Global Bid for Successful Licensing Rounds
A momentary peak in oil price in late 2018, hitting $80, spurred amongst other things a rash of bid rounds designed to take advantage of renewed exploration confidence. Exploration investment remains low, however, with an all-time hiatus in multi-well drilling campaigns. The role of license and bidding rounds is due some scrutiny, as some of those launched late 2018 have stalled or failed. Whilst the major trend is towards more established petroleum plays, some countries (Mexico and Argentina, for example) are starting to add unconventional into the conventional oil and gas mix.
Expectations for a typical bid round start high, and remain high, based on the level of organization, promotion and favorable geological prognosis. The latter risk is the most difficult to manage, and authorities need to engage in the bid round process only when expectations below ground are robust. Frontier exploration can always be promoted, but competitive bidding and prescriptive licensing rules can – and do – put off major investors. On the other hand, a well organized and well promoted exploration sector (with good data availability) will always compete to attract exploration dollars for higher risk acreage. Recent successes and failures highlight this simple dichotomy.
Mature Areas Winning
The most successful bid rounds of the last 12 months have been in areas of proven and often mature exploration and production. There are thought to be over 60 active bid rounds globally at the moment, with those in the Americas appearing to attract the greatest investment. Newfoundland and Labrador held three Call for Bids in 2018, attracting over $1.4bn in bids, mainly from BHP. In the US onshore, bidding on the Permian Basin in 2018 topped $972m, twice the amount recorded in 2008, while the offshore Gulf of Mexico Lease Sale 252 attracted $284m in bids for 257 licenses.
Moving south, a number of governments (Mexico, Brazil and Argentina, for example) have seen a renaissance in licensing strategies designed to re-engage with weary IOCs. Mexico launched successful bid rounds for a number of terrains, with the shallow water Round 3 First Bid Process probably the most successful. The Sureste Basin was the highlight of that round (the Zama discovery, for example), reminiscent of the early years of the Lower Congo salt basin bids of the 1990s. Brazil is likewise bringing order to their licensing strategy, with nine rounds in total, as well as various sub-rounds for exploration concessions versus pre-salt PSCs; Rounds 16 and 6 are currently underway. Elsewhere, successful rounds have been associated with proven or recent hotspot basins, such as Cyprus, Congo, Australia and Egypt.
A number of bid rounds are reaching their culmination. Great interest is being shown in the Tano Basin offshore Ghana, as well as shallow and deepwater Gabon. Croatia, driven like a lot of EU countries to re-organize the E&P sector and promote participation and structure the licensing process, have two onshore rounds that are expected to attract reasonable investment. Argentina will announce the results of Round 1 soon and are planning a second one.
Open Doors Open Frontiers
In some recent examples, however, the competitive bid round has either stalled or been abandoned. Good organization of an open door policy, with regular acreage releases, well prepared and affordable data packages, national repositories and strong communication routes (online access, for example) are often more attractive for IOCs to understand the potential of frontier, higher-risk acreage. Sierra Leone, Kenya, Madagascar, Tanzania and Albania are amongst a few that have witnessed stalled or re-scheduled rounds. Uruguay took the high road and went from a bid round system to a well organised open door policy, and hopes to reap the rewards soon.
Check out some of our latest oil and gas exploration hot spot articles, written by NVentures for GEO ExPro Magazine.
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A number of interesting, but not very adventurous, drilling campaigns in oil and gas exploration are planned for 2019.
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It was a successful 2018 in Middle East oil and gas exploration for the small Gulf states and UAE.
This article appeared in Vol. 15, No. 6 - 2018