Recent laws clarify position of government and operators in production contracts.

Angola promised a high level of transparency as it introduced its first bidding round for offshore properties in 9 years to a crowd of more than 100 interested observers in Houston in its effort to raise annual production from 1.2 million b/d this year to 2 million b/d by 2008.
Since new laws went into effect at the end of 2004, the nation has set up a system that will guide it through annual bidding rounds for new and relinquished tracts.
The new bid round for offshore blocks includes non-producing parts of previously contracted blocks 1, 5 and 6 in shallow water; blocks 15, 17 and 18 in deep water; and new Block 26 in the Benguela Basin off the nation's southern coast.
The partial deepwater blocks already claim huge reserves on discoveries by major oil companies. Block 15, for example, is home to ExxonMobil's Xikomba and Kizomba A production with Kizomba B and C in the works. Total operates Block 17 with the Girassol light oil and Dalia heavy oil field complexes. BP claims more than 1 billion bbl of oil in reserves on its Greater Plutonio development in
Block 18.
"We're here because not all of the plays in Angola have been tested," said Syanga Abilio, vice president of upstream with state oil company Sonangol. The nation has introduced a new policy. It has stopped extending contracts on exploration areas automatically and will either renegotiate contracts with operators already installed on blocks, or it will ask those operators to relinquish non-producing properties for production sharing agreements by new operators, he added.
Angola has a compelling story to tell, he said, with a success rate of more than 60% and 13 billion bbl in reserves already discovered.
Geologists offered a synopsis of the blocks on offer:
• Block 1 is in shallow water in the northern part of the country in the Lower Congo Basin. Operators have drilled 24 wells and made six oil discoveries and three gas discoveries. Oil flow rates range from 200 b/d to 10,000 b/d. The block has proven reserves of 100 million bbl of light oil with an estimated 1.2 billion bbl not yet discovered.
• Block 5, also in shallow water, is northwest of Luanda in the Kwanza Basin south of the Ambriz Arch. With 12 exploratory wells, it has produced 50 million bbl of light oil and should have another 500 million bbl awaiting discovery.
• Block 6, immediately south of Block 5 along the coastline, accounted for 150 million bbl of heavy oil from eight exploratory wells, and it also may have another 500 million bbl to offer.
• Block 15 properties in the Lower Congo Basin lie in water between 656 ft and 4,921 ft (200 m and 1,500 m) deep. The block takes up 1,622 sq miles (4,200 sq km) but only 1,148 sq miles (2,974 sq km) of that block are up for bids in the new licensing round. Of the 19 wells drilled, 17 found commercial reserves with production test rates between 2,000 b/d and 10,000 b/d of production. Sonangol estimates another 1.2 billion bbl of oil remain in the available portion of the block.
• Block 17 produced 16 commercial wells for the 18 wells drilled by Total. The producers offered test rates between 2,000 b/d and 10,000 b/d. In spite of the huge Girassol field and its tiebacks and the Dalia field coming on stream next year with a host of tiebacks, the block may have another 1.6 billion bbl of oil waiting for discovery. Sonangol has identified nine structures with potential.
• Block 18, with 1,898 sq miles (4,915 sq km), will offer a new contractor 1,780 sq miles (4,611 sq km) to explore. To date, BP has drilled eight exploratory wells in the northwest corner of the block, and all were commercial discoveries with initial test rates between 2,000 b/d and 5,000 b/d. Sonangol estimates the block holds another 700 million bbl of undiscovered resources and has picked out five structures with production potential.
• Block 26 offshore south-central Angola in the Benguela Basin lies in 3,281 ft to 5,906 ft (1,000 m to 1,800 m) of water. No wells have been drilled on the block, but the state oil company estimates potential reserves of 1.5 billion bbl of oil, according to Carlos Figueiredo, exploration manager. More than 1,863 miles (3,000 km) of 2-D seismic have been shot over the block, and Sonangol has identified 12 viable prospects, he said. Devon Energy spudded a well in shallowwater Block 10 to the northeast in early November, and exploration has taken place on block 24 and 25, also to the northwest in deeper water.
The data packages for the blocks will include seismic and interpretation work, geological studies, and well data from previous operators. WesternGeco has shot both 2-D and 3-D surveys over much of the area, and PGS has shot speculative 2-D data in blocks 17 and 18, said Isabel Policarpo, data management director.
The packages will include geological and stratigraphic maps of offered blocks and adjacent blocks, and interested parties may purchase the data packages for all the blocks as a group for individual blocks.
Angola had not yet set a price on the data package.
The bid round officially opened on Oct. 18. From that time, interested operators got 45 days to submit pre-qualification information. Pre-qualification details had to be in by Dec. 1.
Sonangol started the bidding segment on Dec. 13. From that date, operators will have 60 days to submit bid proposals. Carlos Saturnino, director of negotiations, asked operators if that period would give them enough time to prepare bids. The period is adjustable.
If the 60-day period holds up, the bid deadline is Feb. 15 and Sonangol will open bids the following day.
If a bid contains irregularities, those must be cleared up within 15 days. Sonangol will announce winners publicly 30 days after the bid opening.
Angola's new policies have other benefits for operators, Saturnino said. In addition to the model contract and the comprehensive data package, Sonangol will respond to complaints and questions in a reasonable time period.
That open, transparent process will be a hallmark of Sonangol bidding operations under the new procedures outlined by Angola's Petroleum Activities Law and Petroleum Customs Law enacted at the end of 2004, according to Alexandre Pessoa Vaz, chief of the Department of Hydrocarbon Concessions.
The Petroleum Activities Law gives ownership of resources to Sonangol, which can grant both prospecting licenses and petroleum concessions under production sharing agreements. The state oil company also manages petroleum operations. As in many other contracts around the world, the operator-contractors take all the exploration risk.
The Petroleum Customs Law allows a tax exemption on goods imported for petroleum operations and on petroleum exports. It also allows for protection of Angolan markets by denying exemptions to operators that use more than 10% of imported goods that could have been provided by Angolan markets.
Under the Petroleum Fiscal Law, Angola gets a 50% income tax under a ring-fencing system. That is, an operator can't take costs from one area as a deduction in another area.
Foreign companies can retain revenues from petroleum sales outside of Angola, except for the amount needed to pay taxes.
Under the production sharing agreement, the operator will bear all costs and must fulfill a minimum work obligation. It must make certain bonus payments - a commercial declaration bonus, for example - and bonuses can't be deducted or amortized. Neither can contributions to social programs.
The ceiling on cost recovery is 50%, since the operator only holds 50% of the concession. The basis for profit splits is internal rate of return.
More than 100 operator representatives showed up for the Houston meeting presented by Sonangol and IHS Energy.
General information on the bidding is available at +244 222 6432191 or by e-mail at new.concessions@sonangol.co.ao. Block data information is available at +244 222 633146 or by e-mail at gas_ep_orders@sonangol.co.ao.

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