PARIS: Gabon's energy sector is preparing to jump into the deep end with the launch of a bidding round for deep and ultra-deep offshore drilling. The energy ministry recently announced it was putting 42 blocks, covering a total area of around 110,000 square kilometers, on offer before the end of the year. CGGVeritas, a Paris-based marine geophysical contractor, has acquired almost 13,000 square kilometers worth of 2D and 3D seismic data from the country's southern and northern offshore zones; the results of which will be published in the May data-room sessions. The authorities are hopeful of encouraging exploration activities into the unexplored sub salt layers, away from maturing shallow water areas. So far Gabon has lagged behind other West African nations in deepwater development and - after recent success in countries such as Angola, Cameroon, Ghana and Brazil - is eager to find out if its deepwater offshore acreage holds commercial potential. Gabon's national oil production, which provides around 60 percent of state revenues, has been in decline for several years. According to IHS, a global provider of business intelligence, the country's average production fell to around 235,000 barrels per day (bpd), down from 350,000 bpd in 1997. Gabon is sub-Sahara's fourth-largest oil producer, preceded by Nigeria, Angola and Equatorial Guinea. Since 2006, as oil prices have risen and marginal production made more profitable, smaller oil pockets have been coming on-line, flattening out the decline and extending the sector's lifetime. One such example is Maurel and Prom, a French oil company, which announced a successful discovery at its onshore Onal concession in February this year, putting around 10,000 bpd on the market. With more producers announcing investments on existing blocks over the coming years, driven by the stabilization of oil prices and successful discoveries elsewhere in the country, smaller pockets are likely to sustain current production levels for five to 10 years to come, according to Charles Tchen, the founding manager of Independent Petroleum Consultants, an energy firm based in Libreville. The new bidding round is also aiming to attract more players to the Gabonese blocks. Although major international oil companies (IOCs) like Shell, Total and ENI have been long active in Gabon, the country counted only seven companies producing oil in July 2009, while another 11 were in the exploration phase. Gabon's authorities are looking to attract firms from both traditional partner-countries like France and from further a field, Including North America and Asia. As such, an international marketing campaign will accompany the bidding round, promoting the new concessions in Paris, London, Houston, Calgary and Singapore. However, while the recent offshore discoveries are encouraging, some new developments may infringe upon the success of the upcoming bidding round. One such factor is the launch this month of a competing bidding round for offshore blocks in Sao Tome and Principe - an island nation located about 250 km off the north-western coast of Gabon. A second, more pertinent, factor is the recent announcement of the creation of a new state-owned oil company, a novelty for Gabon. Earlier this year, President Ali Bongo announced the planned establishment of the Gabon Oil Company (GOC), which will have a mandate to "control the state's participation in oil companies, as well as to manage exploration, exploitation and distribution". Details on what role the GOC will play in current and future contracts and production are yet to be announced, and although investment terms have been favorable so far, the uncertainty will affect investor interest. Nevertheless, the government has gone to great lengths to ensure the terms of the upcoming round are as appealing as possible. Louis Gaston Aubame, the director of economic affairs at the Ministry of Mines, Oil and Hydrocarbons, recently declared to local media that "Gabon will limit its share of oil output from soon-to-be opened offshore exploration blocks to 62.5 percent," a contrast to other parts of Africa, such as Libya, where the government regularly claims over 90 percent. Aubame continued by saying that 'We're trying to offer better fiscal terms than Cameroon and Equatorial Guinea. We also want to compete with Angola and Nigeria, through the terms we are offering and also with our political stability." Julien Nkoghé Békalé, Gabon's oil minister, recently stated that "Gabon is in the course of improving its investment climate to attract the maximum number of investors; we need to have an attractive fiscal system." Some weeks after the announcement of the bidding round, the authorities announced a delay of the initial opening date, scheduled originally for May 5, to a date later this year. According to the communiqué, initial reactions to the bidding round had been so heavy that the oil ministry decided to give oil companies more time to prepare their applications. Although initial reactions indicate favorable interest from investors, much of the bidding round's success will depend on the visibility of the new government's natural resources policy. As several countries around the Gulf of Guinea are gearing up their offshore development activity, Gabon is aiming to ensure its terms are as competitive as possible.
