Bidding Opens for Madagascar’s Offshore Oil Blocks

New developments in Madagascar's oil sector are on the horizon
New developments in Madagascar's oil sector are on the horizon
C Morrison | Pixabay

Madagascar has opened a bidding round for the exploration of offshore oil fields in the Morondova Basin west of the island. Launched at Africa Oil Week in Cape Town, South Africa, at the beginning of November, the bidding round will continue until 30 May 2019 and be followed by a three-month awarding period.

The oil fields are in a zone known to be rich in heavy-oil deposits. Working in partnership with geophysical service providers TGS and BGP, Madagascar’s state-owned petroleum agency OMNIS (Office des mines nationales et des industries stratégiques) has published data suggesting that there are extensive reserves waiting to be explored. Oil extraction and processing has been one of the largest areas of investment in sub-Saharan Africa in recent years, which gives Madagascar cause for optimism. It has indeed embarked on an ambitious programme to promote its call for bids at high-profile industry events over the coming months, including in London and Houston.

As part of this programme, OMNIS has created a dedicated website containing information relevant to potential bidders. Further data can be viewed, upon appointment, at TGS’s offices in Houston and London. The website describes the geology of the area and the size and location of the blocks open for exploration. Altogether, 44 blocks are offered, covering a total area of 63,296 km². Individual blocks vary in size, with most measuring around 1,900 km².

The website also contains information on the bidding process, including relevant forms and templates for use by bidders. There are two steps in the application process. First, a potential bidder must pre-qualify by providing information on its financial and technical capacity and corporate structure. Second, it submits its application proper, in which it must provide a technical assessment, a description of its work programme together with financial details, as well as its proposals regarding the employment of local citizens and its policy on quality, health, safety and environmental matters.

Potentially rich oil reserves lie off the west coast of Madagascar
Potentially rich oil reserves lie off the west coast of Madagascar
Dabarti CGI | Shutterstock

Once successful, bidders and their exploration activities will come within the scope of Madagascar’s Petroleum Code and a related decree on licences for the exploration, exploitation and transport of hydrocarbons. Exploration licences are issued for an initial period not exceeding eight years. The licence holder is entitled to use the hydrocarbons it extracts for exploration purposes but its activity should not transform into exploitation, for which a distinct licence is required.

Before commencing operations, a licence holder must enter into a contract with OMNIS setting out their respective rights and obligations. The code leaves parties free to determine the form of their contract, which may for example be a production sharing agreement or a joint venture. It will be governed by Madagascan law. The contract must contain, as a minimum, the details listed in the code, which include information on the exploring party, how the project will be conducted and financed, decision-making rules and procedures, the allocation of expenses, and environmental risks.

As a law firm established in Madagascar, highly experienced in counselling businesses in the oil sector throughout francophone sub-Saharan Africa, John W Ffooks & Co is ideally placed to accompany oil operators wishing to bid in Madagascar’s 2018–2019 licensing round by providing informed, customised legal advice.


Tags: licensing round madagascar oil exploration OMNIS