
       Lourenço the power to   ident the power to decide the matter.  Sonangol, the national oil company (NOC) of
       cut tax rates for natural   The bill came up for a vote in the National  Angola, and it is capable of turning out 5.2mn
       gas purchases.    Assembly, Angola’s unicameral legislature, on  tonnes per year (tpy) of LNG at its single pro-
                         June 23. It passed easily, with 133 MPs voting for  duction train.
       WHY:              it and only one against, with no abstentions, and   Most of Angola LNG’s feedstock is associated
       Under existing    is now due to go to President João Lourenço for  gas from offshore fields that are being developed
       arrangements, Angola   endorsement.                    by its shareholders. However, the facility also
       LNG receives associated   Angola’s Secretary of State for Petroleum and  processes natural gas from a number of offshore
       gas for free.     Gas José Barroso had said when presenting the  deposits.
                         draft bill to the National Assembly that the meas-
       WHAT NEXT:        ure would give Lourenço the authority to make  Different tax regimes
       Luanda has incentives   changes to the tax regime governing the Angola  Under Angola’s current tax laws, there is a dif-
       to pay attention to LNG   LNG project.                 ference in the way these two production streams
       exports in light of the   He also indicated, though, that the president’s  are treated.
       Russia-Ukraine struggle,   intent was not to gain additional power but to   More specifically, Angola LNG currently
       but it must also invest in   make specific changes.    receives associated gas for free, with no tax
       domestic capacity.  One of these changes will be a reduction in  charged. However, it must purchase natural gas
                         the tax burden shouldered by the group of inter-  from the producer – that is, from the company
                         national oil companies (IOCs) that is operating  or companies that operate the field where the gas
                         the Angola LNG plant, Barroso explained.   originated – and pay a tax on it.
                           He said Luanda wanted to cut the tax rate   This policy puts natural gas suppliers at an
                         levied on purchases of natural gas to support  obvious disadvantage, as it makes their feedstock
                         wider efforts to promote the development of the  far less competitive than associated gas.
                         domestic natural gas sector, such as the forma-  As such, it has the potential to hamper the
                         tion of the New Gas Consortium (NGC) and the  government’s efforts to promote the develop-
                         passage of a gas law.                ment of the country’s natural gas resources by
                                                              reducing its attractiveness to a major local con-
                         Associated vs. natural gas           sumer of gas.
                         The initiative makes sense in light of the origins   And for the foreseeable future, Angola LNG
                         of the Angola LNG project.           will be central to those efforts. As Barroso noted
                           Angola didn’t start producing LNG because it  on June 23, Luanda has made the gas liquefaction
                         possessed large amounts of natural gas. Rather,  plant a key component of its gas development
                         it did so because it had large amounts of crude  plan by obligating NGC to sell future production
                         oil, with considerable volumes of associated gas  from the Kiluma, Maboqueiro, Enguia Norte,
                         in the mix.                          Atum and Polvo fields to the Angola LNG con-
                           In the late 1990s, several of the IOCs working  sortium for processing and export.
                         in its offshore zone began considering the ques-  Currently, there is no other facility in the
                         tion of what to do with this gas. They decided  country capable of liquefying or otherwise treat-
                         that they had enough to support a liquefaction  ing gas.



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