Africa Oil Week musings: Licensing rounds opening up new frontiers

Investment in African exploration & production (E&P) has slowed over the past few years as operators have developed existing finds and capital directed towards US projects with lower perceived risk. But investor sentiment has started to turn over the past six months and there are several licensing rounds planned or ongoing that will open up new opportunities for explorers.

While the auctions of mature plays Angola, Equatorial Guinea, Gabon, Ghana and Nigeria will likely attract widespread interest, others may have largely passed below the radar.

One of the plenary sessions at this year’s Africa Oil Week is titled: African Exploration & Production: Past & Future. With discussions set to cover the opening of frontier areas to exploration and incentivising activity in proven plays, Gneiss Energy’s AOW delegation was keen to look set out a few interesting licensing opportunities that may offer significant exploration potential.

Madagascar

Despite exploration in Madagascar dating back to the early 1900s, only eight wells have been drilled in the country’s offshore and all of these have been in shallow water.

Antananarivo launched a licensing round at last year’s Africa Oil Week with the hope of encouraging exploration off the country’s west coast. This was halted in February though, when a new government was voted in; the incoming administration of President Andry Rajoelina was reportedly keen to prioritise E&P but first wanted to assess the terms drawn up by the previous government.

Hydrocarbon-rich sedimentary basins have already been established in the west of the island, home to the Tsimiroro and Bemolanga heavy oil fields. The bid round was launched by the office of mines and strategic resources (OMNIS) in collaboration with seismic companies TGS and BGP to target 63,296 square km of the Morondava basin, dividing the area into 44 1,940 square km blocks.

With the bid round still suspended, interest is being diverted to TGS, whose data suggests that there is significant potential from the offshore area. In promotional materials, TGS and BGP note that there have been gas shows both on- and offshore Madagascar, while its proximity to major gas deposits in Mozambique gives the frontier Morondava basin seductive appeal for explorers.

OMNIS will need to kick into action soon though, with Austrian operator OMV already reported to have grown tired of waiting, leaving the country in August.

Rwanda

Rwanda’s location in the East African Rift System (EARS) combined with the ease of doing business in the country make it an ideal spot for E&P. Earlier this year, Paul Kagame’s government announced plans to fund a 2-D seismic survey of Lake Kivu, from which methane is currently produced.

The latest independent hydrocarbon prospecting exercise was carried out by Vanoil of Canada, whose 1,600 square km Lake Kivu licence expired in 2013. In 2017, the country’s Mines, Petroleum & Gas Board (RMB) began a programme to improve the attractiveness of future exploration by carrying out the research itself.

RMB CEO Francis Gatare said earlier this year that Rwanda was seeking to “leapfrog” part of the exploration process by acquiring seismic data alone, thereby increasing the appeal for larger oil and gas firms when this data is made available in late 2020 or early 2021.

Having sent requests for bids to select companies for planning, supervision and quality control, RMB expects to make an appointment soon.

Gatare told Upstreamonline.com in May that the RMB had already received some interest, while requests for bids will follow in October or November for seismic acquisition, and later for processing and interpretation.

Previous surveys have shown the presence of 4.5km of sediment and Kigali will be hoping that the momentum reaches a crescendo within the next 12 months or so.

Somalia

May this year also saw the launch of Somalia’s first offshore licensing round as well as the signing of a new Petroleum Law and Revenue Sharing Agreement. The round covers a 75,000 square km deepwater offshore area, split into 15 blocks. Spectrum’s geoscience director Karyna Rodriguez said in February that the total potential resource offshore Somalia was 30 billion barrels.

Prequalifying closed in July, with bids to be in by November 7. Production-sharing agreements (PSAs) are due to be signed a month later for three initial exploration phases, lasting up to eight years, kicking off in January 2020.

The sector is looking to rebound from civil war, which caused incumbent explorers to enact force majeure in 1991. Mogadishu is thought to be planning to honour legacy contracts and reached deals with Shell and ExxonMobil during the summer to settle rental fee payments for offshore blocks.

The country has talked up the transparency of its development framework and has been at pains to highlight that the issues of security onshore are not present in the offshore.

However, neither Shell nor Exxon have shown themselves willing to return to the country and it will take operators with experience drilling in waters deeper than 500 metres backed by investors with appetite for risk to make this one work.

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