Government to reopen its Exclusive Economic Zone (EEZ)
for natural gas and oil exploration while committing to long-term
The Ministry of National Infrastructures, Energy and Water
Resources recently published a first call for bids on oil and
natural gas exploration licenses.
The call for bids comes after a long period of extended public
debate and litigation over the government's regulatory
framework' including the aspects of the government's take
and restraints on exportation. After the implementation of
significant changes to those aspects, the government states it is
now committed to "provide long term regulatory stability and a
favorable environment for investment".
In the last decade there were several substantial natural gas
reservoir discoveries in Israel's EEZ. At present, the total
amount of discovered recoverable gas reserves is estimated at 900
BCM. Independent research conducted recently for the Ministry of
National Infrastructures, Energy and Water Resources by the
international consulting company Beicip-Franlab, estimated
potential additional undiscovered resources in Israel's EEZ to
be 6.6 billion barrels of oil and about 2,137 BCM of natural
In this new call for bids, 24 offshore Israeli Mediterranean
licenses are to be granted under the Petroleum Law 5712-1952, in 24
search area blocks, with a maximum area of 400 km2 each, at a
distance of 7 km from the shoreline. Bids may be submitted from
March 1, 2017, and no later than April 21, 2017, 14:00 (IL
According to the bidding rules, bidders, either alone or in
consortia, may bid for any amount of blocks, up to the 24 blocks
designated for licenses. The total amount of licenses that may be
granted to a single corporation will not exceed 8 licenses, alone
or together, if applicable, with a consortium where the
corporation's interest is more than 25%. Any entity that holds,
directly or indirectly, an interest of 25% or more in an offshore
petroleum lease in Israel that has recoverable reserves greater
than 200 BCM will be disqualified.
When a bid is submitted by a single entity, the bidder must
qualify as an operator. When a bid is submitted by a consortium, at
least one of its members, with an interest of at least 25%, must
qualify as an operator.
As detailed in the call for bids documents, there are
prequalification conditions regarding the financial strength of a
bidder, such as: the total assets in its balance sheet, and for a
consortium – that the total assets of all members together,
are at least USD 400 million; and the total equity in its balance
sheet, and for a consortium – the total equity of all members
together, is at least USD 100 million.
Winning bidders will be required to provide autonomous,
unconditional and irrevocable bank guarantees between USD 2.5
– 10 million (depending on the number of blocks, their
location, and the suggested work plan).
A license will be awarded for a 3+3 year period. The extension
for the second 3 year period is subject to the conditions in the
Petroleum Law and the following:
The license holder carried out its
operations during the first 3 years diligently and in accordance
with the activities and timetable set in the detailed work
If no well was drilled in the first 3
year period, the extension of the license for the second 3 year
period will be subject to the license holder's committing to
drill an exploration well during that second period.
The commissioner is satisfied that
the license holder has the technical and financial capability to
drill at least one well during the additional period.
A license holder that makes a discovery in the licensed area is
entitled, subject to the conditions of the license and of the
Petroleum Law, and any other relevant law, to be granted a lease
for 30 years.
The Nigerian Minerals and Mining Act 2007 ("the Act") was passed into law on March 16, 2007 to repeal the Minerals and Mining Act, No. 34 of 1999 for the purposes of regulating the exploration and exploitation of solid materials in Nigeria.
In this issue of Dentons South Africa Insight we address matters related to wholesale licensing in the downstream petroleum industry in South Africa and highlight certain regulatory specifics in this area in Angola, Kenya and Zimbabwe.
Nigeria is currently the largest oil producing country in Sub-Saharan Africa and the tenth largest producer in the world. The oil and gas sector accounts for about 60% of government's total revenue and more than 90% of its foreign exchange receipts upon which all tiers of government depend.
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