Energy Commission Rejects Renewal for British Gas

The Energy Commission of the National Constituent Assembly issued a decision on 5^th June rejecting the proposed renewal of the Amilcar license for hydrocarbon exploration requested by British Gas.

The rejection issued by the Commission is due to a number of violations of the legal regulatory framework for granting licenses, including the following:

– The length of the duration of the license: the license has been in place for 26 years due to repeated renewals and extensions (4 renewals and 8 extensions). The terms of the license agreement allowed for two renewals, and the possibility of granting a third and fourth renewal, which is not provided for in any legal text. Decree 9-85 does not specify the number of permissible renovations, whereas the Code Relating to Hydrocarbons provides that two renewals may be granted, with a third renewal permissible only in the event of a discovery of hydrocarbons. The Code does not provide for a fourth renewal. Thus, the agreement should not have been renewed, but rather terminated and a new agreement prepared in order to respect the provisions of the Code Relating to Hydrocarbons.

– Terms of license not updated: an example of this is the failure to adjust the minimum investment required for exploratory works, despite the long duration of the license. The Commission judged this a flagrant violation of the responsibility to update the commitments under the agreement on the occasion of each renewal and extension, to ensure the protection of the state’s financial rights.

– Failure to adjust obligations on the occasion of the extension: Decree 9-85 permits the Minister of Energy to exempt the license holder from additional obligations when extending the license; however, this is provided as an exception only. The Commission concluded that there was no justification for continuing to exempt the company from additional obligations given the low level of activity under the license – with only a small number of wells at the cost of $ 27m made throughout the duration of three extensions.

Based on this, the members of the Commission issued a set of recommendations and in particular the following:

• the need to prevent situations of absolute control over energy resources by a single company;
• introduction of a maximum percentage of national energy production open to foreign companies;
• compulsory participation of the Tunisian Institution for Petroleum Activities to prevent absolute control by any foreign company; and
• ensuring a balance between privileges and exceptions granted under exploration licenses, and sound exercise of the powers of the state – such as the power to alter prices in light of the evolution of international prices.