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Liberia perseveres with licensing round

West African country presses ahead with plans to auction offshore acreage

Defying the disruption caused by the Covid-19 pandemic and the slump in world oil markets, Liberia has pressed ahead with the offshore licensing round that it had announced for launch in April. Formal inauguration of the round on 10 April was followed by an online launch five days later.

The round covers nine blocks (LB-25 to LB-33) in the Harper Basin, off the southwest coast and the window for submitting offers will run from 1 November to 28 February 2021.

The widespread bans on international travel have prevented the promotional roadshow originally planned by the Liberian Petroleum Regulatory Authority (LPRA), National Oil Company of Liberia (Nocal) and technical partner TGS.

Nonetheless, regulatory and technical information is available through online channels. Oil companies can access 5,961km of 2D seismic, gravity and magnetic data and 6,167km2 of 3D seismic, gravity and magnetic data held by TGS.

“Oil companies do not make short-term decisions regarding their investment and Covid-19 will definitely not continue forever” Goll, LPRA

The Covid-19 pandemic has led some other countries to postpone bidding rounds. But by launching the round online and on time, despite the pandemic, Liberia aims to show foreign investors that it is an efficient and reliable partner.

The country endured brutal conflict for much of the period from 1989 to 2003, but more recently has enjoyed relative calm. Former president Ellen Johnson Sirleaf, first elected in 2005, embarked on reconciliation and reconstruction, although considerable challenges remain. And for her successor, the former football star George Weah, elected in 2017, the bidding round is an opportunity to show that today’s Liberia can be an attractive location for international investors.

“We want to use this medium to demonstrate that the government of Liberia provides a stable operating environment, predictable as well as flexible legal and fiscal regimes, and a conducive operating environment for doing business,”  Weah announced at the launch.

Timetable rationale

Moreover, there were good reasons for the original timetable for the round. “The Harper Basin was once tendered, but the process was cancelled/postponed before any acreage could be awarded to allow for the completion of the petroleum sector reform. The reform was completed with the passage of the New Petroleum Law in 2016,” the LPRA’s general counsel, Urias Goll, explains to Petroleum Economist.

“The Exploration & Petroleum Law 2016 was undergoing review and subsequent amendment in late 2019—which had to be completed before scheduling any bid round. 2020 was therefore the appropriate time to commence the bid round.

“During this period, we have been updating the data package by applying new studies including the ‘detailed reconnaissance study’ to the seismic dataset, along with our geophysical partner TGS. A new exciting ‘GeoModel’ was built which gives a technical reason to move ahead with the bid round at this time.”

By maintaining the launch date, Liberia aims to show “resilience and perseverance”, says Goll, who also points out that “oil companies do not make short-term decisions regarding their investment and Covid-19 will definitely not continue forever”.

But the closing deadline has been pushed back from October to February, to allow oil companies more time to complete their submissions in the current difficult conditions.

Amendments to the Petroleum Law require 5pc interest in any asset that is awarded to Liberia-owned companies. But the country seeks to offer attractive fiscal conditions.

“Our fiscal regime has gone through several reviews and adjustments to ensure it is more competitive, compared to countries with similar exploration history and prospective [potential]. These reviews were conducted by the International Maritime Fund (IMF), IHS Markit, and Ventura International Energy,” Goll says.

“Based on financial modelling of our current fiscal terms, Liberia is at the bottom quarter of the continent regarding overall government take, thereby indicating a more attractive fiscal regime than the fiscal terms in Senegal and Cote  D’Ivoire.

“The Harper Basin is the final frontier in West Africa as it remains completely undrilled” Sayers, TGS

“We would like to strongly note that our fiscal terms contained in the model PSC is competitive, petroleum laws and regulations provide transparency to the acquisition of offshore acreage and alternative methods of granting  petroleum rights.”

Companies interested in the round can access a substantial bank of data, to support their initial assessments as they consider whether to submit offers.

“Pre-opening there was a lot of work undertaken in Liberia to make sure that the bid round offered attractive terms and invited the exploration community to invest. Many of the bid round components are now biddable and there is a process of negotiation that can be entered into once the bids are opened,” Ben Sayers, TGS director of business development for Africa tells Petroleum Economist.

The seismic has already been acquired and shows “very promising potential”, he adds.

“The Harper Basin is the final frontier in West Africa as it remains completely undrilled. Therefore, explorers have to rely on models and draw insight from relevant analogues in Cote D’Ivoire and basins across the Atlantic, which have shown the potential waiting to be explored. Our data has identified syn-rift structural traps over much of the area, with multi-level prospectivity and direct analogues to producing fields in neighbouring basins.”

Competitive conditions

The initial industry response to Liberia’s bid round has been encouraging.

“During the virtual launch (a free event), there were 64 attendees, represented by 33 international and regional oil companies. In the first live promotional event held on April 23, 2020 (a fee-required event organised by Frontier Energy), there were 33 attendees representing 25 oil companies,” Goll reports.

He accepts that the current slump in oil prices will have some impact on the promotion of the round, its efficiency and levels of investor interest—and that, in the current difficult climate, companies may have less cash available for exploration activities.

However, says Goll, “because an exploration investment decision is long term, with huge capital outlay, we do not believe an unsustainable drop in oil price will be the single most significant factor for E&P companies to rely on in making investment decisions.

“In Africa, we set the fishing baskets in the river when it is dry and collect our catch during the flood. We hope this wisdom will be applicable during this period of the pandemic.”

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