MINISTÈRE DE L INDUSTRIE Entreprise Tunisienne D activités Pétrolières. Offshore oil and gas exploration and production legal framework in Tunisia

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1 Offshore oil and gas exploration and production legal framework in Tunisia Author: Mr Hédi HERICHI Lawyer and Central Director March 2014

2 Table of content Introduction : 1- Definition of some useful notions 2- Historical background of offshore oil and gas activities in Tunisia. I- Geographical boundaries for the exploration and production of O&G in Tunisia : A- With Algeria in the North B- With Italy in front C- With Lybia in the South II- Legislative and regulatory framework of offshore exploration and production of O&G in Tunisia A- Common legal framework with the onshore B- Specific procedure for the implementation of exploration and production activities on Tunisian continental shelf. III- Protection of the marine environment in the context of O&G exploration and production: A- Tunisian national legislation for the protection of the marine environment B- Obligations to protect the marine environment arising from international conventions ratified by Tunisia.

3 INTRODUCTION : 1- Definition of some useful concepts Article 2 of Hydrocarbons Code 1999 (HC) states the following concepts : *Exploration activities: Detection of signs of the existence of hydrocarbons using geological and geophysical methods. These activities are authorized within the framework of an exploration license (Art.10 of HC) *Research: Studies and geological/geophysical drilling works as well as production testing, in order to discover hydrocarbon deposits and assess the reserves. These activities are authorized within the framework of a research license :(Art.11 of Art 38 of HC) *Exploitation activities : - Studies and drilling and completion of wells. - Set up of the necessary facilities to develop and put into production a hydrocarbons deposit. - Preparation Operations of the first hydrocarbon products in order to make them marketable. - Transport of the hydrocarbons by pipeline. - Marketing of the produced hydrocarbons. These activities are allowed only within of a concession for working (Art.39 to 58 of HC).

4 2- Historical background of OFFSHORE oil and gas exploration and production activities in Tunisia: In 1956, right after the independence of Tunisia and the establishment of the Tunisian administration, the authorities began to grant authorizations for offshore exploration and exploitation of hydrocarbons, despite the lack of delimitation of the continental shelf at that time with neighboring countries and countries in front of Tunisia. The same goes for the onshore exploitation. Gulf of Gabes : - Permit of Eastern Gabes in Permit of Gulf of Gabes in 1965 (Ashtart 73) Gulf of Hammamet : - Marine Permit of Hammamet Gulf 1965 (Halk el Menzel 1979) - Marine Permit Marin East Center 1973 (Isis 1980) - Permit Cap Bon Gulf of Hammamet 1972 (Cosmos Yasmin Zinnia 1990) - Grands Fonds permit Hammamet 1973 (Birsa Oudna 1988)

5 I- Geographical boundaries for the exploration and production of O&G in Tunisia (CS) : A- In the North with Algeria: In 1995, negotiations started between the 2 countries. A preliminary agreement on boundaries was adopted for a duration of 6 years (expected solution by Art 74.3 and Art 83.3 of the 1982 Convention on the Law of the Sea). Provisional boundary measures are based on a single line - all purpose line of maritime delimitation: Tunisia accepted : - A limited effect on the island of La Galite. - Renunciation to grant Territorial Sea to the islands Sorelles. Algeria accepted : - Delimitation of the CS between Tunisia and Italy. - Admission to the sovereignty of Tunisia on Sorelles islands granting a Territorial Sea on 4 MM. These provisional measures came into force in 23 Nov 2003 and covered a period of 6 years. These provisional measures were made final following the final approval of the Governments of both countries: - Tunisian ratification by Decree Law No. 104 dated on 22 Oct Algerian ratification by Presidential Decree Law No of 16 Sept 2013.

6 B- Delimitation of the Continental Shelf with ITALY : On 2nd Aug 1971, Tunisia and Italy came to an agreement delimiting the CS between the two countries. Content of the agreement: Art 1 "The delimitation of the CS between the two countries is based on a median line with equidistant points from the nearest points on the baselines from which are measured the widths of the Territorial seas... ". This line is 32 points (the point O on the side of Algeria is opposite to Sardinia island and point 32 is opposite the Sicily). Linozo, Lampidoza, Lampione and Pantellaria islands are wrapped with 13MM radius circles which centers are located on the coastline of these islands. With an exception for Lampione island which is wrapped with 12 MM radius circle (Paragraph C of Art 2 of the Agreement) L'Art 4 : This agreement states that If Natural Resources of oilfields extend on both sides of the borderline of the Continental Shelf the competent authorities for the Contracting Parties shall concentrate in order to meet an agreement to decide about the terms of exploitation of these resources.

7 C- Delimitation of the Continental Shelf with Libya : Under the CIJ judgment of 24 Feb 1982, an agreement was established between the two countries on Aug 8, This agreement was approved by Tunisia with Law No. 10 on 1st Feb This agreement includes tracing two lines for the delimitation of the CS: 1. A first line of 26 starting from land border Ras Ajdir up to points '30 in the North of the Gulf of Gabes. 2. A second line of 52 from the point determined above up to its intersection with a boundary of another state.

8 II- II- Legislative and regulatory framework of offshore exploration and production of O&G in Tunisia : A. Common legal framework regarding onshore 1- Establishment of an agreement with the Tunisian Government Research and production of hydrocarbons in Tunisia is based on an agreement to be established with the Tunisian State. This agreement is approved by an O&G Decree which has to be published in the official journal JORT. 2- Principle of ETAP participation Tunisian legislation (O&G Code) stipulates that a research permit for exploitation of hydrocarbons is only granted in association with the ETAP. (Art.92 of O&G Code). However all risks and expenses related to exploration and research are in charge of the coholder and not ETAP. If the research turns out to be positive and ETAP decides to participate in the exploitation operations of the deposit, ETAP will reimburse its share of the expenses; refund will be made on the basis of hydrocarbons produced.

9 B- Specific procedure for the implementation of exploration and production activities on Tunisian continental shelf : - An environment impact assessment must be submitted to the competent authority, if the EIA is not approved, no activity can be then undertaken. - Prior approval has been established by Decree No of 15 Sept on the exercise of scientific research, exploration, lifting and drilling vessels in Tunisian waters and continental shelf. - Article 2 of this Decree specifies all required docs and info of the application for authorization to any scientific research, exploration, surveying and drilling activity as well as the use of any ship, or any other marine craft in the Tunisian waters or CS for these purposes. It should also be noted that the last paragraph of Art I states: this authorization does not relieve the applicant to obtain any other necessary authorization foreseen by laws and regulations"

10 III- Protection of the marine environment in the context of O&G exploration and production: A- Tunisian National legislation for the protection of marine environment on exploration and exploitation of hydrocarbons (O&G Code): When O&G Code was proclaimed in 1999, that Tunisian legislator introduced a coherent legal framework in order to protect marine environment against offshore O&G exploration and production activities. In O&G Code Art.2 specifies the following ideas : - Maritime Space: sea or stretch of sea that are under the sovereignty or national jurisdiction (Art.2.J). - Environnent: the physical space, including land, air, sea, underground and apparent water (rivers, lake, lagoon, sebkha and similar...) and spaces, landscapes, natural sites, various plant and animal species and in general all elements of the National Heritage (Art.2.r) In addition, O&G Code 1999 laid down rules for the protection of the environment before the beginning of the exploration and exploitation of hydrocarbons (a), after the completion of mining operations (b).

11 1- Rules related to safety and marine environment protection before and during the activities: - The holder of a prospecting license and research/operating license is obliged to: a) develop an environmental impact assessment in accordance with the laws and regulations, which must be approved prior to each phase of its research and exploitation b) take all measures to protect the environment and is required to comply with the commitments made in the EIA as approved by the Competent Authority. c) Incurring liability insurance against risks of damage to property of others/third parties as consequence of his activities, this includes also environmental risks (Art 59.2 O&G C) - The holder of an O&G license is required to certify its production facilities by an independent office approved by the licensing authority, comply with legislation to regulations and rules, criteria and good practices in International petroleum Industry (Art 60 O&G Code)

12 - During the validity period of an exploration or research license and in case of renewal and/or extension of the license, the holder will be entitled to renew and extend the said licenses only if he hasn t harmed the environment through its activities; (Art.23 and 28) - In addition, in case of the discovery of O&G, the development plan to be submitted to the licensing authority must contain a study of the safety measures to be taken to protect personnel, facilities, population and environment (including explosions and fire) in compliance with the Tunisian legislation or in compliance with the best practices in O&G industry (Art 47.9)

13 2- Safety and environmental measures after offshore exploitation of O&G: - Principle of the rehabilitation of the operating site - A provision for abandonment to meet the expenses of abandonment will be made during the last five (5) years of operation for off shore sites and during the last three (3) years for in land sites (Art O&G Code) - Possibility for concessions holder established and developed before the entry into force of O&G Code to constitute a leaving reserve. - Possibility for holders of concessions who were established and developed before the entry into force of O&G Code to constitute a leaving reserve. - The holder of the exploitation concession is required to submit a abandonment plan setting the leaving conditions and restoration of the site. The plan has to be approved jointly by the O&G and the environment competent authorities (Art 61.3 O&G Code). - Abandonment, decommissioning and removal of offshore oil installations as well as rehabilitation of sites located in the marine environment must comply with the law, regulations, standards and international conventions ratified by the Tunisian government.

14 B- Obligations to protect the marine environment arising from international conventions ratified by Tunisia: Laws ratified by Tunisia under international and regional conventions: - Law N 85-6 dated on 22 Feb 1985 ratifying the United Nations Convention on the Law of the Sea - Loi N dated on 9 May 1994 ratifying the IMO STCW Code. - Law N dated on 23 May 1980 ratifying SOLAS Convention. - Law N dated on 21 Jan 1976 ratifying MARPOL Code. - Law N dated on 01 Aug 1972 ratifying COLREG Convention. - Law N dated on 19 Jun 1995 ratifying OPRC Convention. - Law N dated on 23 Feb 1998 ratifying LONDON-LC72 Convention and its 1996 Protocol. - Tunisia adhered to the guidelines and recommendations made in the Mediterranean regional framework by the Barcelona Convention in 1976 as well as its protocols for the protection of the Mediterranean Sea against pollution caused by O&G. (Madrid Protocol of 14 Oct 1994 on protection of the Mediterranean Sea against pollution resultant from exploration and exploitation of the continental shelf, the seabed and its subsoil.)

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