Business
Liberia signs oil exploration agreement with majors COPL, ExxonMobil
The National Oil Company of Liberia (NOCAL) has signed an exploration agreement with the Canadian Overseas Petroleum Ltd. (COPL) and ExxonMobil for exploration of Liberia’s offshore Block 13 (LB-13).
Landing the world’s largest private sector oil company will add heft to Liberia’s nascent oil industry. The deal comes as the West African state is seeking to overhaul its petroleum policy and bolster transparency.
“The president feels that this deal is in the best interests of the country and she is scheduled to sign it later this afternoon,” the spokeswoman for Liberia’s President Ellen Johnson-Sirleaf said.
The accord for offshore Block 13 will need to be ratified by parliament, something which is likely in the coming weeks.
Interest in West Africa’s offshore energy sector has surged after Ghana struck oil in 2007. Companies have since announced a string of smaller finds in regional neighbors including Liberia and Sierra Leone.
(More: Liberia strikes oil – Potentially huge discovery)
Chevron, Anadarko, and African Petroleum also have rights to offshore blocks in Liberia. None have identified commercial reserves, though African Petroleum said last year it struck a “potentially large” reservoir on its Block 9 and was pursuing further exploration.
Liberia’s state run oil company NOCAL negotiated the latest deal, announcing on Thursday that it would give the state a 10 percent free equity stake and royalties of between 5 and 10 percent once production began.
It will also require Exxon and COPL to jointly pay a US$50 million up-front signing bonus to Liberia’s government.
COPL shares gained more than 20 percent on Thursday after the announcement, reflecting the importance of the Liberian project on its relatively small portfolio of projects, while Exxon shares slipped 1 percent.
The terms are slightly better for Liberia than those of some previous oil deals, some of which waive royalty payments or offer reduced tax rates and state equity share.
But the latest deal still falls short of the country’s current laws, which call for royalties of no less than 10 percent and a free stake for the state of 20 percent.
Governance watchdogs, including the Revenue Watch Institute, have highlighted the problem of poor nations flouting their own laws in oil and mining contracts to attract foreign investment.
Liberia is in the process of overhauling its petroleum and mining laws. Officials have declined to say whether the overhaul will lower existing royalty, tax, and state share requirements, or if existing contracts will need to be renegotiated.
Liberia’s Extractive Industries Transparency Initiative (EITI) is auditing more than US$8 billion worth of oil, mining, and agriculture contracts amid mounting pressure on President Johnson-Sirleaf to clean up the sector.
Liberia, which was adversely affected by 14 years of on-off civil war, which ended in 2003, hopes that the discovery of oil will present the country with the much needed revenue to help it rebuild.
Block 13 was previously held by little-known UK energy firm Peppercoast Petroleum which agreed to give up its rights after missing its drilling targets.