The Republic of Cameroon, lies on the eastern border of oil-rich Nigeria, and is the fifth largest oil producer in Sub-Saharan Africa producing 100,000 barrels per day (1999). The country has gas reserves, estimated at 110 billion cubic metres (bcm), that are still unexploited. The upstream oil industry is an important part of Cameroon’s economy.
There is an unresolved dispute with Nigeria over the ownership of the Bakassi Peninsula. The issue is under mediation by the International Court of Justice (ICJ).
The downstream oil industry in Cameroon is also an important sector of the country’s economy. Consumption of liquid fuel products is currently in the region of 900,000 tonnes per annum excluding smuggling from Nigeria, estimated to be 30% of this figure.
With the building of the Chad to Cameroon oil pipeline, and the siting of the export terminus at Kribi, Cameroon has the potential to become a notable oil transport centre.
The Ministry of Mines and Energy regulates the industry, through its national oil company, Societe Nationale des Hydrocarbures (SNH). SNH reports directly to the president and is responsible for promoting the development of the country’s hydrocarbon resources, and management of the state’s interests in any discoveries of oil and gas resources.
The current Minister of Mines and Energy is His Excellency Mr Andre Bello Mbele.
The upstream oil industry is a key element in the economy of Cameroon. It has estimated reserves of 740 million barrels of oil and 3.9 Tcf of gas. In 1999, it is estimated that crude oil production averaged at 100,000 bpd. Oil exports for mid 1990’s accounted for nearly half of total exports. While Cameroon is currently a net exporter of crude oil, output has been falling by between 6% and 12% in recent years as oil terms offered by the government have not been sufficiently attractive to encourage new exploration activity.
In an attempt to reverse the decline and prevent Cameroon from becoming a net importer of oil, the Cameroon government has revised its fiscal terms. New terms include a fixed division of profit oil under which foreign companies can take up to 40% subject to negotiation. Foreign companies are also permitted to sell their entire oil entitlement abroad as well as retain the proceeds outside the country. Special incentives for the exploration and development of marginal fields have also been included.
There are three significant hydrocarbon basins in Cameroon. There is the offshore Rio del Rey Basin on the Niger Delta; the offshore Douala / Kribi-Camp Basin and in the north of the country is the Logone Birni Basin.
The government is offering acreage both offshore and onshore in a licensing bid from September 1999 to June 2000 in which four offshore and six onshore blocks are being made available.
The main companies involved in the upstream industry in Cameroon include Elf, Perenco, and Pecten International. Other companies include CMS Nomeco, Phillips Petroleum, Trophy Petroleum, Euroil Cameroon, Mobil Producing Cameroon, Globex and Kelt Cameroon.
The downstream oil industry in Cameroon is also an important sector of the country’s economy. Consumption of liquid fuel products is currently in the region of 900,000 tonnes per annum excluding smuggling from Nigeria estimated to be 30% of this figure. However recent attempts to reduce smuggling and the reduction in Nigerian price subsidies have probably reduced this percentage significantly.
Petroleum exploration, development and production activities in Cameroon are at present governed by the mining law No 64-LF/3 of 1964 and the fiscal law no 78/14 of 1978. Cameroon’s petroleum contract has been subject to a number of improvements in 1990, 1991, 1995, and 1998 to make it more attractive to investors.
All hydrocarbon rights are vested in the State and the State reserves the right to acquire an interest in all or part of the petroleum operations.
New petroleum legislation was passed in December 1999. In terms of this law, licenses are issued in the form of either a concession contract or a production sharing contract, and operators may choose which option they prefer.
A Concession Contract (CC) is entered into prior to the granting of a hydrocarbons exploration permit. In terms of the CC the holder is responsible for financing the petroleum operations and is entitled to the Hydrocarbons extracted during the period of validity of such contract, subject to the right of the State to collect royalty in kind.
In terms of a Production Sharing Contract (PSC) the state contracts for the services of a holder to explore for, and in the event of a discovery, to exploit hydrocarbons. The holder is responsible for financing the petroleum operations. Hydrocarbon production is shared between the State and the holder in accordance with the terms of the contract. The holder shall receive a share of production as reimbursement of its costs and as compensation in kind (cost oil), the remainder of the oil (profit oil) shall be shared between state and holder.
The exploration phase is made up of an initial period of three years (which in the case of Special Petroleum Operations Zone can be extended to five years) and is renewable for two periods of two years. The exploration may not exceed 7 years or 9 years in the case of Special Petroleum Operation Zones. The exploitation phase is 25 years for oil and 35 years for gas and may be renewed once, on application, for a maximum of 10 years.
The petroleum contract may provide for a signature or a production bonus. The improved terms allow for exemption from custom duties during exploration and reduced rates for the first five years of exploitation. The operator has the right to a dollar accounting system and to remit profits and retain abroad proceeds from sales.