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Coal News
China's R7.7bn SA mining splurge confounds
China's R7.7bn SA mining
splurge confounds
[miningmx.com] – PROPOSALS by Chinese investors to buy marginal South African precious metal assets totalling R7.7bn raises the question as to whether the flurry in business activity signals the bottom of the commodities cycle, or if the approaches are merely coincidental, or just plain wrong-headed?
[miningmx.com] – PROPOSALS by Chinese investors to buy marginal South African precious metal assets totalling R7.7bn raises the question as to whether the flurry in business activity signals the bottom of the commodities cycle, or if the approaches are merely coincidental, or just plain wrong-headed?
“The Chinese are very
astute investors. Although they do have some difficulty operating in Western
economies, it’s still fair to say that they are very commercial,” said Neal
Froneman, CEO of Sibanye Gold.
Froneman knows a thing
or two about Chinese investment. He sold Gold One International to a Chinese
consortium ahead of the combination of some of its assets with Sibanye Gold
which was demerged from Gold Fields. As a result, about 20% of Sibanye’s share
register consists of Asian investors.
The question about the
intentions of Chinese investors comes after a series of announcements by
Chinese companies in October and November that they were investing in South
African mining.
The first this year was
a bid by a consortium led by China National Arts & Crafts Corporation for
the Blue Ridge mine of Aquarius Platinum for about $37m (R405m). The
transaction was eventually scuttled – much to the annoyance of Aquarius – after
the South African government failed to approve the proposed transaction,
allegedly because its empowerment credentials didn’t add up.
The other four proposals
are still in the pipes.
Three of them are rival
takeover bids of a $148m (R1.6bn) and a $150m (R1.64bn) and another $150m for
Johannesburg’s Central Rand Gold (CRG). The suitors are a Hong Kong-registered
businesses called Hiria Group, Beijing Ankong Investment and Shengbang Jiabo
Consulting. Somewhat eccentrically, the parent companies of some of these
Chinese businesses have diverse, non-mining interests ranging from yacht hire
to chemicals and even media.
The third is the
somewhat heftier $225m (R2.46bn) offer by Hebei Zhongbo for Eastern Platinum, a
Johannesburg and Toronto-listed platinum mining company that put its eastern
and western bushveld properties into mothballs in 2012 and 2013 as the platinum
price dived.
What’s interesting is
that none of these assets could be described as a dripping roast while the
identity of the bidders is strange to Western eyes: the notion of an arts and crafts
led consortium makes one think of crayons and glue rather than backacters and
graders.
Paul Smith, COO of
Wesizwe Platinum, a R1.3bn company in which China’s Jinchuan Group has a 45%
stake, believes the bids for Eastern Platinum and Central Rand Gold are
misjudged investments.
“I find them astonishing
and astounding. I can’t understand why these companies are buying these assets.
They are really buying liabilities,” said Smith who added that while Jinchuan
Group had knowledge of the bidders, it would be a mistake to think there was “a
higher order” logic to the offers.
“I suppose there’s a
flavour in them that this is the very bottom of the market. So if people really
believe that it’s the bottom of the cycle, and the prices for commodities [such
as platinum] recover really agressively, it could be a good buy,” he said.
Ilja Graulich who works
at Madini Minerals, a private equity company that is currently investing and
helping to manage assets in Africa, said the first wave of Chinese investment
was fairly undiscriminating, such as the 2011, $580m bid by Hing Wing
International for Taung Gold, an exploration business that is yet to progress.
“The Chinese have never
been scared about entering South Africa,” said Graulich. “What has changed,
however, is that they are learning to walk away from assets,” he added. His
former company, Elemental Minerals, which was developing potash in the Central
African Republic, saw an offer from China’s Dingyi Group fail earlier this
year.
Froneman said the
important perspective about Chinese investment in South Africa is that it’s not
time-bound by the same deadlines as Western companies. “In general, they have a
longer time-frame in respect of commodities.
“Disruptions don’t phase
them and they have a completey different view of political risk,” he said
adding that South Africa’s participation in the BRICS alliance was starting to
bear fruit in these mining investments. “They are bankrolling some South
African deposits as a means of getting in Africa,” he said.
A potential investment
by China in the South African steel industry – which has limped along at best
over the last five years - is another example of the speculative nature of
Chinese investment.
State-owned Hebei Iron
and Steel said on September 12 that it had signed a deal to take a 51% stake in
a venture with the Industrial Development Corporation and the China-Africa
Development Fund to build its biggest overseas steel mill.
It’s an approach that
has David Brown, CEO of Coal of Africa, particularly interested.
CoAL recently sold
additional shares to Beijing Haohua Energy (BHE) a state-owned Chinese company
as part of its strategy to finance its projects and clean up the balance sheet.
“There would be a
synergistic benefit of Hebei using our coking coal that serves the greater good
for the Chinese,” said Brown. BHE already has about 24% of the company.
Investments by CAD,
which has its regional headquarters in Johannesburg’s Sandton, are the ones
that seem to stick in South Africa. “An investment by CAD is a major stamp of
approval,” said Graulich.
This article first
appeared in Finweek.
This article is a printout from Miningmx.com
Copyright © 2009
São Tomé and Príncipe
São Tomé and Príncipe
Central Africa, islands in the Gulf of Guinea, just north of the Equator, west of Gabon
Mineral production is limited to clay and volcanic rock. All other mineral product
requirements are imported
Indications of the existence of hydrocarbons in
São Tomé and Príncipe were first noted in 1974, but attempts by the Portuguese Colonial Administration to sign a concession agreement with
Ball & Collins North Sea consortium (a predecessor of Premier Oil of the United Kingdom) were abandoned following the country’s declaration of
independence in 1975.
Other attempts to start petroleum
exploration during the late 1980s and 1990s also failed. In 2003, Nigeria (60%)
and São Tomé and Príncipe (40%) agreed to jointly operate an overlapping maritime boundary located about 200 km offshore Nigeria known as
the Joint Development Zone (JDZ). Activities in the JDZ were to be overseen by
the Joint Development Authority (JDADA). The JDZ was divided into nine blocks,
and a licensing round was opened for bids in 2004, which resulted in the award
of Block 1 to a consortium made up of Chevron Corporation of the United States (51%),
Esso Exploration and Production Nigeria-Sao Tome (One) Ltd. (40%), and Dangote
Energy Equity Resources Ltd. (a joint-venture of the Dangote Group of Nigeria
and Energy Equity Resources AS of Norway) (9%).
The consortium signed a
production-sharing agreement with the JDADA in 2005 and, in January 2006, began
drilling activities within the block. In May 2006, the consortium announced
that it had encountered hydrocarbons in the Obo-1 exploration well in Block 1
and that it was in the process of evaluating reservoir rock and liquid samples
to determine the next step of the appraisal process. Block 1 is located about
300 km north of São Tomé and Príncipe and about 200 km south of the
city of Port Harcourt in Nigeria.
Asecond licensing round for Blocks 2
through 6 was opened for bids in 2005. Energy Inc. of the United States (ERHC) won the rights to
these blocks and, in March 2006, the company signed a series of
production-sharing agreements with the JDADA and several petroleum and gas
companies, among which were Addax Energy Nigeria Limited, Addax Petroleum
(Nigeria offshore 2) Limited, Addax Petroleum Resources Nigeria Limited,
Sinopec International Petroleum Exploration and Production Corporation Nigeria,
and several other petroleum and gas companies whose names were not disclosed.
Following inquires by the Petroleum Affairs Commission, the National Petroleum
Council recognized deficiencies in the awarding process and ordered a formal
investigation. The Attorney General, after concluding that the procedures used
in selecting petroleum companies was flawed, recommended a restructuring of the
procedures for future bidding rounds that would conform to international
standards. The Attorney General’s report also called for the reexamination of
ERHC’s preferential rights for Blocks 2, 3, 4, 5, and 6 within the JDZ.
Since 2006, there has been no word on
any of the reexamination of ERHC's preferential rights and the countries of Sao
Tome and Nigeria are moving forward with the exploration of the JDZ for oil. In
or about July 2009 there were scheduled two oil rigs to start exploration and
drilling of petroleum reserves within blocks 2-4 and ERHC is predominant in
these blocks. With the possible acquisition of Addax Petroleum by Sinopec, and with the reports of Sinopec looking into
acquiring ERHC, it is looking more like Sinopec will be the mainstay of the JDZ
for Sao Tome and Nigeria in this area.
ERHC EnergyInc. Signs Memorandum of Understanding for Sao Tome and Principe Exclusive
Economic Zone
HOUSTON, Dec. 16, 2014
(GLOBE NEWSWIRE) -- ERHC Energy Inc. (ERHE), a publicly traded American company
with oil and gas assets in Sub-Saharan Africa, today announced the signing of a
Memorandum of Understanding (MOU) with an International Operating Company
("IOC") related to Block 11 of the Sao Tome and Principe Exclusive
Economic Zone (EEZ). ERHC currently holds 100 percent interest in the Block.
Under terms of the MOU,
ERHC agreed to grant first right of refusal to the IOC for a farm-out of EEZ
Block 11 for a period of six months. Under the terms of the MOU, ERHC will keep
the identity of the potential partner confidential except and until a
definitive farm-out is agreed on and entered into.
Until a definitive
farm-out agreement is entered into and approved, ERHC continues to operate EEZ
Block 11. The work program during the first four-year phase includes
re-processing existing data, completing an aeromagnetic survey over the Block
and acquiring 2,500 km of 2D seismic data.
EEZ Block 11 totals
8,941 square km, situated directly east of the island of Sao Tome and abuts the
territorial waters of Gabon. ERHC's preliminary studies on currently available
data indicate the possibility of a significant cretaceous play in Block 11
similar to the Jubilee Field offshore Ghana.
In addition to its oil
and gas exploration interests in the EEZ, ERHC holds interests in the Republics
of Kenya and Chad, and the Nigeria-Sao Tome and Principe Joint Development Zone
(JDZ).
About ERHC Energy
ERHC Energy Inc. is a
Houston-based independent oil and gas company focused on growth through high
impact exploration in Africa and the development of undeveloped and marginal
oil and gas fields. ERHC is committed to creating and delivering significant
value for its stockholders, investors and employees, and to sustainable and
profitable growth through risk balanced smart exploration, cost efficient
development and high margin production. For more information, visit www.erhc.com.
Indian Ocean Islands
Comoros
In 2012, the only mineral
commodities produced in Comoros continued to be small quantities of common
building materials that were used for domestic consumption. The demand for
cement, petroleum products, and steel was met through imports. Import dependence and deforestation may lead to
development of the country’s geothermal resources.
The Government of Comoros announced in 2012 that it had awarded its
first petroleum exploration and production license to Bahari Resources Ltd., which was a privately owned company based in
Kenya, and was taking the first steps to develop its petroleum exploration
strategy. The exploration area has acreage adjacent to the offshore Area 1 and offshore
Area 4 of Mozambique’s Rovuma Delta where Eni S.p.A of Italy and Anadarko
Petroleum Corp. of the United States had made significant natural gas discoveries.
Bahari Resources planned to undertake a phased seismic and drilling program
within the licensed area. The Government also announced that it hoped to have a
Petroleum Code in place by yearend 2013.
CIA Factbook
Mauritius Freeport Portal
The Republic of Mauritius, which
is located east of Madagascar, consists of the main island of Mauritius, the smaller
island of Rodrigues, and two smaller groups of islands. All the islands are of
volcanic origin and are surrounded by coral reefs.
In 2012, the country had few
mineral resources, and the mineral industry of Mauritius was a negligible
factor in its economy. Historically, mineral output consisted of basalt for construction,
coral sand, lime from coral, and solar-evaporated salt. Small organic phosphate
fertilizer (guano) resources occur on the islands of Agalega, Cargados, and
Rodrigues. Imported fuel oil was the main source of energy used for electricity
generation Mauritius’ main mineral
commodity imports were lubricants and mineral fuels and related materials.
Reunion
Seychelles,
Mauritius Plan Joint Offshore Oil, Gas Exploration
8/19/2013
URL: http://www.rigzone.com/news/oil_gas/a/128515/Seychelles_Mauritius_Plan_Joint_Offshore_Oil_Gas_Exploration
8/19/2013
URL: http://www.rigzone.com/news/oil_gas/a/128515/Seychelles_Mauritius_Plan_Joint_Offshore_Oil_Gas_Exploration
NAIROBI, Aug 19, 2013 (Reuters) – Seychelles and
Mauritius plan to jointly explore for petroleum in an area in the Indian Ocean
that they both own.
East
Africa has become a focal point for exploration after oil discoveries in Uganda
and Kenya and natural gas deposits in Tanzania and Mozambique.
"An
Authority will be established to deal with the Licensing and to oversee the
activities in the Joint management Area. All revenues will be split
50:50," Eddy Belle, chief executive officer of Seychelles upstream
regulator PetroSeychelles said in an emailed response to questions from
Reuters.
"Mauritius
and Seychelles are still working on the legal framework that will dictate oil
exploration and exploitation in the Joint Management Area (JMA). No deadline
has been set for the opening of the area."
The
two island nations received permission in 2012 from the United Nations for an
extended continental shelf off their respective coasts, estimated to measure
396,000 square km. The granting of the joint exploration rights was meant to
forestall any future maritime territorial disputes.
In
June, Seychelles invited oil and gas companies to bid for exploration blocks,
bringing to an end a two-year moratorium, and introducing new rules for bidders
after completing a review of laws regulating the sector.
So
far, Afren Plc and Australia's WHL Energy are the only companies holding
exploration licences in Seychelles, an archipelago of islands northeast of
Madagascar.
PetroSeychelles
said in early August it had already received two new applications under the
newly introduced Open File Licensing Initiative, which were undergoing due
diligence before proceeding to the next stage of evaluation.
(Reporting by George Obulutsa)
Reunion is a volcanic island located about 200 kilometers southwest
of Mauritius. Administratively, it is an overseas department of France, and, as
such, is part of the euro area.
Mineral production represented only a very small part of the
economy of Reunion in 2012, although quantitative information on mineral
production was not available. Production of aggregates, cement, and seacoast
coral sand was believed to meet local consumption needs. Reunion had no
identified resources of coal or petroleum; all demand for metals, mineral fuels,
and petroleum products was met through imports.
Source: PetroSeychelles
The Seychelles archipelago, which
comprises 74 coralline islands and the Mahe group of 41 granitic islands, lies
in the western part of the Indian Ocean. The Seychelles lies just south of the
Equator in the Southwest Indian Ocean and at the northwestern part of the
“boomerang” shaped Mascarene Ridge. It comprises over 115 islands of a total
land area of 445 sq. km spread in an Exclusive Economic Zone of approximately
1.33 million sq.km.
The
outcrop geology is quite simple comprising granite intruded in places by
basaltic dykes. This makes the Seychelles unique among mid-oceanic islands and
it is this fact that attracted geoscientists to conduct geophysical
investigations in the Seychelles in the late sixties.
These
granites have been dated and they are Precambrian in age at 750 million years old. It is generally accepted in the scientific
community that the islands are the emergent peaks of a microcontinent that once
formed part of the super continent of Gondwana. The exact extent of this
microcontinent is currently still unknown but there is evidence to support a
southeasterly extension at least as far as the Saya de Malha Bank.
Seychelles is not a globally
significant mineral producer or consumer. Production of granite, gravel, and
salt was limited and not reported. Other mineral production consisted mostly of
unreported quantities of construction materials. Small quantities of an organic
phosphate fertilizer (guano) was occasionally mined but also was not reported
by the Government. Seychelles had no identified resources of coal, natural gas,
or petroleum. All demand for mineral fuels and petroleum products was met by
imports
The mineral industry is regulated
by the Ministry of Industry. The Mineral Ordinance, 1962, governs mineral
extraction and mining.
Currently, there are two oil companies exploring in
Seychelles and these are AFREN, a UK listed company, and WHL Energy – an
Australian listed company. Both these companies have drilling obligations.
AFREN has recently completed a 3-D seismic acquisition program and WHL energy
will also conduct a seismic infill or 3D programme before drilling.
“Fast-track” data from
3D seismic survey in Seychelles waters is encouraging, says Australian oil
company WHL
Victoria,
Seychelles | October 16, 2014, Thursday @ 15:57 in Business » ENERGY | By: Sharon Uranie
Map of surveyed area
(Junon Block) in the Seychelle EEZ (PetroSeychelles)
Australian oil
company, WHL Energy, has described as “encouraging” preliminary
data that has become available as a result of a 3D seismic survey carried out in its Seychelles offshore asset
between June and July this year.
The seismic survey of an exploration block known as Junon, 115
kilometres southeast of the main Seychelles island of Mahé was undertaken by
its partner FTSE-listed Ophir Energy.
Dolphin Geophysical, a
Norwegian service company won the contract for the survey which was conducted
by their 3D vessel, the Polar Duchess.
Ophir Energy which is involved in oil and gas exploration
in East and West Africa with interests in countries including Ghana, Gabon,
Somaliland and Kenya, signed a farm-in deal with Australian oil company
WHL in March.
Under the agreement
Ophir stands to earn a 75 percent stake in WHL's offshore Seychelles assets in
return for an investment of up to $17.0 million on exploration, including the
conducting of some 1500 km² of 3D seismic surveying.
Polar Duchess, of Norwegian
company Dolphin Geophysical that conducted the 3D seismic completed in July
this year. (Bruno Webster, Dolphin Geophysical) Photo License: CC-BY
|
In a press statement
issued today, WHL Energy says an initial review of the “fast-track” data volume from the
Junon 3D seismic survey that it has received is encouraging “in that
the key prospects identified on the previous 2D seismic data can be interpreted
on the fast track volume.”
WHL undertook a 2D seismic survey when it first acquired its Seychelles
exploration permits.
The data now needs to
be fully processed and WHL has indicated that an initial interpretation should
be available by December this year.
“It is pleasing to see
the progress with the investigation of the high potential Seychelles project
continue utilising the latest technology available,” said David Rowbottam, the
Managing Director of WHL Energy, in the press statement.
“While this initial
seismic volume of the Junon 3D seismic data is very early stage with a lot of
state-of-the art processing and interpretation yet to be undertaken, it is
encouraging that the key geological features noted in the earlier 2D seismic
can be interpreted on the fast track 3D seismic volume.”
The state owned
company responsible for regulating the hydrocarbon sector of the Indian Ocean
archipelago, PetroSeychelles, told SNA that they will have access to the
“fast track” data shortly.
“It is encouraging
news. PetroSeychelles will nevertheless undertake its own
interpretation of the preliminary data that has become available while we wait
for the data to be fully processed and get the final interpretation,” the Chief
Executive Officer of PetroSeychelles Eddie Belle told SNA.
Once fully interpreted
that data is expected to give the investors a better indication of whether
drilling should commence around the surveyed areas and where it should take
place.
Since the beginning of
this year oil exploration in the Seychelles waters has been attracting
more interest with several foreign companies currently involved in collecting
seismic data.
Apart from the joint
venture between Ophir Energy and WHL Energy,
the state-owned company responsible for regulating the hydrocarbon sector of
the Indian Ocean archipelago, PetroSeychelles, and Japan Oil Gas Minerals Exploration
Company (JOGMEC) also conducted a two-week geochemical survey in
the waters south-west of the main Seychelles island of Mahé in May.
Before that, in April,
Russian seismic vessel ‘Akademik Fersman’ carried out a 2D seismic survey as part of the same JOGMEC-PetroSeychelles
venture.
The CEO of PetroSeychelles, Eddy Belle,
also indicated that the country’s other exploration license holder, AFREN, will
also be conducting an additional survey within the Seychelles’ EEZ early next
year.
As foreign companies
continue prospecting for oil and gas in Seychelles waters', the archipelago has
also recently been accepted as a candidate country by the Norway-based
Extractive Industries Transparency Initiative (EITI) board.
EITI sets the global transparency standard for all
minerals and Seychelles joins 45 other countries worldwide, that are required
to extensively disclose revenues and measures to improve accountability in
exploitation of oil, gas and minerals.
Seychelles: Oil Exploration -
Seychelles, Mauritius And Comoros
Last Updated: 28 August 2014
Article by Luke Havemann
International Oil Companies (IOCs) that have been eyeing East
Africa may want to look beyond established jurisdictions like Kenya and
Mozambique. Across the water that is, to the Indian Ocean islands of
Seychelles, Mauritius and Comoros. All three islands offer interesting
opportunities, but in this short article I'll be concentrating on just one of
them – Seychelles.
General Background and Geology
Seychelles, which lies outside the cyclone belt, enjoys a stable
weather system, with daytime highs ranging between 25 and 31⁰ C. Besides being a high-end tourism
destination, Seychelles has a thriving fishing industry, and a versatile port
that can accommodate container ships and tankers. There's an international
airport, with flights to Europe, Africa, the Middle East and Asia.
Telecommunications are good. The country is politically stable. The population
of some 87,000 is well educated. In short, it's a good place to do business.
From a geological perspective, Seychelles was once part of the
supercontinent Gondwana which, as result a of the rifting that occurred during
the early Permian period, led to the formation of East and West Gondwana, as
well as the micro-continent where the island nation now finds itself.
Seychelles also finds itself in the Seychelles Rifts AU, one of four assessed
geological provinces and assessment units (AUs) along the central coast of East
Africa.
The Petroleum Industry
As things stand, Seychelles is underexplored and only four
exploratory wells have thus far been drilled. The first three wells were
drilled in 1980 and 1981. Although commercial quantities of hydrocarbons were
not discovered, these wells uncovered oil and gas shows and proved that
Seychelles possesses a working hydrocarbon system. In the words of Eddy Belle,
CEO of PetroSeychelles: 'Three wells were drilled by Amoco in 1980 and 1981.
They found all that is necessary to have an oil province." It was not
until 1995 that Enterprise Oil drilled a fourth exploratory well that turned
out to be dry.
The petroleum industry in the Seychelles is a truly nascent
industry that has much exploration ahead of it, as well as a long way to go before
production of domestic hydrocarbon resources might be considered. Notably, the
aforementioned PetroSeychelles - which is an arm of government - oversees the
upstream petroleum sector, promoting and supervising oil exploration programs
in the Seychelles Exclusive Economic Zone. A government-owned company,
Seychelles Petroleum Company (SEYPEC), operates in the downstream sector. It
used to be the case that SEYPEC was the regulator, not PetroSeychelles,
however, since SEYPEC had a share in the companies conducting the exploration,
a conflict existed between that shareholding and its obligations as a
regulator. Consequently, PetroSeychelles was formed. According to Eddy Belle,
PetroSeychelles is well-placed to reduce the amount of time that it may take for
Seychelles to develop its own petroleum industry. To this end, Belle has stated
that "when it comes to decision-making, we're much faster than a
ministry...being an independent body that has its own funds, we move much
faster...because we are also like a national oil company, discussion with other
companies is much better as we are more or less on the same wavelength."
The Indian Ocean islands have, unsurprisingly, seen benefits in
working together closely towards the development of their potential resources.
For example, Seychelles and Mauritius are in agreement regarding a Joint
Licensing Area in terms of which revenue will be split on a 50/50 basis – the
two are hammering out a legal framework for the Joint Management Area (JMA),
and some form of authority that will deal with licensing and oversee activities
in the JMA. Seychelles and Mauritius have also submitted a joint submission to
the Commission on the Limitation of the Continental Shelf (CLCS) for an
extended continental shelf in the south east (Seychelles is itself also seeking
an extension of the CLCS in the north).
Legal Framework
The Petroleum Mining Act says that the state owns petroleum
accumulations within the Seychelles, and that the government can grant
non-exclusive licences to companies to carry out exploration services. The Act
also allows the government to enter into a Petroleum Agreement with an IOC in
terms of which the company is granted exclusive rights to explore for, and
produce, petroleum within Seychelles – the size and location of the acreage to
be included in the agreement will be settled by negotiation, but the size must
not exceed 10,000 square metres.
There is a Model Agreement in existence, and this provides for a
duration of 34 years if commercial discovery occurs. This period is divided
into two phases - an Exploration Phase of nine years (itself made up of three,
three-year periods), and a Development and Production Phase that starts on the
date on which the company decides that it's commercially viable, and continues
for 25 years.
In June 2013 Belle said this: 'We are working on updating our
petroleum model agreement....we're making it in line with what is happening
elsewhere in the world... this is where we will look at models like that of
Norway." Not only has Seychelles turned to the Norwegians for assistance,
it has also sought advice from the Extractive Industry Transparency Initiative
(EITI), the World Bank and the Commonwealth Fund for Technical Cooperation. As
Belle has, rightly, stated: "we're small so we don't have capacity, which
means we have to rely on others who have the capacity to assist us.'
Fiscal Regime
In Seychelles, there are three principal revenue-sharing
mechanisms:
- A
royalty of 10% levied on the market value of oil produced and saved during
each month.
- Petroleum
Income Tax of 35%, which is paid in accordance with the Petroleum Income
Tax Act 2008.
- Petroleum
Additional Profits Tax (PAPT), a resource rent tax levied on cash flows.
The Model Agreement provides for a two-tier structure for PAPT - the first
becomes due once the company has earned a particular threshold rate of
return on its investment, and the second becomes due after the company has
earned an even higher post-tax rate of return. The first threshold rate of
return which triggers payment of PAPT is 15% and the tax rate is 25%, the
second threshold rate and tax rate are negotiable.
Licensing Initiative
As part of its Open File Licensing Initiative, Seychelles
invited IOCs to bid for exploration blocks in June 2012. Two applications were
received, one from Afren Plc, and one from WHL of Australia. Both companies now
hold exploration licences. WHL has already entered the drilling phase and it is
in the process of farming out. Afren has conducted a survey and it is
apparently in the process of identifying a deep-water drilling location, with
drilling due to start in the last quarter of 2014. According to Belle, Petro
Seychelles has been trying to establish links with Sinopec and with CNOOC. He
says that 'they can see the merit here, but there is an element of risk because
we are still frontier...however, once we have the first discovery then there
will be a flood of companies.'
The Open File award process works as follows – an application
for a 10,000 square km area can be made at any time, PetroSeychelles will then
verify if the minimum criteria are met, and there will be a notice of the
application's filing and the solicitation of competitive applications (with a
90-day limit). There is no need to reveal the identity of the applicant or the
proposed terms.
The variables in the Petroleum Agreement should be the
following: area; work program; rental payments; relinquishing terms; fiscal
terms; and training commitment. The Exploration Phase should include the
following: Period 1 (years 1-3), funding for seismic (US$15 million); Period 2
(years 4-6), funding for at least one well (US$25 million); and Period 3 (years
7-9), again funding for at least one well. As for the recommended minimum
acceptable applicant qualifications, these include technical and professional
capacity, as well as financial ability.
The weighting criteria for competitive bids are as follows:
- Work
program: geological prognosis, 10%; Period 1 commitment, 40%; and Period 2
proposal, 10%.
- Fiscal
considerations: Tier 2 PAPT and any other items, 10%.
- Applicant
qualifications: technical, 15%; financial, 15%.
Conclusion
Seychelles may be a frontier area, but much data is available,
and interesting leads have been mapped. The data confirms that a working
petroleum system exists, with all the necessary ingredients - source,
reservoir, seals and structures - to make the area an oil and gas province. The
government has recognized the importance that the discovery of petroleum would
have for its objectives, and it has put in place the required legal framework
to facilitate exploration and the eventual production within its marine boundaries.
There are exciting opportunities for companies to bid in the Open File system,
or to farm into existing licences. The Indian Ocean islands seem promising and
Seychelles may well demonstrate that not all the action, so to speak, is to be
found on the continent itself.