Oil and Gas

Last verified on Wednesday 14th June 2017

Dominican Republic

Milvio Coiscou
Coiscou & Asociados, Attorneys at Law
  1. 1.

    What is the legislation applicable to oil and gas activities in your country? Is it federal or state legislation, or both?

  2. It is a national legislation, in the Dominican Republic does not exist the distinction between federal and state legislation. The applicable laws are:

    • Law No. 4532-56 on Oil Deposits and Other Fuels;
    • Law No. 4833-58 that modifies Law 4532-56;
    • Law No. 407-72 regulates the sale of gasoline, diesel oil, lubricants and other similar products;
    • Law No. 112-00 Tax Regulations for Hydrocarbons and its Application Rules;
    • Law 520-73 LPG Import and Distribution;
    • Law 1728-48 Installation of Fuel Storage Tanks;
    • Law 57-07 Incentives to Renewable Sources of Energy;
    • Resolution No. 121 Vehicular Natural Gas Regulation;
    • Resolution No. 01-08 Rules of Procedures for Licensing for Marketing Natural Gas;
    • Regulation of LPG National Market;
    • Regulation No. 2119, that Regulates the Use of LPG;
    • Decree No. 736-83 Technical Regulation on Metrological Control of Liquefied Petroleum Gas for Domestic Use;
    • Law No. 146 Mining Law;
    • Law No. 100-13 Ministry of Energy and Mines; and
    • Law No. 142-13, which modifies Law 100-13.
  3. 2.

    Are oil and gas activities carried out by the state or a state-owned agency or national oil company?

  4. The oil and gas activities are carry out by both national and international companies, which may or may not have the state as investor.

    In the other hand, the state agency in charge of regulating the sale and distribution of hydrocarbons is the Ministry of Industry and Commerce, for sale and import/export, as well as the Sub-Direction of Hydrocarbons, a unit of the General Mining Agency, for exploration and exploitation issues.

  5. 3.

    Is oil and gas a regulated business that can only be carried out by companies that are licensed or that receive government concessions to operate?

  6. Yes. Import, distribution and sale of hydrocarbons are regulated and require special state authorisation. Likewise, the exploration and the exploitation of hydrocarbons require a specific concession from the state.

  7. 4.

    Identify the regulatory agencies charged with regulating oil and gas activities in your country and describe the role each agency plays in regulating such activities. 

  8. There are several state agencies involved in those activities, such as:

    • the Ministry of Industry and Commerce, the Mining Agency (throughout the Sub-Directorate of Hydrocarbons);
    • the Ministry of Environment and Natural Resources (regarding environmental licences for the projects); and
    • the Ministry of Energy and Mines (regarding exploration and exploitation licences for the projects).
  9. 5.

    Are all hydrocarbons in your country deemed to be originally owned by the state? If so, when does ownership transfer to the extractor or buyer of the hydrocarbons?

  10. Yes. The oil and its derivatives, hydrocarbons and other kinds of fuels, belong to the state and may be explored and exploited in benefit of individuals but only under concession contracts granted by the Executive Branch. It must be clarified that the terms and conditions of those concessions have to be consequent with the national interest. The exploitation rights would be granted for an unlimited time with the surface area to be agreed.

    All matters relating to the exploration in the country with the purpose to discover oil and other hydrocarbon-substances to the exploitation of deposits that are the same on the surface or in the interior of the earth, whether solid, liquid or gas; to manufacturing and refining of minerals exploited and transported by all means requiring special way, is declared a public utility. In consequence it will always need a concession from the Executive Branch.

  11. 6.

    How are oil and gas exploration and production rights or concessions granted? Is there more than one method for granting such rights (ie, concession and joint exploration agreements) or co-existing regimes applicable to different exploration or production areas?

  12. The oil and gas exploration are order or made by the Ministry of Energy and Mines. Likewise the ministry is entitled to grant the permits for such exploration.

    Thus far, with the new legislation, the method to grant the exploration rights is only through permits.

  13. 7.

    Is there a public bidding or similar process for oil and gas exploration and production licences? If so, is it open to foreign companies and investors?

  14. The concession for exploration and exploitation can be assigned by way of a public bidding by the State or by a request by the interested party presented to the Ministry of Energy and Mines. As is established in the Law No.4532, only Dominican people and Dominican corporations have the rights to explore, exploit and beneficiate from the deposits. A concession might be granted, however, to a foreign company and investor as long as the contract subscribed obligates them to submit to Dominican laws and its jurisdiction. A foreign government cannot, under any circumstances, be admitted as beneficiary of a concession, whether directly or through a company in which they participate.

  15. 8.

    Are there any minimum local content requirements related to international bidding processes?

  16. The particular requirements for the bidding are established in the corresponding offer.

  17. 9.

    Are there any restrictions on foreign participation in such rights or concessions or in companies holding any such rights?

  18. As stated in question 7, only Dominican people and Dominican corporations have the rights to explore, exploit and benefit from the deposits. A concession might be granted, however, to a foreign investor as long as the contract subscribed obligates them to submit to Dominican laws and its jurisdiction. A foreign government cannot, under any circumstances, be admitted as beneficiary of a concession, whether directly or through a company in which they participate.

  19. 10.

    Are there any restrictions on the participation in such rights or concessions by state-owned entities or local national oil companies?

  20. The Law of Oil Deposits and Other Fuels does not state any restriction for local national companies in the participation in the rights for exploration and exploitation or concessions nor state-owned entities, the only express prohibition is regarding the participation of foreign governments as shareholders or directors of said company.

  21. 11.

    Are companies or consortia that are awarded exploration and production rights given priority to operate and exploit the corresponding oil and gas fields? If so, how is such priority structured and documented?

  22. Law No. 4532 of Oil Deposits and Other Fuels, and Law No. 4833 that modifies Law 4532, which regulate the exploration and exploitation rights in this field, do not establish if the companies or consortia that are awarded exploration rights will receive a priority to exploit the corresponding resources. However, the Mining Agency has established that taking into account the Mining Law and its Regulations, it can be inferred some of the requirements to be taken into consideration for determining if those companies would receive a priority to operate. In consequence, regarding this law, the companies that are awarded exploration rights have a priority to operate and exploit the field. Thus, the companies that are awarded exploration rights in the field of hydrocarbons would receive priority to operate in the area where they received the concession for exploration. The terms of this priority would be established in the concession contract for the exploration.

  23. 12.

    What rights does the holder of an exploration and production licence or concession have to the hydrocarbons discovered during exploration and subsequently produced? 

  24. When, in the course of the exploration, a holder makes an oil discovery it shall immediately notify the state by letter, specifying in such notice all relevant information related to the discovery. If the holder notifies the state that the discovery has a potential commercial interest, the holder shall prepare with due diligence, a work programme or budget work programme for the evaluation of the discovery. Such work programme or budget work programme evaluation should include a comprehensive assessment of the operations necessary to determine if the discovery is a commercial discovery. When the state approves the working programme, both parts settle the terms of the exploitation. Any benefit on exploration and exploitation of hydrocarbons can be agreed by contracting the state, this also applies for the concessions granted.

  25. 13.

    May a holder of an exploration and production licence or concession transfer such right?

  26. Yes, Law No. 4532 of Oil Deposits and Other Fuels establishes that if is not prohibit by one of the clauses in the contract the holder can transfer the rights for exploration, exploitation to a new entity, in that case this entity will be obligated to comply with the obligations and responsibilities of the contract. Also the holder is entitled to subcontract other entities to perform all or part of the exploration, exploitation and sharing benefits. It is relevant to remark that Law No. 4833, which modifies Law 4532, specifies that any transfer must be notified to the Executive Power before being processed.  

  27. 14.

    Who has title to assets imported to develop and produce hydrocarbons, including any technology or expertise provided by foreign participants in the local oil and gas sector? 

  28. The Ministry of Industry and Commerce, throughout its Direction of Hydrocarbons.

  29. 15.

    How are federal, state and local governments recompensed for granting companies rights or concessions to conduct oil and gas exploration and production?

  30. The actual legislation does not have any provision regarding recompenses for federal, state or local governments, nevertheless the percentage of benefits to be paid to the Dominican government could be established in the contract subscribed with the beneficiary of the concession.

  31. 16.

    May companies or consortia that hold oil and gas exploration and production rights compulsorily acquire property or rights of way to carry out exploration or production activities? Are these compulsory acquisitions governed by special judicial or administrative proceedings?

  32. In the field of oil and gas there is no such specific regulation yet. In principle, compulsory acquisition of property from third parties does not apply. However, there is a right of passage if a plot of land (ie, the area of the concession) does not have a direct access to main roads.

  33. 17.

    Are natural gas exploration and production activities regulated separately or subject to the same regulation applicable to oil exploration and production? Are there different royalties or other government charges payable by companies that conduct natural gas exploration and production activities?

  34. Gas exploration and production activities are regulated separately from oil exploration.

    In the other hand, Law No. 57-07 (Incentives to Renewable Sources of Energy) and Law No. 112-00 Tax Regulations for Hydrocarbons and its Application Rules regulates the tax and benefits of tax exceptions applicable to the natural gas production.

  35. 18.

    Do foreign ownership restrictions apply to the oil and gas sector in your country?

  36. Yes, as established in article 4 of Law 4532-56 (see question 7).

  37. 19.

    Are there any minimum domestic participation rules or any labour law rules relating to domestic and foreign workers?

  38. Yes. The Labour Code requires companies to have a minimum percentage of Dominican workers, which depends on the total number of workers registered to the company. Labour matters are regulated by the Labour Code and immigration permits are regulated by the General Directorate of Immigration and the Department of Foreign Investment of the Centre for Import and Export of the Dominican Republic.

  39. 20.

    Are there any limitations on vertical integration in the oil and gas industry in your country?

  40. In the Dominican Republic, there is no such particular regulation in the field of oil and gas. However, concerning to vertical integration good commerce practices and anti competitive standards must comply with the Competition Defence Law, No. 42-08.

  41. 21.

    Are oil and gas activities carried out through incorporated entities with limited liability or by consortia or other types of unincorporated joint ventures? Are joint venture partners jointly and severally liable for the obligations undertaken in connection with such activities?

  42. These activities can be carried out by physical persons or by corporations (whether a limited liability or a consortia). In addition, joint venture partners are jointly and severally liable for the obligations assumed with regards to the oil and gas industry.

  43. 22.

    May oil and gas reserves be pledged or encumbered to secure the repayment of debt? How?

  44. In the field of oil and gas there is no such specific regulation yet. The parties might agree the possibility of pledged or encumbered the oil and/or gas on the contract regarding to the payment or repayment method.

  45. 23.

    Can oil and gas rights that are subject to a lien be sold or transferred freely by the secured creditor? What issues, if any, do secured creditors face in enforcing liens on oil and gas rights?

  46. Article 5 of Law 4532-56 determines that if is not specificities in the contract agreed with the government, the holder may transfer all the obligations and responsibilities to a third person or entity. Such transfer must be duly and formally notified to the executive power. This implies that the new holder (secured creditor) must comply with all obligations required by law; also it will be subject to any benefit or limitation that might result from such activity.

  47. 24.

    Is oil and gas output freely exportable in your country? Are there any limits or quotas applicable to oil and gas production? Is there access to export pipelines? What licences are required for oil and gas exports? Are duties or tariffs applicable?

  48. Currently our legislation does not regulate the export of oil and gas; however, the Ministry of Industry and Commerce could determine the requirements to be complied with by the companies.

  49. 25.

    Are prices for oil and gas set or fixed by the government?

  50. Yes, they are regulated by the Ministry of Industry and Commerce.

  51. 26.

    Are oil and gas exports taxed under the general income tax regime or is there specific hydrocarbons tax legislation?

  52. There is a specific tax on the sale of hydrocarbons, as specified in article 1 of Law 112-00, but the general income tax would apply to the benefits received by the exporting company, unless a tax exemption is established in the concession or by a special law.

  53. 27.

    Do special environmental rules apply to oil and gas exploration and production?

  54. Yes. Due to the nature of oil and gas, its storage and exploration require an environmental licence. This licence is granted by the Ministry of Environment and Natural Resources.

  55. 28.

    Are environmental regulations in your country consistent with any international standards?

  56. Yes. The principal of which is the Kyoto Protocol.

  57. 29.

    Must companies that participate in the oil and gas industry obtain special environmental or other government permits (other than licences or concessions to carry out oil and gas exploration and production) to operate in your country?

  58. Yes. In addition to the environmental licence approval of the Ministry of Industry and Commerce is required.

  59. 30.

    Does the government (including any development banks or agency) provide financing, subsidy or other support to companies undertaking oil and gas exploration or production?

  60. In the case of natural gas, there are tax incentives established in Chapter III of Law 57-07 (Incentives to Renewable Sources of Energy). In the case of oil exploration, the beneficiary would enjoy exoneration or reduction in taxes, as specified in its particular contract, as established in article 56 of Law 4532. We should also consider Law No. 112-00, which regulates the Tax for Hydrocarbons and its Application Rules.

    In general the financing for this type of projects are taken in foreign banks, in consequence, currently, the local banks do not have any financing directed to oil and gas exploration or production.

  61. 31.

    Are there any tax stability or similar regimes available to foreign investors undertaking investment in the oil and gas industry in your country?

  62. The benefits set forth in Law 57-07 (Incentives to Renewable Sources of Energy) and Law No. 112-00 (Tax Regulations for Hydrocarbons and its Application Rules) are applicable to both national and foreign investors, however, we should take into consideration the restrictions established in Law No. 4532-56 (see question 7).

  63. 32.

    Are oil and gas activities generally protected under bilateral investment treaties entered into by your country?

  64. The Dominican Republic is signatory of DR-CAFTA, among other treaties.

  65. 33.

    Are there any dispute resolution systems specific to the oil and gas industry? Does state immunity apply in such disputes?

  66. No, there is not a specific dispute resolution system to oil and gas industry, therefore are used the systems in ordinary law. Since foreign states are not allowed to be beneficiaries of concessions, no state immunity applies.

  67. 34.

    Do anti-corruption rules apply to the oil and gas industry?

  68. Yes.

  69. 35.

    Has your jurisdiction adopted any legislation or regulations governing the exploitation of shale gas (fracking)? Are any special licences or environmental permits required for such activities?

  70. We don’t have any specific regulation for shale gas. Drilling activities would always require an environmental permit as well as a drilling licence.

  71. 36.

    Has your jurisdiction adopted any legislation or regulations governing ultra-deep-water exploration or drilling activities? Are any special licences or environmental permits required for such activities?

  72. Taking into consideration that, article 10 of Law No.66-07, states the Dominican Republic an archipelagic state, establishes that, “The Dominican Republic’s sovereignty extends over the territorial sea, the seabed and subsoil of the seabed and the living and non-living resources in the content as well as air space above the territorial sea.” In the event that ultra-deep-water drilling would be executed, we understand that a drilling licence as well as an environmental licence would be required; notwithstanding, there is not a specific legislation or regulation for this matter.

  73. 37.

    Have there been any recent material amendments to the laws, rules or regulations governing hydrocarbon exploration and exploitation? Have any new laws, rules or regulations governing hydrocarbons exploration and exploitation been passed in your jurisdiction?

  74. The recent material regarding to hydrocarbon exploration and exploitation is Law No. 100-13 (Ministry of Energy and Mines), which was enacted in July 2013, creating the Ministry of Energy and Mines, amended by Law 142-13.

    Regarding to hydrocarbon exploration and exploitation, this law creates the Vice Ministry of Hydrocarbons and it empowers the ministry for granting exploration permits and exploitation concessions.

    The Ministry of Energy and Mines will work hand in hand with the Ministry of Industry and Commerce and the Ministry of Environment and Natural Resources.

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Questions

  1. 1.

    What is the legislation applicable to oil and gas activities in your country? Is it federal or state legislation, or both?


  2. 2.

    Are oil and gas activities carried out by the state or a state-owned agency or national oil company?


  3. 3.

    Is oil and gas a regulated business that can only be carried out by companies that are licensed or that receive government concessions to operate?


  4. 4.

    Identify the regulatory agencies charged with regulating oil and gas activities in your country and describe the role each agency plays in regulating such activities. 


  5. 5.

    Are all hydrocarbons in your country deemed to be originally owned by the state? If so, when does ownership transfer to the extractor or buyer of the hydrocarbons?


  6. 6.

    How are oil and gas exploration and production rights or concessions granted? Is there more than one method for granting such rights (ie, concession and joint exploration agreements) or co-existing regimes applicable to different exploration or production areas?


  7. 7.

    Is there a public bidding or similar process for oil and gas exploration and production licences? If so, is it open to foreign companies and investors?


  8. 8.

    Are there any minimum local content requirements related to international bidding processes?


  9. 9.

    Are there any restrictions on foreign participation in such rights or concessions or in companies holding any such rights?


  10. 10.

    Are there any restrictions on the participation in such rights or concessions by state-owned entities or local national oil companies?


  11. 11.

    Are companies or consortia that are awarded exploration and production rights given priority to operate and exploit the corresponding oil and gas fields? If so, how is such priority structured and documented?


  12. 12.

    What rights does the holder of an exploration and production licence or concession have to the hydrocarbons discovered during exploration and subsequently produced? 


  13. 13.

    May a holder of an exploration and production licence or concession transfer such right?


  14. 14.

    Who has title to assets imported to develop and produce hydrocarbons, including any technology or expertise provided by foreign participants in the local oil and gas sector? 


  15. 15.

    How are federal, state and local governments recompensed for granting companies rights or concessions to conduct oil and gas exploration and production?


  16. 16.

    May companies or consortia that hold oil and gas exploration and production rights compulsorily acquire property or rights of way to carry out exploration or production activities? Are these compulsory acquisitions governed by special judicial or administrative proceedings?


  17. 17.

    Are natural gas exploration and production activities regulated separately or subject to the same regulation applicable to oil exploration and production? Are there different royalties or other government charges payable by companies that conduct natural gas exploration and production activities?


  18. 18.

    Do foreign ownership restrictions apply to the oil and gas sector in your country?


  19. 19.

    Are there any minimum domestic participation rules or any labour law rules relating to domestic and foreign workers?


  20. 20.

    Are there any limitations on vertical integration in the oil and gas industry in your country?


  21. 21.

    Are oil and gas activities carried out through incorporated entities with limited liability or by consortia or other types of unincorporated joint ventures? Are joint venture partners jointly and severally liable for the obligations undertaken in connection with such activities?


  22. 22.

    May oil and gas reserves be pledged or encumbered to secure the repayment of debt? How?


  23. 23.

    Can oil and gas rights that are subject to a lien be sold or transferred freely by the secured creditor? What issues, if any, do secured creditors face in enforcing liens on oil and gas rights?


  24. 24.

    Is oil and gas output freely exportable in your country? Are there any limits or quotas applicable to oil and gas production? Is there access to export pipelines? What licences are required for oil and gas exports? Are duties or tariffs applicable?


  25. 25.

    Are prices for oil and gas set or fixed by the government?


  26. 26.

    Are oil and gas exports taxed under the general income tax regime or is there specific hydrocarbons tax legislation?


  27. 27.

    Do special environmental rules apply to oil and gas exploration and production?


  28. 28.

    Are environmental regulations in your country consistent with any international standards?


  29. 29.

    Must companies that participate in the oil and gas industry obtain special environmental or other government permits (other than licences or concessions to carry out oil and gas exploration and production) to operate in your country?


  30. 30.

    Does the government (including any development banks or agency) provide financing, subsidy or other support to companies undertaking oil and gas exploration or production?


  31. 31.

    Are there any tax stability or similar regimes available to foreign investors undertaking investment in the oil and gas industry in your country?


  32. 32.

    Are oil and gas activities generally protected under bilateral investment treaties entered into by your country?


  33. 33.

    Are there any dispute resolution systems specific to the oil and gas industry? Does state immunity apply in such disputes?


  34. 34.

    Do anti-corruption rules apply to the oil and gas industry?


  35. 35.

    Has your jurisdiction adopted any legislation or regulations governing the exploitation of shale gas (fracking)? Are any special licences or environmental permits required for such activities?


  36. 36.

    Has your jurisdiction adopted any legislation or regulations governing ultra-deep-water exploration or drilling activities? Are any special licences or environmental permits required for such activities?


  37. 37.

    Have there been any recent material amendments to the laws, rules or regulations governing hydrocarbon exploration and exploitation? Have any new laws, rules or regulations governing hydrocarbons exploration and exploitation been passed in your jurisdiction?


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