This article reviews some of the most significant international legal developments made in the areas of international energy, natural resources, and environmental law in 2021.
In line with the Executive’s goal to boost the country’s downstream subsector, the Minister of Mineral Resources, Petroleum and Gas approved the legal framework applicable to the importation and marketing of lubricating oils and greases, setting forth the principles applicable to engagement in the activities of importation and marketing of these products in Angola. Likewise, the Minister approved the Regulations on Specifications of Lubricants Marketed in Angola covering lubricants to be used in four-stroke gasoline/diesel engines, automotive gears, stationary and/or industrial equipment powered by gasoline/diesel, recreational craft, and lubricating greases.
On the upstream subsector, almost one year has elapsed since the approval of the new Legal Framework on Local Content in the Petroleum Industry (Presidential Decree 271/20, of 20 October 2020), which completely changed the paradigm of procurement of goods and services in the petroleum industry. The implementation of the new local content rules was dependent on the issuance of the lists of goods and services falling under the Exclusivity and Preference Regimes by the National Agency for Petroleum, Gas and Biofuels (Agência Nacional do Petróleo, Gás e Biocombustíveis, ANPG), which the ANPG released in October.
On the energy front, important statutes have been approved, including: (1) the legal framework for intensive energy consumers, which aims to foster energy efficiency and local energy production at the facilities of final consumers that have significant energy consumption; (2) new Rules Applicable to Energy Services Companies, which was approved in the context of the National Energy Efficiency Action Plan and applies to all private entities wishing to provide energy services to final consumers, in particular energy efficiency services and local energy production services; (3) an amendment to the Legal Framework for Exploitation of Mineral Mass, which resolves some contradictions in the organic powers and overcome practical problems in the application of the statute (e.g. powers for the granting of licenses); (4) the Fossil Fuel Specifications for Road Transportation, which approved the specifications to be observed for gasoline and diesel in the domestic market; and (5) the new Tariff Regulations for Fuel Sector, which defines a “periodic tariff review based on a maximum price system of the last three years, the components of the tariffs of regulated petroleum products, and the applicable regulatory system.”
In January 2021, Gabon defined rules governing local development initiatives in the mining sector. This decree details the obligations applicable to mining operators implementing Corporate Social Responsibility (CSR) projects, including with respect to the CSR Fund.
In addition, after a series of delays imposed by the COVID-19 pandemic, the 12th Licensing Round that launched in late 2018, in which twelve shallow-water and twenty-three deep-water blocks were put on offer, was recently concluded. Provisional licenses were awarded but remain subject to final agreement on the terms of the Production Sharing Contracts with the Government of Gabon.
In order to implement Congo’s policy on nuclear safety, the accession to two nuclear conventions was authorized during 2021: (1) the Convention on Early Notification of a Nuclear Accident, which “is intended to ensure the notification of accidents that result or are likely to result in a release of radioactive material, which may lead to a transboundary release”; and (2) the Convention on the Physical Protection of Nuclear Material, which “targets the effective protection of nuclear material used for peaceful purposes in international transport or domestic use, storage, and transport.”
Moreover, “the ratification of the agreement between the Government of the Republic of Congo and the Government of the Russian Federation on the cooperation in the field of peaceful use of nuclear energy” was authorized. This agreement sets forth that the cooperation between both States shall address, inter alia, “the creation, and development of the atomic energy infrastructure of Congo, the development of projects and the construction of nuclear power reactors and nuclear research reactors, the exploration of mineral materials (uranium 4), and the management of radioactive waste.”
In order to promote a sustainable management of environmental resources and to respond to the indiscriminate mining and extraction of aggregates, a new statute setting forth the legal framework governing the exploration and extraction of aggregates throughout Sao Tome and Principe has been approved. The main aspects of the new regime include, inter alia, the following: (1) as a rule, the extraction of sands and coastal aggregates is prohibited, except as expressly provided for in the law; (2) the extraction of sand and other coastal aggregates for scientific and academic purposes, recovery of beaches, and extraction on private land and in small quantities are subject to special rules; (3) the request and grant of licenses/authorizations for mining and extraction of aggregates is subject to a specific procedure; and (4) applicants for licenses/authorizations must comply with and fulfill a number of requirements (e.g., in respect of hygiene and safety at work and environmental protection).
With respect to the oil and gas sector, the transfer of petroleum products price differential has been approved. The transfer of petroleum products price differential applies to operators engaged in the wholesale sale of petroleum products, who are required to transfer the price differential generated by the sale of those products in favor of the state, to the public treasury’s account. Moreover, Production Sharing Agreements were made more flexible due to COVID-19. The new statute approved an exceptional regime allowing production sharing agreement terms and conditions to become more flexible through an extension of up to twelve months of the exploration period. To benefit from this extension, the relevant party should request it from the National Petroleum Agency.
Several important statutes on local content applicable to the petroleum industry in Senegal were finalized, including: (1) Decree 2020-2047 on the organization and operation of the National Local Content Monitoring Committee; (2) Decree 2020-2048 on the funding and operation of the Local Content Development Support Fund; (3) Decree 2020-2065 on the terms of participation of Senegalese investors in companies engaging in oil and gas activities, and which qualifies oil and gas upstream activities in the exclusive, mixed, and non-exclusive regimes; and (4) Decree 2021-248 on the funding and operation of the Local Content Development Support Fund. Moreover, in October 2021, the time period for the submission of bids for the Senegal 2020 Licensing Round, in which twelve offshore blocks are put on offer, has been extended once again to December 15, 2021.
After several years of discussion and preparation, the much-awaited Mining Code has been approved by means of Law 12/2021. “It is expected that the approval of this regime will create the conditions to attract the necessary investment for the development of the [Timor-Leste] mining sector.” “The new Code governs all aspects related to the exploration of mineral resources in the country, including, notably, the classification of minerals, the rights and duties of mineral rights’ holders throughout all the phases of the mining activities, and the procedures for the acquisition of such rights. The Code also defines the rules on the right to access and occupy land, relevant compensation for damages and relocation of local communities, as well as the environmental and fiscal frameworks applicable to the mining sector.” “The Autoridade Nacional de Petróleo e Minerais (ANPM) shall act as the Regulatory Authority for the Mining Sector, and be in charge of monitoring, supervising and regulating the mining activities carried out in the country.”
Since the 2014 release of the Green Bond Principles (GBP), which is a list of voluntary guidelines developed by the International Capital Market Association (ICMA), the green bond market has continued to develop with a growing demand for a standardization of the principles through regulation. In anticipation of the 26th United Nations Climate Change Conference of the Parties (COP26) in Glasgow, United Kingdom (UK), in November 2021, the government of the United Kingdom pushed through their own development of a green bond, called the Green+ Gilt.
The goals of the Green+ Gilt were not only to generate revenue for environmental projects in the United Kingdom but also to set the global standard on green bond regulation with the intent of introducing mandatory reporting financial information relating to Environmental, Social, and Governance (ESG) investing by 2025.
In June 2021, Her Majesty’s (HM) Treasury released the UK Government Green Financing Framework. The framework outlines the specific uses of Green+ Gilt, dividing them into six categories: Clean Transportation, Renewable Energy, Energy Efficiency, Pollution Prevention and Control, Living and Natural Resources, and Climate Change Adaptation. HM Treasury will provide annual allocation reporting, showing how Green+ Gilt revenues are expended by category and subcategory. More significantly, the framework also provides environmental impact metrics and social co-benefits for each category, adding a tangible way to measure the effectiveness of the investments.
The first issuance of the Green+ Gilt in September 2021 drew 100 billion pounds from investors, while the second issuance a month later by National Savings & Investments (NS&I) netted 74.1 billion pounds. The Green Financing Framework provides the regulatory framework for the UK green bond market to shift from voluntary standards under the Green Bond Principles to a standardized and regulated reporting standards under the UK government by the 2025 target date.
In December 2020, the Argentine Republic submitted its second nationally determined contribution (NDC) under the Paris Agreement, where it pledged to limit greenhouse gas emissions to an absolute and unconditional target, applicable to all sectors of the economy, with a limit of 359 million metric tons of carbon dioxide equivalent by 2030. This calculation equates to a nineteen percent decrease in emissions by 2030 compared to the all-time high in emissions reached in 2007, and a 25.7 percent reduction from the previous NDC submitted in November 2016 in Marrakesh (483 million tons of carbon dioxide equivalent (tCO2eq)).
Second, the Republic of Argentina committed to present its long-term development strategy with low-emissions, with the aim of achieving carbon-neutral development by 2050. Subsequently, at the Latin American Summit on Climate Change, the Argentine Republic expanded its commitment to reduce its greenhouse gas (GHG) emissions by 2030 by two percent compared to those presented in the second NDC, so as not to exceed 349.16 MtCO2e (27.7% lower than the goals presented in 2016).
On November 1, 2021, the Guidelines for an Energy Transition Plan to 2030 were approved by the National Secretary of Energy. The Guidelines posit that Argentina enters the global energy transition process facing a complex social and macroeconomic situation. Thus, the energy matrix by 2030 is required to be more inclusive, dynamic, stable, federal, sovereign, and sustainable, based on the significant potential of clean sources from wind, solar, hydroelectric, and bioenergy energy, as well as the development of nuclear energy and other energy vectors such as hydrogen, which will play a key role in achieving the energy transition.
To meet the proposed objectives and contribute significantly to the reduction of GHG emissions, the following lines of action were proposed:
1. Energy efficiency: More efficient uses of energy consumption will be affected to reduce electricity and gas consumption by up to 8.5% in all sectors of the economy by the year 2030.
2. Clean energy in GHG emissions: More than ninety percent of the increase in installed capacity between 2022 and 2030 will come from low-emission energy sources, exceeding a fifty-five percent share in electricity generation and displacing the less efficient and more polluting thermal power plants, reducing about half of the emissions from the subsector. Additionally, one gigawatt (GW) of renewable power will be reached.
3. Gasification: Measures will be implemented to gasify energy consumption from onshore and offshore basins, which today is supplied by liquid fuels derived from petroleum. GHG emissions will be reduced through reliable, affordable, continuous, and less polluting supply, while taking advantage of the resources of the country. Moreover, Argentina will seek to transform itself into a regional and global scale natural gas supplier collaborating with the viability of the energy transitions of other countries.
4. Development of national technological capacities: Scientific and technological developments will be promoted to generate not only added value through the development of quality local suppliers but also continuous learning processes and accumulation of capabilities for environmental and energy transition goals and objectives for 2050. This path is projected to strengthen conditions for stability by reducing foreign exchange vulnerabilities.
5. Energy system resilience: Adjustments will be undertaken in the generation matrix, and in the high and medium voltage transportation and in distribution networks, to ensure optimal conditions of operation, even during extraordinary weather events. Access to affordable energy through the expansion of the electricity grid and the promotion of distributed generation, both in rural and urban environments, will reduce vulnerability of the population to extreme events.
6. Federalization of energy development: The energy transition will be conducted federally, with the active participation of the provinces in the planning and development of renewable and clean energy projects. The inclusion of local actors in essential projects for the energy transition will be sought, generating territorial and gender equity in the development of technological capacities.
7. National strategy for the development of hydrogen: A roadmap will be implemented to promote the production and export of hydrogen as a new energy vector, which uses natural gas and considers other sources for its production.
The underlying policies to achieve those goals include on the demand side: (1) the penetration of electric vehicles, (2) an increase in the compressed natural gas (CNG) driven vehicle fleets, and (3) the diffusion of liquefied natural gas (LNG) for its use in long-distance transport (freight and passengers), resulting in an increase in natural gas consumption for transportation, which would go from 6.7 MMm3/d in 2019 to 21 MMm3/d in 2030. In the current trend scenario for the 2022-2030 period, (1) an annual growth in electricity consumption of 2.4 percent is estimated, reaching 168 TWh, which could be reduced to 155 TWh (at a rate of 1.7 percent i.a.) if various energy efficiency measures are applied, and (2) and an annual growth in natural gas consumption of 2.7 percent is estimated, reaching 103 million cubic meters per day TWh, which could be reduced to ninety-three million cubic meters per day, respectively, after implementing efficiency policies.
On the supply side, two possible scenarios are proposed. The first scenario involves greater oil and natural gas requirements based on domestic capabilities, with a participation in the generation of renewable energies of twenty percent in the electricity matrix by 2030 (REN 20). In the second scenario, higher natural gas requirements and relatively lower oil requirements are assumed together with a greater share of renewable energies in electricity generation reaching thirty percent (REN 30). This proposal would require the addition of 11,875 MW (3,175 MW) more than in REN 20, at a rate faster than that demanded by the electric market, significantly increasing the required investments and foreign exchange. The first scenario is anticipated to shelter the country from incremental foreign exchange risks which could jeopardize economic growth and, ultimately, the very same energy transition process.
On August 4, 2021, the National Congress enacted the Biofuels Regulatory Framework Law 27,640, abrogating the prior Ethanol National Plan enacted under Law 23,287; the Biofuels Promotional Framework enacted under Law 26,093, which would have otherwise expired on August 27, 2021; and the Bioethanol Promotional Framework enacted under Law 26,334, ending the government incentives aiding the biofuels sector.
The Biofuels Regulatory Framework proved most controversial, receiving support from hydrocarbon-producing states and rejections from corn-, soybean-, and sugar-cane-producing states, where biofuel-producing facilities had been established under the auspices of the abrogated regimes.
The Biofuels Regulatory Framework covers all biofuels production, storage, marketing, and mixing activities and shall be in force until December 31, 2030, subject to a single five-year extension as may be determined by the National Executive Branch. Governmental licensing is required to conduct any such activities, whereas hydrocarbon producers and refiners are restricted from owning or having interests in facilities for the production of biofuels.
Section 8 of the Framework reduced the mandatory cut of biodiesel in diesel that is marketed within the national territory from ten percent to five percent. Moreover, the enforcement authority was empowered both (1) to raise the aforementioned mandatory percentage when deemed appropriate, depending on the supply of demand, the trade balance, the promotion of investments in regional economies and/or environmental or technical reasons and (2) to reduce it to a nominal percentage of three percent, when the increase in the prices of basic inputs for the production of biodiesel could distort the price of fossil fuels at gas stations for altering the proportional composition of the latter on the latter, or in situations of shortage of biodiesel by the processing companies authorized by the enforcement authority for the supply of the market. The biodiesel cut shall be allocated to individual biodiesel producers on a prorated basis, subject to a cap of fifty thousand tonnes per year for companies with a higher scale, except when volumes resulting therefrom are insufficient to meet the aggregate monthly demand.
The mandatory cut of bioethanol in gasoline remained at the previous twelve percent, to be allocated in halves to sugar-cane-based and corn-based producers. But, as in the biodiesel case, the enforcement authority was empowered: (1) to reduce transitorily or to increase the allocation of the six percent cut to sugar-cane-based producers when deemed appropriate in light of the supply of demand, the trade balance, environmental or technical reasons, or the promotion of investments in regional economies; and (2) to increase or to reduce down to three percent the allocation of the six percent cut to corn-based producers when the increase in the prices of basic inputs for the production of corn-based bioethanol could distort the price of fossil fuels at the gas stations for altering the proportional composition of the latter on the latter, or in situations of shortage of biodiesel by the processing companies authorized by the enforcement authority for the supply of the market.
Biodiesel and bioethanol will not be levied by the Liquid Fuels Tax and the Carbon Dioxide (CO2) Tax, established in Title III, Chapters I and II, respectively, of Law 23,966, at any stage of production, distribution, and marketing. In the course of mixing such biofuels with fossil fuels, the tax shall be levied only on the fossil fuel component that integrates the mixture. The tax treatment provided for in this article shall apply until the date of completion of the regime and shall correspond insofar as the main raw materials used in the respective production processes are of national origin.
On September 15, 2021, the National Executive Branch submitted to the National Congress a bill for a new Hydrocarbons Promotional Regime, aimed at increasing hydrocarbons production and exports, increasing natural gas industrialization, adding domestic value along the supply chain, and attracting foreign and domestic investment to both the conventional and conventional hydrocarbons exploration and production, midstream, hydrocarbons industrialization, energy. and logistics infrastructure, to ease the domestic supply and export of hydrocarbons and by-products, including large-scale LNG liquefaction.
The Promotional Regime would last twenty years and be made up of several chapters with different eligibility criteria and benefits: (1) an Oil E&P chapter, (2) a Natural Gas E&P chapter, (3) a Low Productivity Oil Wells Chapter, (4) a General E&P, Industrialization & Transportation Chapter, (5) a Large Investors Chapter, (6) an Offshore Investments Chapter, and (7) a Domestic & Regional Suppliers Program. Moreover, support programs for energy sustainability and gender-based employment in the hydrocarbons industry were proposed. Additionally, a special set-off system to pay up to thirty percent of the fuels tax with accumulated net losses is available to investors who effectively invested in 2019-2020 more than $1,000 million over one year.
Benefits common to all chapters include fiscal stability and stability in all other benefits under the Promotional Regime. Projects would be scrutinized by a special hydrocarbons investment council to be created.
Lastly, an amendment to the National Hydrocarbons Law would be introduced to allow the granting of (1) natural gas underground storage concessions for a term of twenty-five years subject to evergreen ten-year extensions, (2) transportation concessions to eligible non-exploitation concession holders, and (3) firm capacity rights to new infrastructure or expansions to existing infrastructure.
