Liberia: National Oil Company Seeking Regulatory, Commercial Powers in Amended Petroleum Law
Monrovia – The National Oil Company of Liberia is seeking both commercial and regulatory powers in the 2019 Amendment to the New Petroleum Law, a source close to the process has told FrontPageAfrica.
Report by Alpha Daffae Senkpeni, [email protected]
The Act, also seen by FPA, seeks to amend certain provisions of the new petroleum (exploration and production) reform law of 2014 by giving NOCAL both commercial functions and at the same time authority to issue out reconnaissance licenses to prospecting companies.
Reconnaissance licenses are permits granted to exploration firms for the purpose of undertaking preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping, but do not include drilling or sub-surface excavation.
International best practice supports the management of said process to be done by a national independent regulator instead of a commercial firm as in the case with NOCAL.
However, Section 11.1 (a) of the draft amendment states that “a company may, upon payment of prescribed fees, apply to NOCAL for the grant of nonexclusive Reconnaissance licenses in a designated area, for the conduct of surveys, accessing the geological, geophysical, geochemical, and geotechnical characteristics of the designated area for the sole purpose of data management and sales.
Section 11.1 (b) also adds that the Liberia Petroleum Regulatory Authority “may grant reconnaissance petroleum rights (to be administered by NOCAL) to interested companies for the sole purpose of prospecting for oil and gas.”
Also Section 14.1 (c) appears to be repetitive or unclear and it states that in the case where NOCAL is granted 100% interest in a block, the LPRA shall negotiate the PSC terms with NOCAL.
Wherein NOCAL decides to divest or farm-out some of its interest, the LPRA shall be informed, authorize and supervise the renegotiation to ensure that transaction fees are paid to the government. This, our source, argues would create uncertainty and unfair disadvantage for other private firms.
Our source, who is an oil and gas expert, says “NOCAL Cannot issue out reconnaissance permit for prospecting companies for oil and gas. This is a purely regulatory function that may cause backlash. Even granting reconnaissance license to them for acquisition of data may create an issue. If NOCAL possess all these regulatory function, it may not be encouraged and pushed to advance its commercial functions.”
With the apparent anomalies in the draft amended Act, this means NOCAL would be usurping the responsibility of LPRA by acting as a player and referee for the sector, the expert said.
“NOCAL should not be allowed to grant licenses for acquisition of data or petroleum rights; these are regulatory functions,” the expert source said, adding that LPRA should instead be provided technical support by NOCAL, which is by law a national commercial oil company.
“When the LPRA issues out the license for data acquisition through reconnaissance licenses, NOCAL can then work with the company to market and manage the data. In addition, data management including marketing should be carried out with supervision from the Authority. If not, there may not be proper accounting during bid round.”
“My recommendation is that the legislature can sign a joint resolution granting NOCAL two or three oil offshore blocks in the interest of national development and to strengthen our national oil company, as such NOCAL can go into JVC or farm-in or farm-out with/to one of the super major oil companies in the world to develop those granted blocks,” source said.
In May this year, The Government announced the completion of a Transfer Plan required in the Petroleum Law which it described as “major milestones” for the growth of the sector.
The government, at the time, mentioned that the full transfer of all regulatory functions from NOCAL to LPRA, allowing state-owned firm to focus on improving the commercial capabilities and promoting the government’s interest and citizen participation while the LPRA deal with key activities leading to the bid activities of offshore acreages.
President George Weah then stressed that “while the country is in desperate and [in] dire needs to discover commercially viable quantity of oil, we must not lose sight of the attending consequences that could evolve when the right policies, regulations and laws are not developed or adhered to”.
NOCAL Chief Executive Saifuah-Mai Gray have stated that a licensing round was mooted earlier this year, with blocks already demarcated in deep-water and ultra-deepwater areas, but that data collation for the Harper basin would require special attention.
But with the conflict of interest evincing in the draft amended law, fear of pessimism would likely hover the viability of a sector that was once rocked by a pattern of corruption allegations and mismanagement.
NOCAL, once a beacon of hope for Liberia’s hydrocarbon industry, has been in tatters for the last couple of years. Allegations of financial improprieties rocked the company back in 2016 which later manifested by the depletion of the firm’s coffers.
Between 2004 and 2010, NOCAL reportedly granted several oil blocks to foreign firms for exploration but what experts considered commercial quantity of oil was never discovered. This created setback for the sector coupled with the outbreak of the Ebola virus disease that also saw international oil firms pulled out of the country.
In 2018, the company was accused of ditching out huge fees and unnecessary foreign travels to its board members. That was the first set of allegations the new management team under the Weah-led administration had to deal with and the company refuted the reports and promised to revive the sector.
Meanwhile, the concerns of irregularities in the amended oil and gas law are becoming palpable as Liberia now risks being delisted from the ranks of the Extractive Industries Transparency Initiative (EITI) if the country fails to implement “significant corrective measures” before the end of December this year.
Mamadou Bady Balde, Africa Director of the EITI, said on last Thursday that delisting Liberia will compromise the country’s ability to attract international oil companies and attract foreign direct investment.
Liberia has failed to meet EITI standards and, unless it publishes delayed reports before the end of December, it will be delisted. Liberia was suspended from the EITI in September 2018 over reporting lapses.