Four African countries currently have ongoing licensing rounds with at least six planned to launch later in the year. There are at least another 10 which may be held in the near future and further tenders which closed end-2018 are also currently being evaluated. Simultaneously, many of the majors and supermajors are acquiring, or looking to acquire, new frontier exploration acreage across the continent, including in previously unexplored deep and ultra-deepwater areas. It is anticipated that the independents will follow this trend. However, the volume of acreage available at present is likely to mean that some good opportunities are overlooked; even some of the supermajors have commented that they do not have the capacity to fully evaluate all the available opportunities.
Ongoing Bid Rounds
Of the four licensing rounds currently open for bidding it is probably the 1st Ghanaian Licensing Round that has generated the most interest to date. Fourteen companies have pre-qualified with bids due in May. Six blocks in the Tano/Cape Three Points area are being made available: three via competitive bidding, two via direct negotiations, with one block reserved for GNPC (which is seeking a partner). It is expected this licensing round will be a success; early successes on Ghana’s transform margin triggered Guyanese exploration and the mammoth success of Stabroeck is likely to bring things full circle, reassuring explorers of the opportunity. The main issues are likely to relate to local content requirements. Under the terms of the 2016 Petroleum Law, five percent equity is reserved for indigenous companies, but the government has struggled to find local businesses with the necessary resources to invest in the sector. Following ExxonMobil’s award of the Cape Three Points Deepwater block in January 2018 it took until November before a local partner could be identified.
Gabon launched its 12th Offshore Licensing Round in November 2018, with 35 shallow and deepwater blocks being made available in new and proven oil plays along the margin. A series of roadshows have been held and interest has been high, but it is expected that planned amendments to the 2014 Hydrocarbons Code (especially to the gas commercialization terms) will need to be ratified for this interest to generate high numbers of bids. The new code was to be in place by end-2018 but has not been signed into law due to the ill health of President Ali Bongo and the attempted coup of January 2019. The bid deadline has now been extended from April to September 2019, to allow companies time to assess data and terms thoroughly.
The Congo (Brazzaville) Licensing Round Phase II 2018-2019 is also expected to generate interest. Eighteen onshore, shallow water, and deepwater blocks are being made available, with bids due by June 2019. The launch of this round follows the ratification of several awards made after the Congo Licensing Round 2016 (Phase I), to Perenco and Kosmos with the ratification of a further deepwater block to be awarded to Total expected take place shortly. Despite some of the ongoing issues facing Congo’s oil sector at present, these awards can be seen as a vote of confidence from the industry.
The fourth licensing round currently open is the 1st Somalia Licensing Round, launched in London in February 2019. Fifteen offshore blocks along the Somali Coastal Basin are being made available with bids due in November. Very little exploration work has taken place here to date, but Spectrum’s interpretation of recent seismic has identified carbonate and clastic leads, and basin modelling indicates the area will be prospective for oil, rather than gas. Despite promising geology, there are above-ground risks here that will give potential investors some concerns. Although offshore piracy has largely been vanquished, investors will still have to stomach a high degree of political risk. The round has already generated controversy, particularly in the local press, and protests were held at the launch event. A new Petroleum Bill remains in parliament, although a model PSA has been released. The launch of bidding has also intensified the ongoing maritime border dispute between Somalia and Kenya, although no blocks are being offered within the disputed area.
Planned Bid Rounds
In late-February 2019 a long-awaited announcement regarding the next phase of Angolan licensing was made. From 2019 to 2025 a total of 55 blocks are expected to be offered via a series of Public Tenders, Limited Public Tenders, and direct negotiations, which are outlined below.
Since President João Lourenço was elected in August 2017 numerous changes have been enacted across Angola’s petroleum sector, including the creation of the new national concessionaire, ANPG. Additionally, several new laws relating to E&P were passed in 2018, to make the legislative and fiscal terms more conducive to investment. These changes have been generally well-received by the industry and companies including Total, BP, and ExxonMobil have responded by taking new Final Investment Decisions on field developments, commencing new exploration drilling, and signing new agreements for exploration acreage. Therefore, it is expected that the new planned acreage releases will generate significant industry interest.
The first Public Tender will be launched in June 2019, with acreage offered in the largely unexplored Namibe Basin. Blocks are also expected to be awarded in the ultra-deepwater Lower Congo Basin and the Namibe Basin via direct negotiations.
In 2020, acreage in the onshore Lower Congo and Kwanza Basins is to be made available via a Public Tender. The majority of these blocks were also previously offered in 2014, with bids received from predominately local companies, many of which did not have E&P backgrounds. No licenses were awarded due to the unsuitable fiscal terms on offer and lack of capacity of the companies involved. Further onshore acreage is to be made available in another Public Tender in 2023.
Offshore acreage will be made available in 2021, mostly in the shallow Kwanza and deepwater Lower Congo Basin, via Limited Public Tender. Another Limited Public Tender will take place in 2025 with blocks offered in the deepwater Kwanza Basin. A series of NFWs from 2011-2015 has shown that the Kwanza Basin is largely gas-prospective; one of the new laws passed in 2018 specifically addresses that the ownership of gas and oil companies can now monetize this. There are still questions as to whether Angolan gas will be attractive, with Sonangol unable to complete a planned sale of Block 20/11 and Block 21/09 in 2018 (which contain some 2.6 Bboe gas-condensate resources).
Other Planned Bid Rounds
In April 2019 almost all open acreage in Equatorial Guinea is to be made available in the EG Ronda 2019. Opportunities will include the Fortuna gas complex, previously operated by Ophir. Although Equatorial Guinea does host periodic licensing rounds, the government has been far more successful awarding licenses via direct negotiations, with both ExxonMobil and Kosmos signing for new acreage in 2017. In contrast, after the EG Ronda 2016, seven companies were announced as having submitted successful bids for six blocks but only Ophir signed a PSC.
In East Africa, Uganda is planning to launch its 2nd Licensing Round in May 2019, with acreage to be made available in the Albertine Graben. The basin has an ~87 percent success rate for drilling and some 6.5 Bbo in-place have been discovered to date, so it will generate interest. Until these discoveries can be monetized (via the construction of the planned export pipeline to Tanga, Tanzania) it is unclear whether there will be significant further investments made here at this time. Sudan is also planning to offer acreage in Q3 2019; it is likely that most investments here would be from Asian companies. Following industry consultations, Mozambique may launch its 6th Licensing Round in Q3 2019, with acreage potentially to be made available in the Zambezi and Angoche areas. The country’s ongoing debt issues, and the three-year delay between the 5th Licensing Round awards and ratifications will be off-putting for some, but progress on the Rovuma gas developments is now being made, which may buoy investor confidence here.
Two significant licensing rounds are also anticipated in Egypt. Western Mediterranean acreage may be offered in the EGAS 2019 Bid Round, however EGAS has stated that direct negotiations for its offshore blocks is also now possible. The Western Mediterranean is mostly unexplored and is likely to generate significant interest. Additionally, frontier Red Sea acreage will be made available in the Ganope 2019 Round.
Although not a licensing round, Côte d’Ivoire has hosted a series of extremely successful promotions through 2017-2018, with very attractive fiscal terms, and almost all acreage in the Eastern part of the country has been snapped up. Petroci is expected to continue promoting blocks in the western area, which is largely unexplored, through 2019.
Following the expiry of Total’s Technical Evaluation Agreement for the Ultra-Deepwater area in Senegal in March 2019, there will also be acreage opportunities here, both to farm-in to the acreage that Total is to acquire as a full PSC, and also via a potential licensing round that is anticipated to be launched at some point following the passage of the new Petroleum Code. Several other countries have new laws in the pipeline, including South Africa, Nigeria, and Kenya. Licensing rounds may be held in these counties following the ratification of legislation, but realistically these will not take place until 2020 at the earliest. Other countries where licensing may take place includes Liberia, where new blocks have been delineated, and the Nigeria-São Tomé JDZ.
In mid-February 2019, the new President of Madagascar suspended the Morondava Basin Licensing Round. Fiscal terms for the round were to follow the 1996 Petroleum Code, rather than under an updated law which has been under creation. At the time of writing it is unclear whether the President intends to pass a new law prior to re-opening bidding. Sierra Leone also suspended its 4th Licensing Round in September 2018. It was to launch industry consultations before re-launching bidding, which may take place in 2019.
Of the 18 African bid rounds that were held from 2014-2018, very few were successful. Only four saw multiple (ratified) awards made to companies with the technical and financial capacity required to operate without a farm-out (these were the 2015 and 2018 Egyptian EGAS rounds, the 2016 Congo offshore round, and the 2015 Mozambique Round). Many of the others (including the 2016 Gabon Round, the 2014 Tanzanian Round, the 2014 Angolan Round, and the 2014 Liberian Round) did not result in a single award being ratified. The major reason behind this was the unsuitability of the fiscal terms on offer, many of which had been revamped for US$100/bo exactly at the time that this scenario was ending. Where blocks have been awarded through the downturn it has generally been via direct negotiations, in frontier countries where fiscal terms are better.
Legislative uncertainty will remain an issue for many of the 2019 licensing rounds which have been launched before new laws have been ratified. However, it is also important that any ongoing changes to legislation are not rushed through parliament just to meet the requirements of oil companies; if the long-term needs of populations are not being met, the industry’s social license to operate will be further jeopardized. Where countries get it right, they are likely to be rewarded with high levels of investment; Côte d’Ivoire is a good example.
In many countries, simultaneously with legislative changes being made, significant volumes of new seismic data have been acquired. This has taken place as service companies have looked to utilize vessels which were not being awarded contract work through the downturn and has meant that almost all bid rounds now are accompanied by modern, and in many cases expensive, technical data packages. Most licensing rounds are also receiving some degree of support from one or more service companies, who are under pressure to sell data packages to recoup money invested. This will mean that exploration work can take place at a much faster pace on any awarded blocks but has probably contributed to the fact that companies are struggling to assess all the data that is available to them.
Overall it is a very exciting time for exploration in Africa and it is anticipated that most, if not all, of the opportunities on offer will generate interest from the industry.