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Best Practice for Governments When Licensing Oil and Gas Acreage
Stage 2 – Marketing it may be necessary to unravel some of the information as it may not
All licensing groups may need assistance with marketing individual be consistent, and indeed may not actually have been used yet in an
licence opportunities and producing brochures describing the acreage offer situation. Even if legislation is in place, the nature of the
on offer and the terms and conditions for the offer. It may be useful guidelines for an application for acreage may not have been put
to employ a petroleum geologist familiar with the area in order to together. The method of award – essentially discretionary or auction –
enhance the public relations (PR) group putting the documents needs to be decided; if a discretionary method is used, a clear marks
together, as well as advising on which conferences to exhibit at to gain scheme needs to be drawn up that is unambiguous and transparent,
maximum exposure for the launch. Although not actually required until leaving absolutely no room for accusations of malpractice.
a licensing ‘round’ is to be launched, considering what publicity is Applications can now be registered electronically and with guaranteed
needed early on and making PR part of the team makes the whole security, which facilitates administration by the government agency.
process an entity and thus more efficient. Indeed, government websites are an ideal location for advertising
licence opportunities, although this is perhaps still no substitute for
Stage 3 – Conducting a ‘Round’ publication at conferences, where discussion and questioning can
The most usual scenario is for advice to be sought at Stage 3, where more readily take place.
legislation is already in place but the government is uncertain of what
acreage to license, what terms to set and how to negotiate work At this stage, a decision will need to be made on how to conduct the
programmes with prospective applicants. It is not unusual to be asked agreed application process. Auctions can be by sealed bid opened
to erect a transparent system and even to re-look at previously used privately or at a gathering of applicants, as in the US. Usually, a reserve
guidelines in order to update or amend them. The attraction of amount is set in advance by reference to data in order to obtain a fair
exploring prospects in deepwater may be one of the reasons for doing market value, as outlined above. Awards by discretionary action need
this. Whatever the reason, the government agency responsible must to follow a proscribed marking scheme conducted by a panel of
provide access both to all of the data previously acquired and to any members, not confined to staff of the government agency responsible,
interpretations made, including any existing field data, so that there is so that the process can be seen to be as transparent as possible. At the
a basis upon which to set any advice given. award stage, marks should be published and applicants should be
offered the opportunity of knowing where they have failed; this is
Usually, geological information will be available, together with seismic particularly important between the winner and the runner-up.
surveys commissioned by licensees or by the government itself. Given
the opportunity, if not already completed, interpretations of this However, the award of acreage usually follows an interview with
information should be made and an assessment of potential gas/oil applicant (groups) at which questions may be asked about the details
resources put together. An economic evaluation may also be useful, of their application document and a suitable, or enhanced, work
particularly if the acreage on offer extends into deepwater or if heavy programme may be negotiated if the acreage is awarded to this
oil is considered a possibility. group. The interview panel should consist of the members of the
adjudication group who will mark the application immediately after
Outside of these issues, many governments may have boundary issues interviewing each set of applicants. A written record of the meeting
to settle with their neighbours, and coastal states may be submitting together with a note of questions posed and answers given should be
claims under Article 76 of the Law of the Sea Convention to the compiled for every application. It may be that during the different
Commission on the Limits of the Continental Shelf. Resolution of both elements of the licensing process consultants will invited to sit in on
may add to, or reduce, the amount of potential acreage that can be meetings and at the various interviews conducted. It goes without
offered for licensing. saying that absolute discretion is required of them. Having interviewed
each applicant group, each ‘block’ should be considered separately
A rigorous interpretation of existing well and seismic data can assist and a record of the discussion about awards made for each one. Such
the government in its decision-making in a number of ways. It can records may be published.
show the extent and location of valid structures or closures within
the already drilled succession and play concepts, and identify Having made such assessments and records of all meetings and
undrilled play concepts at these and deeper geological horizons. It discussions, it is then a matter of putting the inherent
can enable numerical assessments of undiscovered hydrocarbons to recommendations to the ‘authority’ – usually the Minister for the
be made and thereby assist in block/acreage selection for offer. It department/agency responsible. Part of the unspoken conversation is
may also be used to place a value on acreage – fair market value in that no changes can be made to the recommendations without full
US terms – if the acreage is to be auctioned instead of being discussion with the assessment group and their agreement. To do
allocated by government discretion utilising a published mark otherwise would cast doubt over the government’s desire to conduct
scheme. Such interpretations are of no value in assessing the the award of oil and gas licences in a completely open and
amount of signature bonus to be paid at the time of application, nor transparent manner.
of application fee payments. In the current climate, governments
might well be advised to ask for work to be carried out and to take It then remains for the agency to draw up a list of awards in a press
any cash from subsequent production. release together with the work programme or auction amount
offered, and, in the case of discretionary awards, to invite
Very occasionally, when one has examined all of the existing unsuccessful applicants to a meeting for an explanation of where
legislation and guidelines that have been put together for applicants, they did not measure up. ■
EXPLORATION & PRODUCTION – VOLUME 7 ISSUE 1
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