ALLAFRICA.COM
THE ANALYST [08/03/13]
Oil and gas discovery in Liberia bumped into premature hullabaloo with particular attention clamoring over the manner and form that suspected wells of the coveted natural resource were negotiated and handed over to potential investors. The leadership of the National Oil Company overseeing the budding oil sector took cue from the discontent and has since begun to right previous wrongs with deliberately reformed policies. The turnaround is paying off, not only in the fact that the noise over oil and contracts is receding, but also in the consummation of revenue-bolstering and people-centered agreements that NOCAL and oil barons are reaching. Block 13 which had been in the center of controversy and nearly presumed to have been a giveaway has now turned out to be a product of the most lucrative contract ever, with a colossal sum of upfront US$50m signature fees along with other goodies announced. The Analyst reports
The National Oil Company is seeking the approval of Oil Block 13 contract by President Sirleaf and its subsequent rectification by the National Legislature. At a MICAT press briefing yesterday, NOCAL Chief Executive Officer, Dr. Randolph McClain, disclosed that renegotiated Block 13 based on various financial provisions of the contract, US$50m is to be received by Government immediately upon ratification and printing into handbills. Components of the amount include $21.25m, which is one of the highest Liberia oil block signature bonus yet.
The amount of $21.25m is also the largest ever upfront payouts to a non-producing country in the world, Dr. McClain boasted, adding: Up until now, it may interest you to know that the largest signature bonus Liberia has received for a single offshore oil block is US$3.33m.
According to the NOCAL boss the contract has been submitted to President Ellen Johnson-Sirleaf following a lengthy period of negotiations between NOCAL, the Canadian Overseas Petroleum Ltd (COPL) and ExxonMobil.
Speaking of the benefits, he noted that the contract includes unprecedented benefits for our country and for our people...with other long-term financial benefits, strong social and environmental protections as well as provisions to promote local content and job creation in Liberia.
Dr. McClain also assured citizens of Liberia that in many respects, the contract is different from and better than the previous one, moving Liberia closer to realizing its ambition of a new model agreement which is fair to the investor and beneficial to the country and our people.
The contract, NOCAL further said, is superior to the original contract and addresses many of the concerns around LB-13 in particular and the oil sector in general, ending two years of uncertainty over the future of LB-13.
This contract is amongst the first in the world to include provisions where citizens could receive dividends from production if the exploration in LB-13 leads to a successful discovery and production of oil,†the Company said, adding: This contract, of which we are proud, bears witness to how far our country has come in consolidating our peace and security by attracting investments into our country such as ExxonMobil, the world's premier super power in oil and gas. With the ratification of this contract, Liberia's oil acreage will comprise the biggest and the best in the world, second only to none.
According to the Company, the negotiating team of the government has also secured a 5% Citizen Participation Share in LB-13. Simply put, if exploration and development in LB-13 are successful, revenues would be available to share with citizens, NOCAL asserted further. This will be at no cost to the citizens, NOCAL or to the Government of Liberia after ExxonMobil and COPL have recovered their exploration, development and production costs the share could generate dividends to the citizens from the oil production. This is real profit for the people of Liberia.
Also in this contract, we have secured a 10% royalty on oil produced from wells drilled under water depths of 1500 meters. A 5% royalty was agreed for oil produced from wells drilled under water more than 1501+ meters of depth. Prior to the negotiation, there was no royalty under the PSC of LB-13, the company said, also including that the contract now includes the opportunity for Liberia to participate directly in the country's oil industry.
NOCAL says it has the right to receive, without cost to it, a 10% share in Block 13 at the start of commercial production. This allows Liberia to build skills and understanding of the industry, and to receive 10% of the profits from LB-13 after ExxonMobil and COPL have recovered exploration and development expenses.
According to the Company, the contract makes provisions for local content, for training and for educational opportunities.
Yet still, the Company says the contract provides for unprecedented amounts for training, education and social welfare contributions which should increase if discoveries are made and LB-13 moves into development.
These include funds for training programs at $100,000 per year during exploration and appraisal and $750,000 per year during development and production; funds for Social Welfare Programs costing $150,000 per year during exploration and appraisal and $500,000 per year during development and production; and funds for the University of Liberia put at $150,000 per year every year.
NOCAL says the contract places premium on the protection of our environment as more stringent requirements for environmental and social impact assessments and environmental and social management programs are provided for at every step of the oil exploration and development process.
In line with international best practice, NOCAL notes that the PSC requires ExxonMobil and COPL to establish an “Abandonment Fund†for each field placed into production once 50% of the estimated recoverable petroleum has been produced from such field.
The fund must be held in an escrow account at a financially sound international bank, and must be funded in regular installments based on the estimated costs from time to time of abandonment. What this means is that Liberia will no more inherit waste and deserted fields when the oil is depleted, as has been the case in other sectors, the Company states further.
NOCAL: The contract requires ExxonMobil and COPL to develop Project Linkages Plans for each of the exploration and development periods to identify opportunities for local suppliers, contractors and service providers to supply goods and services to the operators. The plans are to also provide for the development of local purchasing. This provision is aimed at developing, over the long term, the capacity and participation of Liberian suppliers in the oil services sector.
At NOCAL and across the country, all Liberians are aware that we must continue to invest in the capacities of our people as a means to achieve the objectives of expanding Liberian participation and ownership of our economy. In this regard, if the project moves to the development stage, ExxonMobil and COPL must also develop programs to train Liberian citizens in the full range of managerial and technical activities involved in the performance by ExxonMobil and COPL of their obligations under the PSC. Such programs will include, and not be limited to, engineering design, information technology, and petroleum geology technology.
Meanwhile, NOCAL is mobilizing public support and continuous engagement to request President Sirleaf to sign this agreement, and to implore the honorable Legislature to ratify it.
Dr. McClain thanked the entire government and people of Liberia for the confidence reposed in NOCAL executives and staff to steer the affairs at NOCAL.
I also wish to express the sincere gratitude of the management and staff of NOCAL to the people of Liberia, their elected representatives, and to you, distinguished members of the press, for the heightened level of interests, vigilance and support we continue to receive at NOCAL about issues in the oil sector. You have kept us faithful, diligent and honest,†the NOCAL CEO said.
The Company was established 2000 by an Act of the Legislature to serve as an independent state-owned enterprise with the mandate coordinate the development of Liberia's oil sector. In furtherance of this mandate, NOCAL chairs Liberia’s Hydrocarbon Technical Committee (HTC), and as the responsible arm of the government, is coordinating a vigorous oil governance reform program.
The reform exercise is proceeding along three main steps that include drafting and adopting a new policy creating principles and guidance for exploration and production activities; drafting and enacting a new petroleum law, guided by the new policy, to cover Exploration and Production; and to create a new model Production Sharing Contract (PSC) that reflects the new law.
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