Some major oil and gas companies are poised to make use of the massive investment opportunities provided by the Sierra Leone government. If managed well, the oil and gas sector will serve as a golden opportunity to transform the country’s economy, resulting in bettering the lives of citizens.
“Oil and gas is not a partisan enterprise, it is not about politics and not a mafia enterprise. It is a natural endowment that we should make good use of for the benefit of all,” said the Director General of Sierra Leone’s Petroleum Directorate, Timothy Kabba, adding that “our opportunities are unlimited, and we hope to have many companies to make use of the good opportunities provided in the oil and gas sector.”
Kabba said they want to ensure that the Petroleum Directorate is seen as a competent sector worth for investors’ money. “We have the capacity to ensure that our activities do not pose a threat to the environment,” he assured.
It could be recalled that in September 2018, shortly after his appointment as Director General of Sierra Leone’s Petroleum Directorate, Timothy Kabba announced a six-month period of Industry Consultation, the purpose of which was to solicit feedback from potential participants in the country’s Fourth Licensing Round.
Meetings have since been held with a broad spectrum of high-quality international oil and gas companies. The Directorate is appreciative of the time that companies have so far devoted to the consultation process, and its intention is to use the insights gained to bring the Fourth Licensing Round to a successful conclusion.
Thus, the general conclusions of the consultation exercise include companies increasingly recognizing the proven nature of Sierra Leone’s working hydrocarbon system. License Round Participants have considered a broad basis of prospectively, which spans a range of geographic locations, play types and water depths; this prospectively extends beyond the boundaries of the License Areas made available at the start of the Fourth Licensing Round.
A key conclusion drawn by the Directorate is that the conditions offered pursuant to the original tender process no longer provide the Government of Sierra Leone with a structure broad enough to explore the full range of investor interest that has been expressed.
The Directorate has noted that a portion of the interest lies in water depths in excess of 2, 500 meters, the boundary line between deep and ultra-deep waters. He said it is the view of the Directorate that the number of companies with financial and technical capability to operate safely in such-ultra-deep water areas is very limited; and potential investors acknowledge that their understanding of Sierra Leone’s prospectivity will benefit from working with the world-class inventory of seismic, gravity, magnetic and well data and studies that is owned by the government.
“Based on these conclusions, the government has decided to reopen the country’s Fourth Licensing Round with the following structure: fully open the Republic’s offshore waters for petroleum licensing; optimize a more flexible Block framework as the basis for licensing; launch a Direct Tender for license applications where 50% or more of the application area is in water depths in excess of 2, 500 meters; and launch an open tender for all other license applications,” Kabba told a news conference on Tuesday. He further revealed that following publication in the Sierra Leone Gazette, both Tender processes have been launched on Tuesday 21st May 2019.
The open Tender process will run for six months and the Direct Tender process for four months. The deadline for Open Tenders is 22nd November, 2019 and Direct Tender negotiations will close on 20th September 2019. It is, however, possible for Licenses to be awarded by Direct Tender prior to the closure date.
“To participate in either Direct or Open Tender, companies must prequalify for that process by fulfilling all financial, technical and health, safety and environment (HSE) related elements relevant to their respective applications. The open tender process, being focused on shallower water depths, will provide the opportunity for a broad range of companies to apply for offshore acreage,” the Director-General remarked.
Given the predominance of ultra-depth-water areas in the Direct Tender process, each applicant will be expected to evidence that they possess the financial and technical capability to safely operate in ultra-deep water.
At the launch of the Fourth Licensing Round, five License areas were defined and released for licensing. The industry consultation process has highlighted that this rigid approach has not provided the Directorate with the flexibility it requires.
To address this, and with the Republic’s offshore waters now fully open to licensing (excepting environmentally protected estuaries and a five-kilometer wide coastal fisheries zone), the Directorate has decided to utilize a predefined, reticular Block framework. This size of each block is 1, 360km2. Using this framework, applicants are invited to delineate their areas of interest be assembling multiple contiguous Blocks.
“The License application must cover an area which is equivalent to at least 3 blocks in size and may be made up of a combination of whole and partial Blocks. Overlapping License Applications will be reviewed with reference to their relative merits and against the criteria detailed on the published scorecard. Applicants are asked to propose a work program for the Initial Exploration Period following which they will have the option to enter an extension period. No minimum work program specifications have been set for the Initial Exploration Period. However, the Directorate expects companies to invest in studies, data and other activities that build toward the drilling of exploration wells.”
“Applications for both Direct and Open Tenders will be assessed against a publicly disclosed scoring system. Once accepted, an exclusive License Agreement will be signed and ratified by Parliament. The agreement then becomes valid and binding, and a summary of the License published in The Sierra Leone Gazette. The Petroleum Directorate looks forward to a successful conclusion to Sierra Leone’s Fourth Licensing Round,” Kabba said.
In a similar development, the Director-General of Petroleum Directorate, Timothy M. Kabba, led a four-man Petroleum Directorate team to the America Association of Petroleum Geologists (AAPG) 2019 Annual Convention & Exhibition (ACE) held at the Henry B. Gonzalez Convention Center in San Antonio, Texas from 19-22 May 2019.
ACE 2019 brought together over 7,500 professionals from 72 countries, representing a broad spectrum of the geosciences community. Presenters shared innovations and best practices in the industry and exhibitors introduced state-of-the-art displays and next-gen products.
Mr. Kabba used the occasion to announce the re-opening of Sierra Leone’s Fourth Licensing Round for oil and gas exploration, following six months of wide-ranging consultations with multi-faceted actors in the industry, including major and independent oil companies.
Mr. Kabba informed the audience that the consultations had revealed that Fifth License Round participants are looking forward to a much broader range of prospectively than was offered in the Fourth Licensing Round.