Congo Unveils More Enticing Offshore Exploration Opportunities

November 22, 2018

Congo (Brazzaville), sub Saharan Africa's third largest oil producer, has intensified its campaign to promote the country's offshore drilling and exploration investment opportunities.

The Ministry of Hydrocarbons hopes to ride on the new hydrocarbons regulations that were approved by Parliament in 2016 to attract interest from more new international oil companies and entice expansion of drilling, exploration and production by those already operating in this country that produces 350,000 barrels per day (bpd) and has previously attracted international explorers such as Total S.A., Eni, Perenco, Kosmos and SOCO.

A look at the 2016 Hydrocarbons Code or oil sector regulations, which the ministry was marketing at the recently concluded Africa Oil Week conference in Cape Town early this month, paints a picture of a country that is desperate for a share of the existing interest by oil and gas explorers in Africa's offshore upstream space despite the recent slow down or change of strategy by companies because of the low global oil prices.

While Congo's Hydrocarbons minister Jean-Marc Thystere Tchicaya admits recent years have been difficult for the global hydrocarbons sector because of the fluid economic situation especially in large economies, his country is determined to “develop our mining sector to ensure the renewal of our reserves of liquid and gaseous hydrocarbons.

He said the competitive international bidding process for Congo's offshore oil blocks “offers interesting opportunities for the international oil and gas industry, permitting them to take strategic positions in areas of the Republic of Congo with a significant proven potential for hydrocarbons.”

During this month's Africa Oil Week conference, Congo (Brazzaville) Director of Hydrocarbons Teresa Goma and the country's Upstream Advisor at the Ministry of Hydrocarbons Jean Baptiste Pouti unveiled the second licensing round for 10 offshore blocks in the Coastal Basin's offshore shallow water, deep and ultra deep water with interested oil companies having up to June 2019 to submit their bids ahead of the September 2019 evaluation and announcement of the preferred bidders.

In the shallow waters, the ministry is auctioning blocks Marine XXV, Marine XXVI, Marine XXIX, Marine XXXI and Youbi while on the deep and ultra deep waters bids have been invited for blocks Marine XIX, Marine XXII, Marine XXIII, Marine XXIV and Marine XXX.

To woo more exploration companies into the shallow water offshore plays the Ministry of Hydrocarbons Congo has promised to give credit to companies that agree to support the country's National Oil Company SNPC’s regional 3D seismic project covering over 5 000 sq. km, of the Congo Shelf or Peu Profond area to support the second licensing round that closes in June according to Goma.

“Participation by a company in this seismic acquisition project on a block allocated to it will be deducted from the 3D seismic work commitment for that block in the Peu Profond area,” said Goma.

SNPC had in May this year announced partnership with Norwegian international, marine geophysical company PGS to acquire images and 3D data in two phases at the Peu Profond area involving 1,500 sq. km and 3,500 sq. km respectively.

Moreover, the Ministry of Hydrocarbons is touting the amended hydrocarbon regulations as a key plank in addressing explorers' jitters over issues such as royalties, foreign exchange rate fluctuations and foreign funds transfers.

Under the new hydrocarbons code, award of any oil and gas block must be subjected to an international competitive bidding process including for private national companies. In addition, Congo has slashed the payable royalties to 12 percent down from 15 percent for oil and 5 percent for gas down from 15 percent for operations in frontier zones.

Elsewhere, explorers in ultra deep frontier blocs will have a 12-year exploration period and exploitation period of 25 years with an additional five for oil and 30 years and additional five for gas operations.

Furthermore, the Ministry of Hydrocarbons now says there is no cost transfer allowed in between permits while international exploration companies have a right to a tax free importation of oil goods and equipment “imported permanently and those required to be re-exported.”

Congo has also set the 'Cost Stop' at 50 percent but the government says the amount “could exceptionally and for limited period be set at higher recovery rate of 70 percent maximum in order to accelerate capital expenditure recovery in frontier areas.”

As a fiscal incentive for oil and gas explorers that will respond to this call for investment in Congo's hydrocarbons industry, the government has a new policy that ensures stability of the country's fiscal regime but just in case there is volatility, this policy “guarantees contractors that the overall economic equilibrium of the contract will be maintained.” This applies even in situations where there are modifications to laws affecting the country's fiscal regime that affects the contract after signing of the production sharing contract.

There is no doubt Congo's oil and gas sector investment campaign looks well choreographed and any offshore finds especially after the first licensing round in 2017 and the recently opened second round, will attract more new explorers and even open floodgates for more partnerships and acquisitions as the country ramps its current production levels.

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