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Best Practice for Governments When Licensing Oil and Gas Acreage
Industry Outlook
a report by
John RV Brooks
Director, Brookwood Petroleum Advisors Ltd
It perhaps comes as a surprise to learn that many countries have little acquired, logs, seismic, well data and cores and cuttings, together with
or no geoscience or legal expertise in the field of licensing their application and licence documents and a means of data release. The
potential onshore or offshore acreage for hydrocarbon exploration to more open and transparent the licensing regime, the more highly it will
industry. Consequently, countries seek advice on how to proceed with be regarded by industry, and interest will be enhanced.
their wish to undertake exploration of potential oil and gas acreage in
both onshore and offshore areas. Broadly, there are three stages involved in putting a licensing regime
into effect:
Not every licensing authority is organised in the same way, so at the
outset of licensing negotiations it is important to establish the authority’s • drawing up initial legislation and a fiscal regime;
structure, who is who and where the geoscience and legal people, if they • early consideration of the marketing of a licence ‘round’ or
exist, reside. The Minister responsible and the existence (or absence) of a opportunity; and
state oil company (SOC) and its role in the licensing process, if any, are • preparation of offer documents and guidelines for applications,
also of relevance to the consultant in terms of creating a clear picture of including the licence award procedure (i.e. terms and conditions).
the overall oil and gas industry in a particular country. The government
should provide a single point of contact for all of the work to be In addition to these fundamental requirements, governments need to
undertaken, and that individual should ideally be familiar with all phases consider what they know about the prospects of finding hydrocarbons
of licensing; however, this is rare, simply because a specific type of in the onshore and offshore areas that they control. In a country with
licensing may never have taken place in that country before. no previous history of oil and gas exploration, it may be helpful to
consult adjacent states, or even the literature, to establish what
So, what do governments and consultants have to do to achieve a opportunities there might be of finding hydrocarbons. Bathymetry maps
satisfactory licensing outcome given that there is no single template for are also of use in establishing the costs of drilling and development and
the process, as each country will have its own specific issues that need the feasibility of seismic and drilling operations. If any seismic data at all
to be addressed? There are two golden rules: have been acquired and any drilling below 1,000m carried out, some
interpretation of that data set should be made to give an image of the
• regardless of the size of the consultancy, employ only those subsurface at different geological levels. More often, seismic data have
geoscientists and lawyers who have first-hand experience of the been acquired and even some deep wells drilled, and reports have been
licensing process; and logged. However, these data are not always adequately interpreted and
• decide internally what you think you need to achieve your objectives. so cannot be used for later decision-making on, for example, where to
license next, the location of geological structures and the potential of
To conduct a licensing offer, a government should have the relevant different geological horizons, let alone the size of undiscovered
legislation in place and the necessary guidelines published that will allow resources in a sedimentary basin or play concept.
applicants to understand fully what is required of them. Such information
will include maps and co-ordinates of the acreage on offer, details of A full dialogue concerning the up-to-date position of the
how the application will be judged (either by discretion or by auction) interpretations the government has made is a prerequisite to deciding
and whether any signature bonus is being requested. A marks scheme what advice is necessary. Such discussions also pull into focus the
should be included, together with application forms and any other qualifications and experience of the staff engaged in the relevant
guidance. The government should also have the requisite staff in place agency or department, and may suggest enhancement and/or
who are competent to conduct the operation, both administratively and training within the group. This is a separate issue and will not be dealt
technically, together with an infrastructure that allows collection of data with in this article.
Stage 1 – Legislation and Fiscal Terms
John RV Brookes is Director of Brookwood Petroleum
Advisors Ltd, which provides geological and licensing
Very occasionally, governments ask for advice from the outset and seek
advice to host governments wishing to launch acreage
drafts of legislation and guidelines for applicants covering the whole
offers. He is Past President of the European region of
licensing process. An experienced team consisting of a lawyer and a
the American Association of Petroleum Geologists
(AAPG), and was previously Director of Exploration geoscientist can do a great deal in a very short time once they have
and Licensing, Oil and Gas Directorate, at the
gained an insight into precisely what the government wishes to achieve
Department of Trade and Industry (now DECC) in the
UK government.
by licensing its acreage. Some governments want early cash up-front,
and others want hydrocarbons and thus a work programme with
E: jrvbrooks@supanet.com
defined commitments – and some want both.
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© TOUCH BRIEFINGS 2009
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