Nigeria lags as African peers plan big oil licensing rounds
Madagascar, Algeria, Ghana are among African countries that have concluded plans to conduct oil licensing rounds before this year ends, which will boost their reserves, increase revenue as well as their capacity to take advantage of soaring oil prices but Africa’s biggest producer, Nigeria, is yet finalize bid round plans started since 2016.
At the Africa Oil Week conference scheduled for Cape Town, South Africa from November 5-9, Madagascar will announce oil licensing round offering investors access to 225 offshore exploration blocks. Yet Madagascar is not the easiest places to do business. The tough terrain makes extraction difficult requiring huge technological investment, infrastructure is a challenge and it is politically unstable.
Madagascar has five basins, totalling about 320,000 square kilometres and some its biggest basins in the Western coast share similar geological structure with Nigeria and Angola. The country’s largest fields, Bemolanga and Tsimiroro, remain largely unexplored.
Nigeria’s neighbour Ghana, is conducting its first licensing bid rounds for nine oil blocks in its Western Basin, this October. The country has decided on direct negotiation opening up the process for talks with investors all across the world according to officials of the Ghana energy ministry.
In North Africa, Egypt is looking to deepen gas investments with new bid rounds focused on the eastern Mediterranean and Nile Delta, while also planning new licensing in the more frontier Western Mediterranean and Red Sea. Algeria has amended its hydrocarbon law to attract new investments from bid rounds.
In West Africa, Gambia, Sierra Leone and Cote d’Ivoire are looking to capitalize on industry interest in the Atlantic and West Africa Transform margins with offshore blocks on offer. Senegal has rewritten its petroleum code in anticipation for new licensing rounds. Congo (Brazzaville) is expected to follow up last year’s deep water round with an offering of shallow water blocks.
“The Department of Petroleum Resources (DPR) is not anywhere close to concluding preparations for the next bid rounds, in fact from all indications, it does not seem it will happen any time soon, because the guidance notes for the bid rounds are not even prepared yet. It does not even look like it could happen this year,” a source close to the regulator, who preferred anonymity said.
In a world where options have become abundant, investors are looking for the best deals with little hassle but capital has to be courted hence these countries are turning on the charms.
Algeria and Senegal had to rewrite their Petroleum sector law to offer generous incentives to prospective investors. In the Gulf of Guinea, Cameroon has also offered eight blocks in a bid round earlier in June, under terms which include an increased cost recovery limit.
Last year, there was a rash of media reports pointing to the possibility of a licensing round by the first quarter of 2018. A newspaper article even went to publish the purported guidelines which the Federal Government would explore in conducting the licensing round including discretionary award.
The Department of Petroleum Resources, the industry regulator refuted the reports.
“Though the DPR is yet to finalize any framework for a bidding round, we can however reaffirm Government’s long standing adherence to the principle of an open competitive bidding process as opposed to a discretionary award process of acreage allocations that has long been discarded by the Federal Government,” said the DPR.
Last year, the Nigerian government said it would conduct bid rounds for its marginal fields to raise funds to mitigate a slump in crude earnings and finance the N7.4 trillion, 2017 budget. But with the rise of oil prices above $80 per barrel, more cash lessened the urgency for a new bid round.
Meanwhile, as at 2016, four oil mining leases (OMLs) and 24 oil petroleum leases (OPLs) have expired. In the next five years, 47 OMLs would expiring while 27 OPLs would be available for renewal.