In response to the gradual slowdown in upstream oil and gas activity, the Cameroonian State has
decided to revitalize this sector, whose revenues contribute significantly to the financing of public
projects. This has resulted in the promulgation of the Law No 2019/008 of 25 April 2019 to institute
the new Petroleum Code, followed by its implementation Decree No 2023/232 of 4 May 2023.
Adopted against a backdrop of the oil legislation reform in Francophone Black Africa, the new
petroleum legislation as a whole reflects greater consideration for investors’ interests. While
reflecting the desire to attract new operators as effectively as possible, the text also considers the
existing oil companies in order to accelerate their profitability and the recovery of their investments.
In either case, this involves the allocation of tax benefits, which constituted the subject of our article
in August 2023 and the granting of investment incentives. Our analysis will focus on these incentives.
Generally speaking, investment incentives refer to prerogatives or privileges granted to investors,
enabling them to benefit from adjustments and/or exemptions from certain contractual and tax
obligations in the context of their activity. These advantages are granted by the State through a duly
authorized body, following an examination of the investor’s application. So, what do the investment
incentives in the upstream oil sector in Cameroon actually consist of? Answering this question leads
us to present the content (I) and the conditions of granting (II) these incentives.
The content of incentives
Cameroon’s upstream petroleum regulations provide oil companies with a range of privileges during
the execution of their activities. These may be economic or fiscal in nature. In terms of taxation,
pursuant to Article 129 of the Petroleum Code, investors are exempt from payment of the signature
bonus for petroleum contracts signed on or after the date of promulgation of the law. In addition,
investors benefit from exemption from payment of corporate tax for a maximum period of five (05)
years for liquid hydrocarbons and seven (07) years for gaseous hydrocarbons, taking into account the
amount of investment to be made and the production plateau associated to the investment
programs submitted. Operators also benefit from tax consolidation for expenses incurred during the
research phase. From an economic perspective, oil companies and petroleum contract holders
benefit from the adjustment of the economic parameters of the petroleum contract, with in
particular the possibility of a downward revision of the State’s participation in the exploitation, the
modification of “profit oil” and “cost oil” in the case of production sharing contracts, and the
downward revision of the rate of royalty proportional to production in the case of concession
contracts. In addition, they benefit from the possibility of recovering, from any production in a given
exploitation area, the expenses incurred for seismic acquisition and dry exploration drilling in any
other contractual area in which they carry out petroleum operations. These various incentive
measures help to support oil companies in order to promote onshore exploitation of mining areas
that are particularly difficult to access and to facilitate the implementation of tertiary recovery
programs designed to increase the productivity of mineral deposits. In order to benefit from these
incentives, certain requirements must be met
Conditions for granting incentives
The benefit of investment incentives in the upstream oil sector is subject to compliance with certain
conditions. These conditions vary depending on whether the applicant is the holder of a petroleum
contract or a petroleum project proponent; or is seeking for the renewal of an authorization.
According to articles 128 of the Petroleum Code and 159 of its implementing decree, it appears that
petroleum contract holders who seek to benefit from investment incentives must first comply with
their contractual obligations to the State and conduct their activities in accordance with the legislative and regulatory provisions in force. As for oil companies, they are required to have the
requisite technical and financial capacity and to have strong investment projects that are capable of
leading to a sustainable increase in national oil or gas production. To benefit from incentives under
the operating license renewal scheme, applicants must have fulfilled their contractual commitments
and complied with the regulations in force during the first validity period of the operating license.
Furthermore, the applicant must submit a development and operating plan establishing the
extension of production from active oil or gas fields in operation, as well as the lifespan of existing
production facilities. They must also demonstrate a sustainable increase in production through
increased risk-taking. However, it should be noted that the granting of incentives considers the work
programs submitted by the applicant, the risks taken, the size of the hydrocarbon discoveries
targeted by the research work, and the potential for increasing production they present, in the case
of submitted appraisal or tertiary recovery programs.
In conclusion, it can be inferred from this analysis that investors in the upstream oil sector in
Cameroon benefit from a set of incentive measures in the course of their activities. Defined by the
Petroleum Code and its implementing decree, these incentives involve the adjustment of the
economic terms of the petroleum contract and tax exemptions. However, companies wishing to
benefit from these relieves are required to meet certain conditions, including compliance with
contractual obligations. To enjoy these incentives, petroleum companies should follow the correct
procedure set by the regulation in force.
Author: Jean Didier Ozoto, Tax & Legal Consultant; Supervisor: Albert Désiré Zang, Managing Partner