Law Blog Categories

more

Energy and Natural Resources Global Guide 2018 - Bahrain

Published on : January 2018
Author(s):Several

Oil and Gas Country Guide: Bahrain

1. What department/agency regulates oil and gas extraction? What are the primary laws which apply?
Several government agencies regulate the oil and gas sector in the Kingdom of Bahrain.
  1. Oil and Gas Law GCC 2018The National Oil & Gas Authority (the NOGA) regulates and develops Bahrain’s hydrocarbons sector. NOGA also controls exploration and production and is responsible for issuing licenses, permits, and approvals to third parties.
  2. The Ministry of Labour is in charge of matters relating to the health and safety of employees in the industrial sector.
  3. The Ministry of Industry, Commerce, and Tourism manages Bahrain’s industrial sector. 
  4. The Supreme Council for the Environment is responsible for the development of environmental policies across all sectors, including oil and gas. The Supreme Council, along with the National Oil & Gas Authority, regulate the conduct of stakeholders in the hydrocarbon industry concerning pollution control.
  5. Bahrain Petroleum Company (the BAPCO) has the exclusive right to produce and distribute oil and gas on the government’s behalf. BAPCO is the retailer of oil and gas products both in Bahrain and internationally. 
  6. Tatweer Petroleum supports the government in its goal to increase oil production and the availability of gas.
The following laws apply to the regulation of oil and gas extraction in Bahrain:
  1. A. Decree Number 19 of 2015 restructuring National Oil and Gas Authority Board of Directors 
  2. Law Number 36 of 2004 concerning the criminalization and combat of the smuggling of subsidized oil products. 
  3. Laws Number 2 of 2008, Number 24 of 2009, and Number 6 of 2009 ratify development and production sharing agreements between the Government of the Kingdom of Bahrain and private oil and gas companies.
  4. Decree Number 77 for the year 2007 incorporating oil and gas holding companies.
  5. Law Number 10 of 2006 concerning specifying the functions and powers of NOGA, established under Decree Number 63 of 2005.
  6. Ministerial Order Number 11 of the Year 2006 which deals with banning the export of subsidized petroleum products
  7. Royal Decree Number 63 of 2005 in respect of the incorporation of the National Oil & Gas Authority
2. Are there international laws those working in this jurisdiction need to consider?
Those working in this jurisdiction need to consider the national laws governing the oil and gas sector in Bahrain which comply with international oil and gas standards, for example on health and safety practices. Contractors’ systems for health, safety and the environment (HSE systems) must be compliant with international measures, such as those provided by the International Association of Oil and Gas Production, the International Association of Drilling Contractors, and the International Association of Geophysical Contractors.
 
3. What are the licensing procedures for carrying out different oil and gas extraction processes?
For Development and Production Sharing Agreements (the DPSA), which are production-sharing licenses, the National Oil & Gas Authority (NOGA) will invite contractors to tender. NOGA and the Tender board will make a final decision. The body with the power to grant licenses in Bahrain is the National Oil & Gas Authority (the NOGA). The management of goods and services are governed by Bahrain’s Legislative Decree Number 36 of 2002 concerning regulating government tenders and purchases. The law aims to protect public property by limiting the impact of private interests on tender processes, to promote transparency, to ensure government purchases so obtained are at competitive and equitable prices, and to attract the involvement of suppliers and contractors.
 
4. Is there any appeal process for denial of licenses?
There is an appeal process for denied licenses; the appeal must be made 30 days from the date the decision gets delivered, as per Bahrain’s Civil Court Procedure rules.
 
5. Is a national partner or government body required to be involved?
All hydrocarbons located within Bahrain’s territories are state property. Government bodies and national partners are required to be involved in any project relating to this sector, namely such as Nogaholding, which manages investments owned by the National Oil and Gas Authority. 
 
6. What checks/monitoring is carried out on extraction equipment?
 
The government monitors extraction equipment through state bodies such as the National Oil & Gas Authority. 
 
7. What checks/monitoring is carried out on extracted oil and gas?
 
NOGA acts as the principal regulator of the oil and gas sector which includes oil and gas extractions; it has enforcement powers such as the right to revoke an operator’s license. The NOGA has previously conducted evaluations of the feasibility of projects. In this vein, the Supreme Council and the Ministry of Labour can inspect projects and force an operator to adopt measures that comply with health, safety, and environmental regulations. 
 
Extraction of Oil Gas UAE Bahrain8. Who holds title on oil and gas reservoirs?
 
All hydrocarbons located within Bahrain’s territories are state property. The Bahrain Petroleum Company, which is a state-owned company, will receive crude oil and non-associated gas produced by companies.
 
9. Is the position different for offshore, surface or subsurface extraction?
 
The position is the same for offshore, surface and subsurface extraction; they are state property, although this is subject to negotiation. 
 
10. Are there any specific rules governing the ownership of pipelines?
 
No specific rules govern the construction and operation of pipelines. Authorization must be obtained to conduct this activity.
 
11. Are there any restricted areas where extraction is not allowed?
 
There are restricted areas where extraction is not allowed in Bahrain; the National Oil & Gas Authority decides which areas are restricted.
 
12. Are there any restricted extraction practices, e.g., fracking?
 
There are restricted extraction practices; the National Oil & Gas Authority decides which extraction practices are limited.
 
13. Are there any specific environmental laws for industry participants operating in the oil and gas sectors?
 
The Supreme Council for the environment has the power to regulate activities that may cause pollution. Those operating in the oil and gas sector must consider Bahrain’s Environment Act which sets out specific environmental laws for the protection of the environment, as per Legislative Decree Number 21 of 1996. The decree aims to protect the environment from polluting sources, to control pollution, to protect human health and the well-being of marine and land animals and to identify problems caused by environmental pollution. Also, the National Oil and Gas Authority and the Bahrain Petroleum Company have established regulations on environmental practices. Order Number 10 of 1999 on environmental standards (air and water) imposes limitations on the emission of polluting substances from industrial activities into the air and water, such as those that result from petroleum operations. In 2002, the General Authority for the Protection of Marines Resources, Environment, and Wildlife came into existence to developing sustainable development practices.
 
14. How are oil/gas firms regulated? Do they need to have specific capital, professional status, ownership credentials?
 
The National Oil and Gas Authority and the Ministry of Industry, Commerce & Tourism issue oil and gas regulations for oil and gas firms. The Ministry of Industry, Commerce & Tourism can place restrictions on trading, fiscal and ownership activities. Oil and gas firms must have specific capital, professional status, and ownership credentials. Authorizations are granted only to businesses that meet this particular capital requirement, occupational status and ownership credentials.
 
15. Is there any specific regulation over accreditation firms involved as sub-contractors in oil/gas business?
 
There are specific regulations over accreditation firms involved as sub-contractors in oil and gas businesses. The appointment of sub-contractors must be approved by the National Oil & Gas Authority (NOGA), with the help of Bahrain Petroleum Company (BAPCO) and even sometimes bodies like Tatweer Petroleum. 
 
16. Are royalties paid to the Government?
 
There are no obligations to pay royalties to the Government, although NOGA is entitled to a percentage of the profit resulting from oil and gas operations.
 
17. How does the royalty process work for oil and gas?
 
Development and Production Sharing Agreements (the DPSA) do not include any process for paying royalties to the Government. However, the National Oil & Gas Authority (NOGA) has the authority to impose royalty requirements. 
 
18. What are other taxes levied on the production and sale of oil and gas products?
 
There are no taxes on income, sales and capital gains in Bahrain unless operations relate to the oil and gas sector. The Bahrain Income Tax Law (Legislative Decree Number 22 of 1979) governs the tax system of the hydrocarbons sector. Companies involved in oil and gas operations are subject to a forty-six percent [46%] tax rate on net income. 
 
19. Are any environmental taxes levied on the production of oil and gas products?
 
There are no environmental taxes on the production of oil and gas products in Bahrain.
 
20. How long are the licenses/concessions? Can they be renewed if so how?
 
The duration of a license/concession gets determined by the type of license/ grant in question. Development and Production Sharing Agreements (the DPSA) provides a twenty-year term, but the duration can reach to a maximum of thirty (30) years but this at the sole discretion of the National Oil & Gas Authority.
 
21.  For the offshore production of oil and gas in Bahrain, how far does the seaward regime operate?
 
There are no specific regulations per se that deal with the operation of seaward regimes. The National Oil and Gas Authority is however capable of introducing such regulations.
 
22. How is transportation regulated onshore and offshore are permits required?
 
There are no specific regulations about onshore and offshore transportation. Although, the National Oil and Gas Authority may enforce such regulations if they seem fit.
 
23. How do you obtain rights to construct pipeline or storage facilities for oil and gas?
 
Although there are no specific regulations concerning the construction and operation of pipelines, to obtain rights to construct pipelines or storage facilities for oil and gas, a license must first be received by the National Oil & Gas Authority.
 
24. Can pipeline or storage facility owners be required to allow other producers to use their facilities?
 
There are no specific regulations that pipeline or storage facility owners be required to allow other producers to use their facilities.
 
25. What specific health and safety rules apply to the industries and how actively are they monitored/violations prosecuted?
 
The Ministry of Labour’s health and safety regulations apply to oil and gas operations. Orders Number  38 of 2014 provides that operators must regulate the use of dangerous equipment. The Industrial Safety Order sets out occupational safety regulations in Order Number 8 of 2013. The aim is to protect workers from hazardous health effects and to ensure they enjoy proper physical, mental and social health. The regulations demand that occupational safety managers be appointed and that employees get educated about the hazards of their jobs and further that proper health facilities are maintained efficiently. 
 
26. Is certification required for specific areas of production?
 
Certification requirement applies for specific areas of production. 
 
27. How does Emiratisation and preference for local workers work in the oil/gas industry?
 
Emiratisation is an initiative taken by the government of the United Arab Emirates to assimilate the UAE national workforce into the labor market. The concept of Emiratisation is not applicable in Bahrain, but there is a policy of giving prioritizing Bahrain nationals called Bahrainisation. The Labour Market Regulatory Authority has released a Bahrainisation table on the percentage of Bahraini citizens required to work in a company depending on the company’s registered activity.
 
28. Do foreign workers need specific qualifications/accreditation?
 
Foreign workers do need specific qualifications and accreditations set out by the National Oil & Gas Authority, the Ministry of Labour and the Ministry of Industry, Commerce and Tourism. These will vary based on the activity concerned.
 
29.Are there specific rules governing the sale and marketing of oil and gas products produced in this jurisdiction?
 
Specific rules govern the sale and marketing of oil and gas products produced in the jurisdiction of Bahrain; sale and marketing licenses are granted by the National Oil and Gas Authority. 
 
30. How does price setting operate for oil/gas sales and oil/gas distribution -­‐   are there mandatory requirements?
 
Prices for oil/gas sales and oil/gas distribution are regulated by the National Oil & Gas Authority.
 
31. Are there any specific competition rules which apply in the oil and gas sectors?
 
There are no specific competition rules that apply to the oil and gas sectors in Bahrain.
 
32. Are there any specific rules on the ownership structure of oil and gas companies?
 
In Bahrain, hundred percent (100%) foreign ownership is permitted for commercial activities, but the Ministry of Industry, Commerce and Tourism has imposed restrictions on foreign ownership in the oil and gas sector.
 
33. Does oil and gas regulation differ inside free zones?
 
There are no separate statutes or regulation to govern the oil and gas sector in Bahrain’ free zones.
 

Related Articles