The increasing demand to reduce greenhouse gas emissions and achieve the goals of the Paris Agreement and the global commitment to reaching these goals has made the oil and gas industry unattractive as many investors are now shifting their investments towards clean renewable energy. The impact of the current COVID pandemic and the huge decline in the price of crude oil has only exacerbated an already damming situation.
According to global energy experts, particularly the International Energy Agency (IEA), what this means is that in the next 10 to 30 years, most of the crude oil beneath the earth would have to remain untapped.. In order to achieve net zero emissions by 2050, the IEA suggests that there should be ZERO investment in new oil and gas project.
The oil and gas industry, from extraction to transportation to refining, is no longer the hugely profitable and financially stable enterprise it has always been. Over the past decade, the industry’s returns on investments have sagged, revenues and cash flows have withered, bankruptcies have abounded, stock prices have fallen, massive capital investments have been written off as worthless and fossil fuel investors have lost hundreds of billions of dollars.
These financial pressures are set to intensify over the coming decade, as the oil and gas sector faces the reality of the world’s transition to clean sustainable energy.
Where Liberia Stands
Liberia has since 1970 drilled about 17 offshore wells with no significant discovery of oil in commercial quantity. As a result, Liberia is not yet an oil proven country with proven reserves. While it has been established from drilled wells and geological studies that Liberia has a working petroleum system, further appraisal wells have not been drilled to determine the commercial viability of existing wells – this can only be achieved through the drilling of more oil wells for discovery.
Though it is just a matter of time before the oil and gas industry becomes obsolete, the industry remains the lifeblood of the industrialized nations, therefore, countries that have made discovery remain important to the industry as many investors are now picking their last chance before the global energy revolution.
But Liberia is yet to be one of those important countries in the industry. However, seismic data collected by TGS, a Geophysical Company that provides the global energy industry with the right data, at the right time, in the right place has shown the high possibility of commercial discovery in the Harper basin – an untouched acreage.
Based on seismic data analysis and detailed geological studies done by TGS, the Liberia Petroleum Regulatory Authority now strongly believes that Liberia can become an oil-producing country soon rather than later.
Speaking to FrontPageAfrica when contacted for comment, the Director-General, Hon. Archie Donmo of the Liberia Petroleum Regulatory Authority stated that “No matter how much the seismic data shows you if you do not drill wells you cannot discover oil. And because we have not made commercial discoveries, we are not a country of proven reserve… Senegal, for example, has not produced any oil yet, but Senegal is so important to oil and gas exploration and production now because they have made a commercial discovery and they are now at the stage of development. Therefore, any exploration and production company can go there and invest because it is proven that they have oil.”
He further explained that the discovery in Senegal has changed the landscape in that country and has placed the country in a comfortable position to start borrowing money based on the discovery.
He mentioned the same of Ghana, noting that upon her discovery of oil, Ghana could borrow billions of dollars from the World Bank because of her oil potential resulting in the unprecedented level of development currently ongoing in Ghana.
Making Liberia a Country of Proven Reserve
Oil discovery, though very significant, remains a challenge for the country and according to Director Donmo, it can only be discovered through the drilling of more exploration and appraisal wells.
The Government of Liberia, through LPRA and NOCAL, opened up 9 blocks in the Harper
basin under the Liberia License Round 2020. On the margins of the announcement of the bid round, COVID-19 hit the global economy causing countries to go into mandatory lockdown for almost a year. While LPRA tried to resuscitate interest during this period, the round was unsuccessful up to the end of its first phase in October 2020. Based on approval from the President, an extension was granted for seven months ending in May 2021. Few international oil and gas companies expressed preliminary interest in the rounds but due to difficulty in attracting predictable and sustainable finance, the companies put a hold on their interest anticipating that LPRA or GoL will open up the blocks for direct negotiation which comes with less struggle and minimum competition.
In addition to the COVID-19 situation, companies were wary of the news about the energy transition heralded by climate and environmental activists around the world. Some supermajors, including BP and Shell, announced major cuts to their exploration program in the frontier region. This fast-growing call for the energy transition hindered oil companies from competing with each other in frontier regions. The onus then shifted to LPRA and the Government to devise new ways in attracting international investment in the sector.
This caused the government to explore direct negotiations. Up to 33 blocks within the offshore Liberia acreage, including the Harper and Liberia Offshore Basins, for Direct Negotiations. However, there is yet to be an expressed interest since the direct negotiation process was opened on June 1, 2021.
TGS Braving the Odds
Hon Donmo, disclosed to FontPageAfrica that TGS has expressed optimism of oil discovery in the next two to three years if drilling is carried out and is ready to take the risk in the wake of the shying away of many investors.
“TGS has hired an exploration specialist with over 35 years of experience in exploration activities who has studied and analyzed the data and has convinced TGS of the possibility of discovering up to three billion barrels of oil in the Harper basin,” Hon Donmo disclosed.
He said, TGS is now considering taking up blocks in the Harper basin and finding a drill partner for the sole purpose of making commercial discovery in order for Liberia to become a country of proven reserve.
This, according to Hon. Donmo, is a new module adopted by TGS that if they acquire the seismic data of a particular country and no investor wants to go that country, but they are very convinced that they can make a discovery, they’ll take a block and find a drill partner. If they successfully make a discovery, that country’s status changes and becomes a country of proven reserves. This paves the way for investors to then move in and acquire seismic data from TGS.
“Once you’re considered a country of proven reserve, investment decisions about you are now different, you now get in a different category like Senegal, Ghana, Ivory Coast, Nigeria,” Hon Director said.
Director Donmo said though it appears to be a conflict of interest wherein in the holder of the seismic data would engage into acquiring blocks to drill, the country at the same time cannot continue to afford to remain untapped in the industry, especially in an age when there is a gradual shift from fossil fuels to clean, renewable energy.
“At least if we know we have oil, the government can say let’s keep it for future generations, but now, we don’t know. And if we don’t produce oil in the next 30 years, we don’t know what the world might be. It may be that whatever below ground might just have to stay
underground,” he said.
He added that if an investor had applied for the blocks that TGS has expressed interest in, it cannot be given to TGS since that company would have to be given first preference.
Director Donmo further stated that, the fact that TGS’ is willing to take up an acreage within the Harper Basin further de-risks the basin and shows that the prospect of discovery is very high. This move will boost investors’ confidence when they see the holder of the seismic data taking up blocks.