Busy Search for Commercial Oil Ongoing

Liberia’s national oil company (NOCAL) has always argued that the country is at least five to seven years away from producing a drop of oil, even after a foreign oil company, Africa Petroleum, had announced the discovery in February 2012 of a huge commercial quantity of crude at its Narina well in block 9 off the coast of RiverCess and Sinoe.

At a news conference convened by NOCAL in Monrovia yesterday, it maintained that though oil was found, it is yet to be established as to whether or not the discovery is in commercial quantity. Until that is done, there is no need to stretch the reality of the day, which is “no oil until five or seven years have come and gone.”

“We are still in the exploration phase, and the potential discovery made by African Petroleum in February needs to be evaluated further. That means scheduling a new rig to return to the area and drilling further wells to see how large or small the reservoir is. Only then can they say whether it is of large enough (‘commercial’) quantities to develop to production,” NOCAL said in a post on its website.

So, as pointed out by NOCAL, foreign oil companies operating in the country’s oil sector are currently exploring and hoping to soon make a discovery; a discovery of commercial quantity for that matter.

This goes for oil block 12 which is currently being explored by Chevron (45%), Oranto (30%) and ENI (25%). The three companies have a 25-year lease agreement with the Liberian government to drill oil in the area. Situated off the coast of Grand Bassa County, the block is in its second exploration period with 20% of delimited area relinquished with one well drilled, NOCAL has said.

In case 0 to 30,000 barrels are discovered, NOCAL gets to carry 20% only while the block owners take away 80% as called for by the production sharing contract. If 30,001 to 75,000 barrels are found, NOCAL gets 40% while the companies get 60%.  But if 75,001 to 200,000 barrels are discovered, NOCAL and the block operators get to slice the share on a 50 -50 basis. And in case, 200,000 barrels are found, NOCAL gets 60% while block owners get 40%.  And in the event that natural gas is found, NOCAL will get 30% share, while the companies carry 70%.

NOCAL is yet to upload the production sharing contract for block 13 that was in March 2013 awarded to Exxon Mobil (80%) and COPL (20%). The block’s operator has a 25-year lease agreement to explore and drill in the area. It is situated off the coast of Margibi and Grand Bassa counties. 

Though still in its first exploration period with no wells drilled, the block’s operator has conducted geological and geophysical data acquisitions including 3D seismic to help better define the prospects of the block, NOCAL has disclosed. As per the production sharing contract, Liberia gets to gain 40% of the oil discovery if the production rate is between 0 to 100,000 barrels. In this case, the contractor carries 60%. Both parties get to split the share on a 50 – 50 basis if the production rate falls within 100,000 to 150,000 barrels. Liberia stands to benefit 60% of the share if the production rate is 150,000 barrels, while the block operator gets 40%. Also, the country stands to benefit 35% in case natural gas is found, while the block’s owner gets 65%.

But until a discovery that is economically feasible for companies can be made, no production will start. Potential discoveries will need further and additional analysis to reach conclusion that indeed, they are economically feasible for production.