On August 5, 2014, the Republic of Liberia in association with the National Oil Company of Liberia (NOCAL) announced the opening of the Liberia Basin Competitive Bid Round 2014. NOCAL has now released a Bid Invitation Letter that provides guidelines on the process, stages and application requirements for companies interested in taking part in the Liberia Basin Competitive Bid Round 2014. This update provides an overview of some key contents of the Bid Invitation Letter.
Liberia, like many West African countries, is currently experiencing significant investment interest in its oil and gas sector. According to the US Geological Survey, the West African Coastal Province, which includes Liberia, Sierra Leone and Guinea, has an estimated 3.2 billion barrels of undiscovered and recoverable oil, 23.63 trillion cubic feet of natural gas, and 721 million barrels of natural gas liquids.
What is on offer?
Four undrilled offshore petroleum exploration blocks (LB-6, LB-7, LB-16 and LB-17) for hydrocarbon exploration and development are available for bid.
The bidding process commenced on August 5, 2014, and is being conducted in the following key stages:
- On-line data became available for viewing on August 7, 2014. The cost of viewing data is US$10,000 per day (the first day of viewing will be free for every prospective bidder)
- Submission of prequalification application by interested companies (August 5 - October 3, 2014)
- Submission of comments on the 2014 Liberia Preliminary Production Sharing Contract (PSC) by bidders (the PSC was released on August 15 and is available for comments until September 11, 2014)
- Evaluation of submitted prequalification applications and notification of prequalified companies (August 6 - October 3, 2014)
- Submission of detailed technical and financial bids by prequalified companies (October 3 - October 31, 2014)
- Public opening of received bids (November 3, 2014)
- Evaluation of bids (November 3 - 17, 2014)
- Notification and announcement of winning bids (November 17, 2014)
- PSC signing ceremony (November 24, 2014)
- Ratification by the legislature, signature into law by the president and publication into handbills (November 25 - December 5, 2014)
Bidders may bid individually or as a group. Eligible bidders include both international oil companies and internationally experienced national oil companies. To be prequalified, a bidder or bidder group must satisfy either the technical or financial requirements, or both if it wishes to be prequalified on the basis of both technical and financial capacity.
The technical requirement is that a bidder/bidding group must have acted as operator of an offshore exploration program within the past four years. The financial requirements are that a bidder must submit evidence that it has financial capacity to fund the full exploration period work program and is currently active in some manner in the upstream oil business. The minimum budget for the full exploration work program for LB-6 and LB-7 blocks is US$115 million, and US$103 million for LB-16 and LB-17. If a successful bidder or bidder group qualifies under one of the technical or financial requirements, it will be required, prior to the end of the first exploration phase, to bring in a participant that meets the other requirement.
In addition, bidders must demonstrate high levels of accountability, transparency, and respect for safety, health and protection of the environment.
The Bid Prequalification Form can be downloaded from the NOCAL website.
The prequalification application must be accompanied by:
- A confirmation letter from a creditworthy bank that it is prepared to issue a letter of credit to the bidder; or a letter from a qualified parent company stating it will issue a guarantee in lieu of a bank letter of credit. This requirement is to secure payment of liquidated damages due upon a failure by a contractor to complete the minimum work program for an exploration period, and
- A prequalification fee of US$15,000.
Complete application packages for prequalification are due by October 3, 2014. They are to be submitted to the National Oil Company of Liberia c/o Ernst & Young LLP, 1 More London Place, London SE1 2AF United Kingdom.
A prequalified company may bid on one or more of the blocks. Each bid requires a separate bid submission. The bid must include offers with regard to signature bonus and profit oil sharing. Preference will be given to bids that offer high signature bonus payments. The minimum work commitments are fixed and not biddable.
A committee comprising representatives of NOCAL and the Government of Liberia will assess the submissions based on the combined potential of the bid with respect to profit oil sharing and the signature bonus, together with the local content factor.
Preference will be given to bidding groups that include at least a 20% participation by one or more West African upstream petroleum companies in which Liberian investors have an interest. More information as to the nature of the preference to be given, who qualifies as a West African upstream petroleum company, and the minimum scope of the Liberian interest will be provided by NOCAL.
Complete bid submissions are due by October 31, 2014.
Since the end of its civil wars, Liberia has made considerable gains in the oil and gas sector. According to President Ellen Johnson Sirleaf, Liberia is “ready for business.” To maximize oil exploration and development, the Liberian government has since 2004 awarded 10 offshore oil and gas production sharing contracts and one onshore reconnaissance permit. In February 2012, African Petroleum (AP) announced a significant oil discovery at Narina-1, AP’s third well in block 9 off the coast of Liberia. Similarly, in April 2013, ExxonMobil Exploration and Production Liberia Limited acquired from Canadian Overseas Petroleum (Bermuda) Ltd. an 80% interest in Liberia block 13 (LB-13). ExxonMobil is reportedly nearing the spudding of the Mesurado-1 wildcat on the LB-13. Other operators in Liberia include Anadarko Liberia Co. and Chevron Liberia Ltd.
The 2014 Liberia Basin Bid Round presents a new investment frontier for exploration companies. The World Bank’s Doing Business 2014 Survey indicates Liberia is one of 13 economies globally that has made it easier to do business in the areas of starting a business, getting credit (and access to finance) and trading across borders.
Furthermore, Liberia in partnership with the United States has implemented a number of reform programs that have improved accountability, transparency and foreign direct investments in Liberia. Over the past year, Liberia’s ranking improved 10 positions (from 97 to 87) on the Transparency International Corruption Perceptions Index and Liberia achieved one of the most striking improvements in the Mo Ibrahim Index of African Governance.
As described above, foreign companies may participate in the Liberia Basin Bid Round 2014 by submitting individual or consortium bids. Furthermore, based on the above requirements and our review of the PSC, it is likely that joint venture opportunities will arise after the licensing round in respect of awarded fields, mainly because NOCAL allows successful parties to bring in financial and technical partners to jointly develop and produce the blocks.
It is uncertain what impact the outbreak of the Ebola Virus Disease (EVD) in parts of West Africa, of which Liberia is at the epicentre, will have on the timing on this bid round.