Companies will sign a production sharing contract (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 the 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.

Due to the ongoing political dispute with Morocco, contracts will also include a 10-year PSC assurance agreement (AA), extendable by mutual agreement. This will cover the period between contract signing and the start of exploration, which can only begin following resolution of the status of the territory. SADR, a non self-governing territory, is not recognised by the UN. In the interim, licensees will be granted access to legacy data.

Recent successes in neighbouring areas suggest that the blocks offer good prospects. Offshore Mauritania, deepwater oil discoveries have been made at Chinguetti, Tiof and Tevet, operated by Australia's Woodside, and gas has been found at Banda and Pelican (Oil & Gas, MEED Special Report, 9:7:04, pages 34-35). A consortium led by Aberdeen-based Dana Petroleumin 2003 found gas in the Pelican well in the northern block 6, and the trend is expected to continue in offshore Western Sahara. A joint venture headed by Spain's RepsolYPFhas committed to drill two wells in the Canary Isles blocks to the northwest.

A total of 18 exploration blocks have been drawn up within SADR. The administration will consider launching a licensing round for the six onshore blocks following the successful completion of the offshore round.