Cameroon has opened a licensing round for offshore acreage in the Douala basin (63480 bytes).
The round carries promises of more flexible fiscal terms and new emphases on gas and marginal fields.
State owned Ste. Nationale des Hydrocarbures (SNH) organized the bidding round in an effort to restore petroleum's contribution to the nation's economy.
Cameroon produces about 120,000 b/d of oil from about a dozen offshore fields in the Rio del Rey basin. But pro- duction since 1985 has been falling 11-12%/year. SNH aims to halt the decline by sparking interest in the 12,000 sq km offshore portion of the Douala basin.
SNH in 1990 had hoped to begin reversing the downward trend with a Douala licensing round that included the basin's 7,000 sq km onshore area. As a result of the earlier offering, Cameroon granted units of Phillips Petroleum Co. and Petrofina SA an exploration permit on three offshore tracts. Units of Texaco Inc. and Exxon Corp. also acquired Prospecting licenses onshore.
But of the 60 or so wells drilled in the Douala basin, only one has been spudded there since 1986. That well, on an offshore Phillips operated tract about 15 km from the mouth of the Sanaga River, is suspended at 3,700 in while data are being evaluated.
Phillips and partner Fina are to drill a second well on their acreage either late this year or in 1996. A third off- shore test could be spudded on a tract held by a combine of Kelt Energy plc, London, and Mobil Corp. units if the companies and SNH can agree to terms.
Beyond those few possibilities, the future is uncertain for oil and gas exploration and development in the Douala basin.
FITTING FINANCIAL REALITIES
SNH for the new bidding round has divided open offshore acreage in the Douala basin into 800-1,700 sq kin tracts. But in keeping with the new emphasis on flexibility, the tracts are to serve mainly as a basis for negotiations.
The second Douala licensing round has no deadlines. A company may acquire more details about the basin's oil and gas potential at its own pace.
Jean-Jacques Koum, SNH exploration and production director, said Cameroon has adopted a more flexible attitude toward granting oil and gas concessions because of heightened world competition for investments. In a world awash with good exploration and development prospects, countries must be willing to allow adequate incentives to attract foreign developers.
To fit financial reality, Cameroon since the last Douala basin round has revised its oil and gas licensing terms. The most important changes include:
- Production is shared 60% by the state and 40% by the contractor during the life of a project. Previously, production was split on a sliding scale, with the contractor receiving smaller shares as unit production increased beyond specified volumes.
- In the event of a commercial discovery, the share of state oil that SNH may use to reimburse the contractor for exploration costs is increased to as much as 45% from 3017,
- A contractor may hold offshore all revenue earned from oil and gas sales. In the past, a contractor could expatriate only part of his profit.
MARGINAL FIELDS
Cameroon has yet to announce a commercial offshore discovery in the Douala basin. But SNH said the presence of oil, gas, and condensate is assured by discoveries and seeps.
Seismic and well control data have revealed structural, stratigraphic, and combination traps across the basin. Potential reservoirs and seals occur in all eight of the basin's distinct sedimentary sequences.
Geochemical analyses have identified source rocks and confirmed the presence of a functional charge system.
SNH is willing to allow incentives
for prompt development of marginal prospects found in the Douala basin.
The company defines a marginal field as one with reserves before development equal to or less than 20 million bbl of oil equivalent.
Koum said special terms for a marginal field might include an equal split of profit oil or a higher reimbursement rate for recovery of exploration expenses. Also, Cameroon might be willing to share upfront risk in a project by grant- ing tax incentives or giving up revenue in some other way.
Along with standard incentives, Koum said, Cameroon's new fiscal concessions assure that foreign oil and gas developers receive at least 26% of a project's gross profit. That rate of return would place Cameroon's fiscal regime among the world's top 25, according to estimates by some international sources (OGJ, Dec. 12, 1994, P. 47).
"Everything is negotiable in our contracts," SNH's Financial Director Bernard Bayiha said.
With only a few offshore tracts available, SNH expects to quickly determine which companies are serious about bidding for acreage. With those suitors identified, Koum said, negotiations likely will be straightforward because of SNH's knowledge of competing terms in neighboring countries and its willingness to be flexible.
Bayiha said the fast track negotiating process and favorable fiscal terms are expected to result in new oil and gas production before the end of the centurY.
OUTLOOK FOR GAS
Cameroon in the past has considered building a natural gas liquefaction plant as a way of preparing gas for sale into international markets. But SNH felt the relatively small role it could play in world LNG markets would prevent an LNG project from becoming economically feasible.
As a result, Cameroon today has no policies that cover only gas production and sales.
"So today, we are open to negotiate with any gas investor the type of agreement he would like," Koum said.
SNH said developing gas to generate power or to fuel industry in Cameroon could be very important to the country. Toward that end, the country and World Bank have discussed developing gas in Logbaba field to fuel industries in the city of Douala.
Bayiha said details of that project are nearly final. SNH and World Bank still must settle plans for helping com- panies doing business in Douala to finance the cost of switching to gas-fired equipment. SNH expects to begin the changeover within 2 years.
