Mauritania Energy Sector Legal Framework: From Oil and Gas to Green Hydrogen and Other Renewable Energy Sources
In this expert focus article, Tah Ould Zein of Avaconseil Avocats Associes looks at how the Mauritania energy sector was, and still is, essentially based on hydrocarbons, and how there are great expectations from the BP-operated GTA gas project, with first gas planned later in 2023 or early in 2024.
Until recently, the exploited sources of clean energy in the country have been quite marginal, with the hydroelectric dam of Diama on the Senegal river and few recent wind-power plants being the primary contributors. However, this situation has dramatically changed in the last three years. Driven by a combination of energy security concerns, exacerbated by the war in Ukraine and the worldwide ambition to limit global warming, the developed world has made a significant move to renewable sources of clean energy such as solar, wind and through them, to green hydrogen.
Mauritania, located at the junction of Sahara Desert and Atlantic Ocean, has all the resources in the forms of wind, water and solar energy to produce green hydrogen. Therefore, the government of Mauritania has expressly declared its green hydrogen projects of national interest.
On the legal front, the government has maintained its fairly attractive oil and gas legislation and, on one hand, has revised the Electricity Code to include renewable energy sources within the regulatory framework and, on the other, is actively preparing a Code of Hydrogen.
The oil and gas regulatory framework is maintained
The main legislation governing petroleum activities is the Hydrocarbons Code resulting from Law No 2010-033 dated 20 July 2010, as amended by Law No 2011-044 dated 25 November 2011 and Law No 2015-016 dated 29 July 2015.
Under the Hydrocarbons Code, deposits or natural accumulations of hydrocarbons in the soil and subsoil of the national territory are the property of the state, which may authorise legal entities, including foreign companies, to undertake oil and gas operations under the conditions that they have the required technical and financial capacity and have obtained an authorisation (licence) to operate.
Such authorisation can be obtained directly from the government after a negotiation process. A company may also farm-in to an existing licence.
Acquisition of licences
There are only two types of authorisations (licences).
- Prospecting authorisation (autorisation de reconnaissance) – the holder of a prospecting authorisation is entitled to perform preliminary surface prospecting works on a non-exclusive basis. This authorisation is granted for a 12-month period and is renewable once for a further 12-month period. It does not confer any preferential right on its holder to enter a PSC.
- The Exploration-Production Contract – EPC (Contrat d’Exploration Production) (the “PSC”) – the exploration-production contract is a classic Production Sharing Contract (PSC) that confers on the contractor the exclusive right to perform, in the Contract Area (block) as defined in the contract, as well as governing the terms of exploration activities and production activities in the event of a commercial discovery. The contractor assumes financial and operating risks. Production is shared with the state in accordance with the agreed terms in the PSC.
The PSC provides for two successive periods: the exploration period of ten plus one years in three phases, and the production period of 25 years (30 years for gas) with one renewal period of up to ten years.
The PSC, as well as any amendment, is approved by a decree issued by the Council of Ministers and is published in the Official Gazette.
Farm-in
Under the Hydrocarbons Code, any operator is entitled to transfer whole or part of the rights and obligations resulting from their licence, subject to the Minister of Petroleum’s prior approval. This approval is mainly subject to the technical and financial capacity of the acquirer. Hence, companies with technical and financial capacity can directly acquire interests in the existing PSCs through a farm-in agreement.
Electricity legal framework is revised (new Code of Electricity)
Under the Law No 2022-027 dated 22 December 2022 relating to the new Code of Electricity, the main objectives of the revision of the electricity legal framework are:
- the liberalisation of electricity production, allowing national and international private operators to contribute to the country’s electrification; and
- the energy transition, by promoting the production of electricity from renewable and clean energy sources in general, including the optimisation of the exploitation of the national potential in green hydrogen.
Regarding the first objective, it must be noted that operating in the electricity sector, whether in production, transport, storage or distribution, is subject to a licence, which is attributed to any national or foreign operator having the necessary financial and technical capacity. Structural reforms are underway to ensure that the liberalisation of the sector is effective.
In respect of the second objective, the new Code states expressly that the production of electricity from renewable energy sources is a priority investment choice. Hence, operators in this sector are entitled to some advantages.
The hydrogen legal framework is being prepared (draft Code of Hydrogen)
Mauritania is now largely recognised as an ideal place for the large-scale production of green hydrogen and ammonia. Several agreements were passed with green hydrogen developers, among which are the following:
- May 2021 – a Memorandum of Understanding with CWP Global for a 30GW AMAN green hydrogen project;
- September 2021 – a Memorandum of Understanding with Chariot for project Nour. Chariot later signed a joint development agreement with Total Eren for the same project;
- November 2022 – a Memorandum of Understanding with BP; and
- March 2023 – a Memorandum of Understanding with Infinity Power Holding – a joint venture between Egypt’s Infinity and UAE’s renewables developer and investment company Masdar – and Conjuncta GmbH, a German project developer.
Due to the lack of a hydrogen regulatory framework in Mauritania, all these agreements were passed in the form of memoranda of understandings, with minimal commitments. Indeed, Mauritania, like most countries, has still not developed specific legislation for hydrogen.
A draft Code of Hydrogen, distinct from the Code of Hydrocarbons, is currently being prepared and (if all goes according to plan) will soon be submitted to Parliament for discussion and adoption.
This code will be required to regulate most of the green hydrogen process of production, storage, transport and exportation.
Within the production process, the land regime, the tax and customs regime, the supply of domestic power, hydrogen and ammonia, and local content will need to be specifically regulated.
Conclusion
With the Code of Hydrocarbons, the recent Code of Electricity and the expected Code of Hydrogen, the regulation of the Mauritania energy sector will be relatively complete. Hopefully, interaction with other transversal regulations (Environment Code, Tax Code, Customs Code, Land and Property Code, Water Code, etc) will be eased to remove any obstacles to the development of this critical sector.
Avaconseil Avocats Associes
