What happened?

• Following the coming into force of the CEMAC Regulation 02/18/CEMAC/UMAC/CM in 21 December 2018 (hereinafter the “FX Regulation”), unlike with the former exchange control regulation of 2000, the Governor of the Bank of Central African States (“BEAC”) issued on 10th of June 2019 eleven (11) instructions to facilitate the interpretation and implementation of the FX Regulation in line with article 191 of the FX Regulation.
• The implementation of the FX Regulation was effective as from 1st March 2019, however, economic operators and financial intermediaries were granted a six (6) months grace period to comply with all its provisions. Within the framework of this implementation, the BEAC has been having meetings in the different CEMAC member states in view of creating more awareness on the content of the FX regulation and instructions.
• It is clear that the terms of this FX regulation have an impact on the business climate within the CEMAC member states and economic operators are currently taking certain measures to determine how its implementation will not be too damaging to current and future operations.
• In particular, the Oil and Gas Industry has been impacted by its provisions as some of the requirements in the FX Regulation conflict with the terms of the Production Sharing Agreements/Contracts, therefore calling for the need to take immediate action.

What are the consequences?

• The stakeholders in the Oil and Gas Industry in Equatorial Guinea are working together to analyse the way forward towards the implementation of the provisions of the FX Regulation having regard to the specific nature of their operations.
• There have been meetings held within and outside Equatorial Guinea regarding the implementation of the FX Regulation. Some organised by the BEAC staff to create more awareness on the FX Regulation and the instructions released, such meetings were held in Chad and Cameroon so far and are still continuing. Other meetings were organised at the initiative of the oil companies operating in Equatorial Guinea and in other CEMAC countries to express their concerns on the terms of the FX Regulation vis-à-vis oil and gas operations.
• It is worth noting that the economy of Equatorial Guinea -unlike the other CEMAC Member states- relies principally on the oil and gas industry and thus, it is of top priority to the administration. The basis of oil and gas operations is generally contained in Production Sharing Agreements/Contractors (PSAs) which provide specific provisions on the relationship between the operator/contractors and the State. This is done following international standards particular to the sector.
• Some of the terms of the FX Regulation are conflicting with the terms of the PSAs, thus the need to take immediate action before the end of the grace period to avoid being sanctioned for non-compliance. Therefore, oil companies in Equatorial Guinea have seized the relevant administration which is the Ministry of Mines and Hydrocarbons to express these concerns and together work on the best solution to the present matter.
• A meeting was held with the Minister of the Ministry of Mines and Hydrocarbons and a number of representatives of oil companies operating in Equatorial Guinea earlier this week where some of these concerns were raised. The Ministry appears cooperative and has indicated some conservatory measures will be formerly communicated pending more discussions with other stakeholders to obtain more lasting solutions.
• The O&G companies in Equatorial Guinea have agreed to act as one bloc to face this matter. Hence, all meetings and correspondences to the relevant authorities will be done as an industry and not as individual companies.
• Equatorial Guinea may set a pace and precedent which the administrations in the other countries of the CEMAC region will follow to address the concerns which equally apply to other oil and gas companies operating in CEMAC.

Does my company need to take any action?

Businesses that may be affected ought to contact their external advisors promptly to request a copy of the FX Regulation and seek further advice with regards to its ramifications and implement measures to ensure compliance. As a minimum, businesses ought to consider the below measures:

Regulatory Mapping and Gap Analysis

Map the requirements applicable to your operations and understand the level of compliance within your company.

The Production Sharing Contract/Agreement (“PSC”)

Conduct a review to ascertain the requirements in the FX Regulation that contradict with the PSC and explain the financial and practical ramifications.

Training

Train your employees and managers on the FX Regulations.

Implementation

• Continue engaging in discussions with other O&G companies in the CEMAC, the IMF, the EG government and the BEAC in coordination with the regulator of the sector;
• Draw up an implementation plan, proposing what requirements are acceptable and would have a lesser impact on petroleum operations; and
• Propose a way forward to the State and BEAC, such as an amendment of the Regulation as provided by article 192 of the FX Regulation.

We will continue updating you on the progress of these discussions.

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