State of Qatar Legal and Regulatory Framework for the Oil and Gas Sector
The objective of Qatar’s legal and regulatory framework is to provide for the efficient development and use of hydrocarbon resources. The focus is on optimal resource management in line with Law (3) of 2007 on Natural Resources (and its amendments), rendering long-term benefit for society whilst avoiding, limiting and mitigating negative effects on the environment. With the publication of the Qatar National Vision 2030 in 2008, the framework now also aims for hydrocarbon development in line with this Vision.
Qatar Petroleum (QP) is the national oil corporation of the State of Qatar that has been granted the rights to conduct or authorise petroleum operations as per the Law (3) of 2007 on Natural Resources (and its amendments). QP operates within a set legal framework that is defined by the virtue of the Decree Law (10) of 1974 (and its amendments). This is the document that established QP, set its purpose and clarified how it would be managed. All subsequent legislation that is relevant to QP uses this Decree as a reference and to further regulate the organization’s activities. For Qatar Petroleum to conduct the business entrusted to it, there are several legislations that regulate its fields, rights, scope, areas and function in parallel with the Decree Law (10) of 1974 which are mentioned under each section below.
Like any other public body (government entity) within the State of Qatar, QP’s establishment is through a regulation rather than by virtue of commercial registration. As a State-owned public corporation, QP has been mandated a wide responsibility to ensure that it carries out all the activities related to the oil and gas sector in all its phases.
The responsibility for ensuring QP’s long term success resides with its Board of Directors who are responsible for the oversight of the organization and its operations. The Board reports to the Supreme Council for Economic Affairs and Investment which is chaired by His Highness the Emir of the State of Qatar. The Supreme Council oversees the energy sector and steers its policies and plans in line with the State’s vision. The Council is mandated with the supervision of all matters pertaining to the energy sector, the economy, reserve development and all policies related to the regulations of the finance and energy sector of the State of Qatar.
State Institutions - Structure and Roles
The division of roles and responsibilities within the State Institutions ensures that value creation from oil and gas resources benefit Qatar society. The main authorities responsible for the sector are:
Licensing and Fiscal Regime
All natural resources are considered state-owned and may not be explored unless pursuant to the Law (3) of 2007 on Natural Resources (and its amendments), which grants QP exclusive concession for the exploration, excavation and production of petroleum, natural gas and other hydrocarbons and the derivatives thereof, and for the investment and development of such materials in the State. Legislation establishes the licensing system governing all upstream activities arising out of resources and facilities subject to the State of Qatar Jurisdiction, and QP shall authorize any physical or legal person to conduct petroleum operations in accordance with the legal regulations regulating QP. The negotiation of contracts in relation to the exploration and drilling for oil, natural gas and hydrocarbons are undertaken by QP.
QP’s obligation with respect to the fiscal payments are regulated as per the Decree Law (10) of 1974 (and its amendments). The prescribed tax laws and fees apply to QP and its affiliates, unless exempted under decisions issued by the Council. The law also requires Qatar Petroleum’s annual statements to be periodically audited by an external body.
The Constitution of the State of Qatar requires that the State shall preserve the environment and its natural balance in order to achieve comprehensive and sustainable development for future generations. Law (30) of 2002 on Environment Protection (and its amendments) addresses matters such as conservation of the environment, anti-pollution measures, and protection of biodiversity and human health.
The Ministry of Municipality and Environment sets the standards for the evaluation of the environmental impacts of projects to be licensed and adheres to the requirements as per the Law (30) of 2002 on Environment Protection. Environmental Impact Assessments are required before undertaking any kind of development projects or other industrial activities that may have a harmful impact on the environment. Prior to any project execution, project sponsoring entities are required to apply for environmental permits from the Ministry of Municipality and Environment. These permits are assessed and when granted include stipulated conditions that must be adhered to during project implementation. Furthermore, operating facilities require a Consent to Operate (CTO) license, which sets multimedia environmental protection conditions and quarterly reporting requirements. This ensures that the facilities operate in such a way that there are no harmful impacts on the surrounding environment and ensure compliance with National and international environmental regulations.
Ports and Industrial Cities
Article 27 of Decree Law (10) of 1974 (and its amendments) grants QP powers to perform all the related activities to determination and collections of the fees and charges in the ports and berths. By virtue of Decision of the Council of Ministers No. (19) Of 2002, QP is assigned the management of the following ports: Halul, Messaieed, Ras Laffan and Ras Abu Aboud. QP has extensive powers granted when it comes to the management of the abovementioned ports and have defined internal procedures that regulate the wide mandate granted to it by virtue of the law.
Pursuant to the below Decrees, Qatar Petroleum has the right to use, exploit and manage the land/ facilities allocated to it, and exercise all the property rights granted to an owner except for the right of disposal:
- Decree No. 59 of 1989 Granting License to QP for the Usufruct Rights of Land in Mesaieed Industrial City. Decree No. (64) of 2001 Granting License to QP for the Usufruct Rights of Land in Mesaieed and its amendment.
- Decree No. 35 of 1994 Granting License to QP for the Usufruct Rights of Land and Facilities in Ras Laffan Area.
- Cabinet Resolution No. (9) of 1994 regarding the rights and obligations of the Qatar General Petroleum Corporation to use lands and facilities in the Ras Laffan area.
- Decree No. 55 of 1995 Granting License to QP for the Usufruct Rights of Land and Facilities in Dukhan.
Tax System in the State of Qatar
Qatar applies a territorial tax regime. In the State of Qatar, the only tax imposed, other than customs and royalties on petroleum products, is Income Tax. Income Tax is imposed pursuant to Law (24) of 2018, under Article (2) (Issuance) of the Law where it is stipulated that: “except for Articles (9(2)) and (13) of the law, the provisions of this law do not apply to public corporations (e.g. QP)”.
Article 9 (2) of the law sets a 5% deduction at source tax on gross amounts of royalties, interests, commissions and payments for services carried out wholly or partly in the State and paid to non-residents without permanent establishment in Qatar. Meanwhile Article (13) stipulates that public corporations, among other entities, shall notify the General Tax Authority (GTA) of all the contracts, agreements and transactions that they enter into in accordance with the time limits and periods specified in the Executive Regulation of the Law.
Other than the above, pursuant to Article (4(11)) of the same law, which states that : “shares of profits of legal persons that are wholly or partly, directly or indirectly, owned by the State and operate in the field of Petroleum Operations or petrochemical industries are subject to Income Tax”. Furthermore, this is aligned with Article (9(1)) which stipulates that “the tax rate and all other tax conditions provided for in agreements relating to petrochemical industries and Petroleum Operations –as defined by Law (3) of 2007 on Natural Resources- shall apply provided that, in all cases, the tax rate shall not be less than (35%) thirty five percent”.
The application of the above Articles on QP and its subsidiaries and joint ventures means that unless the subsidiaries/joint ventures are entitled to a corporate income tax exemption or a Council of Ministers Decision approving the tax clauses of the agreement(s), QP’s interest is subject to Income Tax Law. The keywords are “Petroleum Operations” and “Petrochemical Industries”. The Income Tax payments goes to GTA, which is a public authority which reports to the Minister of Finance. On the other hand, the payment of Royalties on sales and shipments of petroleum products goes directly to the Ministry of Finance.
Marketing and Sales of Regulated Products
Producing entities in the State of Qatar are mandated to sell regulated petrochemical and oil products to Qatar Petroleum for the Sale of Petroleum Products Company Limited (QPSPP) and Qatar Chemical and Petrochemical Marketing and Distribution Company Limited (Muntajat).
QPSPP was established pursuant to Decree Law (15) of 2007 concerning the Organization of Marketing and Selling of Regulated Products Outside the State of Qatar and is wholly owned by the State of Qatar. In 2016, pursuant to Law (9) of 2016, QP was appointed by the State of Qatar as QPSPP's Marketing Agent for the purchase of all crude from Qatar-based producers for the purpose of its marketing and sale.
Another marketing entity, Muntajat, was established in 2012 under the Muntajat Law. Muntajat exclusively markets and sells chemical and petro-chemical products outside Qatar.
The success of these organizations is built upon the implementation of commercial and operational controls and governance best practices. Each of these entities are governed through their Board of Directors who oversee their operations on an independent basis. It is supported by proprietary IT systems designed for specific business processes. As QPSPP's Marketing Agent, QP has implemented a robust system of internal controls to segregate the marketing of Regulated Products from its day-to-day commercial and operational activities and to preserve the confidentiality of commercial information it accesses in its capacity as QPSPP's Marketing Agent.
Disputes and Resolutions
The dispute resolution depends on the mechanism that is agreed between the parties for resolving a dispute. As a general policy, all contracts adhere to the law of the State of Qatar, and our preference is for disputes to be resolved by the courts of Qatar. Depending on the nature of the agreement and circumstances surrounding the state of negotiations, we accept alternate dispute resolution mechanisms.