Bids due for Sahara offshore blocks as new round launched

24 February 2006

Despite ongoing territorial disputes with Morocco, the Saharawi Arab Democratic Republic (SADR) is set to sign by early March exploration and exploitation contracts on seven of the 12 offshore oil and gas blocks included in its first international licensing round, launched last May. Tenders have also been issued for six onshore blocks (MEED 20:5:05).

A UK consortium of Premier Oil and Ophir Energy is in line to take four of the offshore blocks - Daora, Haouza, Mahbes and Mijek - covering an area of about 75,000 square kilometres. The Premier/Ophir team and four other companies, including Maghreb Exploration, a subsidiary of the UK's Wessex Exploration, have submitted bids for the seven offshore blocks.

Technical and commercial bids for the six onshore blocks, which have a combined area of almost 200,000 square kilometres, are due on 1 March.

Exploration and exploitation on the blocks can only begin once the status of the territory has been resolved. SADR, a non-self-governing territory, is not recognised by the UN and Rabat claims sovereignty over the region. Prior to a resolution, successful bidders will only be able to access legacy data. Contracts will include a 10-year production sharing contract (PSC) assurance agreement, extendable by mutual agreement, to cover the period between contract signing and start of exploration.

There are encouraging signs that the fields may be prospective. 'We have had very positive feedback from the people who have seen the data on the blocks,' says a spokesperson for the Polisario, the Saharawi republic's ruling party. 'All the indications as to their potential are really positive.'

'The potential of the fields is not proven,' says Frederick Dekker, chief executive officer of Wessex Exploration. 'But it's such a huge basin and it has all the ingredients for a petroleum system, so it's hard to believe that at least some parts of it won't be highly prospective.' The same contractual terms apply to both bid rounds. Companies will sign a PSC with the State Petroleum Authority for three, three-year exploration phases, to be followed by a 25-year exploitation agreement in the case of successful exploration. Bids are to include proposals for a minimum programme of work, cost recovery ceiling, signature and production bonuses and the state's back-in rights. Profit-sharing will be based on the contractor's rate of return at the end of the preceding calendar year.

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