Ex-NOCAL Boss Neyor Warns against ‘Amateur Practice’ Ahead of Liberia’s Oil Blocks Bids
Monrovia – The former President and Chief Executive Officer (CEO) of the National Oil Company of Liberia (NOCAL), Mr. Christopher Z. Neyor has called for the postponement of the bidding process for offshore exploration of oil blocks in Liberia.
Mr. Neyor is now an International Energy Expert and the President of Morweh Energy Group Incorporated.
It can be
recalled that in December 2019, the Government of Liberia, through the Liberia Petroleum Regulatory Authority (LPRA),
announced the launch of the next licensing round for several oil blocks which
are expected to commence in April this year.
The decision was reached following a meeting held between executives of NOCAL, LPRA and TGS, a geo-physical company hosting Liberia’s offshore seismic data and rendering technical support.
The move allows the Liberian government to conduct a successful license round in order to attract the right investors to the sector.
Nine offshore oil blocks are expected to be on offer in the Harper Basin, one of the last unexplored and undrilled regions offshore in West Africa.
TGS holds a range of multi-client data across this acreage to support the licensing round, including 5,272 kilometers of 2D a nd 6,276 square kilometers of 3D seismic, gravity and magnetic data.
But in a statement issued from the United States over the weekend, Mr. Neyor disclosed that the price of crude oil has fallen precipitously over the past few days as a result of the coronavirus that is wreaking havoc globally, and negatively impacting economic production.
He noted that though the outbreak of the virus is lowering the demand for oil, Liberia, as a frontier country which has no confirmed commercial discovery of oil or gas, has bid round scheduled date unluckily coinciding with a growing infection rate of the coronavirus and with its steep drop in oil price.
Mr. Neyor maintained that “ill-equipped negotiators” will “cleverly” use the outbreak to bid for oil blocks if the Government proceeds with its plan to give out exploration licenses for oil blocks in April.
He added that these “ill-equipped negotiators” will also use the low cost of oil and the frontier state of Liberia to get a great deal to the detriment of the country and its citizens.
The ex-NOCAL President and CEO further warned against the use of “amateur practice” for the sale or exploration of oil blocks in Liberia.
“If we bury our heads in the sand and continue with the bid round, our already ill-equipped negotiators will be at the mercy of those oil companies that will bid knowing that they will cleverly use the coronavirus, the low price of oil or the frontier status of Liberia to get a great deal. Even if the coronavirus is contained to some level, low oil price will linger for some time with volatility. Liberia, unfortunately, would have no one to counter the sophisticated charts and graphs and projections from those savvy oil economists and lawyers on the other side. High-end oil contracts negotiation is not a place for amateur to practice. They will eat us for lunch,” he said.
“It is highly recommended that in view of the continuing fall of oil price amid a global coronavirus pandemic that the Liberia oil bid round scheduled for April 2020 be postponed.”
Mr. Neyor pointed out that the targeting of quality companies is more achievable with an attractive oil price and a competent and respected leadership in the oil and gas sector, something which he said should be another reason for which the April’s oil bid round must be postponed.
He noted that the exploration investment decision based on current oil price is even more disadvantageous to a frontier country like Liberia, especially with the country’s recent records of “dry holes”.
“With Liberia’s past history as dry-holes frontier country, it is very strategic to have a critical mass of exploration activities and with reputable companies having track record of discoveries in West Africa in order to build value in the basin again”.
Oil Price Vs Exploration Investment
According to Neyor, the outbreak is immensely contributing to a lower demand for oil.
“The question then is ‘what should Liberia do in view of these unwholesome and unexpected realities?’ First, just some simple oil economic facts: investment in exploration activities (that is looking for new oil resources) is directly proportional to the price of oil. That means a rise in oil price leads to higher investment in exploration and vice versa,” he added.
The former NOCAL boss maintained that though producing a drop of oil from any future discovery of the scheduled bid round and the resulting exploration may be a decade away, investment decision to participate in a bid or allocate monies into drilling of very expensive deep water oil well is contingent on the current price of oil.
He pointed out that each of these deep-water exploration wells cost around US$100 million to drill, and as such, if a company does not find oil in commercial quantity, a dry hole exists, and “too many of those dry holes make your basin less attractive”.
Absence of Logistics Base
Mr. Neyor further called for investment in the construction of an onshore logistics base at a nearby port that serves oil rigs in the middle of the ocean.
He added that besides exploration drilling, when the price of oil is high, downstream infrastructure and other investments would be more attractive.
He maintained that local businesses would also be established for the benefit of Liberia and its citizens if an onshore logistics oil base is constructed.
Said Mr. Neyor: “There is an adage that ‘when the iron is hot’, you strike it”. When it becomes cold, you can no longer shape it into a form you desire. It is a logistics base that accounts for what is referred to local content of that huge investment into an exploration oil well. From the base, specialized boats deliver pipes and lubricants and cleansers and catered meals to the oil rigs and bring wastes and other items to the base for disposal or onshore repairs. This provides the opportunity for local businesses to emerge, build partnership and capacity to benefit from the oil sector”.
Mr. Neyor indicated that “the government through the oil sector leadership has an obligation to promote development of Liberian owned support businesses for citizens’ participation in extraction of their own natural resources”.
He pointed out that over half a billion dollars that was invested in exploration wells in Liberia during the Sirleaf administration, the local content which averages around 25% of the total, mostly went to Ghanaian companies because the operating oil companies used Takraodi for their logistics even though the port was 48 hours away from the oil rigs in Liberian waters.
He stated that though oil companies didn’t like the idea because of the high cost associated, these companies were compelled to do so.
“When the price of oil was high in 2012 long before Ebola hit Liberia, group of well-established Liberian entrepreneurs seized the opportunity and mobilized partnerships and capital to build a logistics base at the port of Buchanan and made their presentation to the GOL.
“However, due to the shortsightedness government bureaucracy killed the project. Then oil price dropped and the logistics base investment became unattractive. Today, we still do not have one and with oil price now going low again, exploration drilling in Liberia will be further discouraging because of the higher cost using Ghana or other outside points as logistics base for their operation in offshore Liberia”.
The ex-NOCAL President, however, expressed the hope that before the next round of oil drilling in Liberia and the price of oil well appreciated in the coming years, Liberia can see reason to refocus on the construction of the Buchanan’s oil and gas logistics base.
According to him, a future commercial discover of oil would accelerate investment that remains critical to Liberian owned businesses benefitting from drilling and prepare for the busier oil filed development and operations.
Invest In human capacity
At the same time, Mr. Neyor has called for investment in human resource capacity in the oil sector.
He further underscored the significance for better negotiation and management processes for the exploration and drilling of oil in Liberia.
“Negotiating and managing this process of creating critical mass in exploration drilling is quite complex and I believed investment must continue in building the human capacity of the oil sector to take on this task,” he said.
“First, the marketing, even in a high oil price environment, has to be targeted to small mid-sized oil companies with the desirable history of deep-water discovery and financial reach to enhance the prospect of commercial discovery in Liberia”.
He recalled that while serving as CEO of NOCAL, he targeted an American-based company to participate in Liberia’s offshore bidding, but his efforts did not yield fruitful results prior to his departure from the country’s oil company.
“One such entity with an enviable history of West Africa discoveries is Cosmos Energy, a Texas based company that has the best understanding of the Gulf of Guinea geology or what is referred to as the West Africa Transform Margin.
“Cosmos did huge oil discoveries in Equatorial Guinea, Ghana (discovered the Jubilee oil field) and Senegal. As CEO of NOCAL, I targeted Cosmos and had encouraged them to participate in the Liberia offshore but they were given the runaway after my departure (I do not work for them but just mentioning them here as example of the kind of companies we should target)”.