São Tomé and Príncipe offers first deepwater licensing round

São Tomé and Príncipe is inviting interested parties to bid on seven blocks in its exclusive deepwater acreage between the Niger Delta to the north and the Gabon salt basin to the east. The area, categorized as the EEZ, ranges from 6,562 to 9,843 ft (2,000 to 3,000 m) water depth with a sediment cover that is unusually thick for such oceanic regions, according to the Agência Nacional do Petroleo de São Tomé e Príncipe (ANP-STP).

The EEZ is bordered to the northwest by the Nigeria-STP joint development zone (JDZ). The JDZ lies in an area of overlapping maritime boundary claims between Nigeria and São Tomé and Príncipe and will be jointly developed by the two countries, according to ANP-STP.

So far the island nation has seen little drilling. According to Luís Prazeres, executive director at ANP-STP, “Three wells were drilled onshore São Tomé and Príncipe during the 1970s and 1980s. The wells were not productive, but are now being used for geological studies.” He added, “The formation onshore is quite different from the geological structure of the EEZ (exclusive economic zone) offshore.”

In the JDZ, a five-well exploration program has seen some success in the frontal deformation region in the Niger Delta Basin, which partially extends into the EEZ, according to a recent report by Deloitte. Over the last 35 years, intensive exploration efforts in and around the Niger Delta have led to a succession of discoveries including Bonga, Agbami/Ekoli, and Akpo in Nigeria and Zafiro and Alba in Equatorial Guinea.

Seven blocks in zones A and B are on offer in the São Tomé and Príncipe debut licensing round. (Map courtesy of ANP-STP)

Since 2001, Petroleum Geo-Services (PGS) has been working together with the government of São Tomé and Príncipe to acquire data in the territory to evaluate resource potential. PGS has produced 6,214 miles (10,000 km) of 2-D seismic data over the prospective region.

“The information is available for an adjustable fee based on how much data is acquired,” Prazeres said.

The EEZ has been divided into two zones. Zone A contains blocks 1, 2, 3, and 6; Zone B contains blocks 7, 8, and 13. Currently, data rooms for both zones have been made available in London and São Tomé. The ANP-STP will accept offers from a company for more than one block in each zone; however a company can only be awarded one block per zone.

“There are no minimum bid requirements established for the present auction, and the profit sharing for the state and company is based on internal rate of return. Successful bidders will secure the right to negotiate production sharing contracts (PSCs) in which the state has a right to participate either directly or through an entity wholly or partly owned and controlled by the state,” Prazeres said.

According to ANP-STP, no petroleum activity can be undertaken in the EEZ, except pursuant to and in accordance with the Petroleum Law n? 16/2009; ceiling cost recovery is set at a maximum of 80%; and international oil companies beginning activities in the country for the first time are required to either be registered or incorporated upon award of acreage and prior to the commencing of any operations.

“Three phases of exploration are required to fulfill the minimum work program agreed upon in the PSC [production sharing contract] before entering the production phase,” Prazeres said. “The first phase is four years, where the company must relinquish 25% of the acreage awarded to it in case the wells drilled in certain areas are not successful. In the second phase, the company will relinquish another 25%. And in the third phase, the remaining is relinquished unless the company goes into the production phase.”

Excluded from the offering are blocks 4 and 5, east of Príncipe, and blocks 11 and 12, east of São Tomé. Two companies have acquired the blocks by exercising their pre-emptive rights, according to the report by Deloitte. Equator Exploration was pre-awarded blocks 5 and 12 and ERHC Energy claimed blocks 4 and 11.

To date, Chevron, ONGC Videsh Ltd., Petrobras, Tullow Oil plc, ConocoPhillips, Marathon Oil Corp., Murphy Oil Corp., and Shell have expressed interest in the current offering.

The lease will close Sept. 15, 2010, giving companies six months to formulate applications. The application fee is US $25,000. Successful bidders will be announced two months after the closing date.

For more information, visit www.anp-stp.gov.st/en/.