With the Atlantic Margin of Africa firmly positioned on a steeply rising limb of the creaming curve, Sierra Leone’s 4th Offshore Licensing Round offers explorers the opportunity to enter into an emerging petroleum province at a favourable time, though changes to Sierra Leone’s fiscal terms make the nation less competitive than it used to be, which may put the round at risk.

Currently, only African Petroleum and European Hydrocarbons Limited hold licensed blocks in Sierra Leone. These blocks, SL-4A-10 and SL-03, have recently entered into their second extension period, expiring in November 2018, or in September 2019 if the operator commits to drill one well in each by the end of 2019. As such, the fourth offshore licensing round offers Sierra Leone the opportunity to expand its upstream sector.

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Discounted state take (%) for Sierra Leone, old and new terms, has been modelled for hypothesised fields of different sizes and compared with the fiscal regimes of neighbouring countries: Mauritania, Senegal, The Gambia, Guinea-Bissau, Guinea, Cote d’Ivoire and Ghana. Sierra Leone ranks fourth among neighbouring countries, with discounted state takes of between 70% and 71%. This compares to state takes of 58% to 90% for the selected peer group of countries. Terms offered under the 4th Offshore Licensing Round have increased Sierra Leone’s discounted state take by 3-4% relative to previous rounds, worsening Sierra Leone’s competitive edge in the Atlantic Margin region.

Comparison of discounted fiscal takes along Atlantic Margin

Source: GlobalData Upstream Analytics

To date, the mean recoverable reserves for fields across the entire west coast of Africa stands at 197 mmboe, with the region displaying a typical field size distribution. Against this backdrop, Sierra Leone and its immediate neighbours are underexplored, leaving a reasonable possibility that considerable volumes of hydrocarbons remain to be found.

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Considerable subsurface data already exists over much of offshore Sierra Leone, including well, 2D and 3D seismic reflection data, and gravity-magnetic data. The minimum work terms defined by the Petroleum Directorate of Sierra Leone have been set so that data acquired as a result of future licensing complements and enhances the national data repository. Strict timescales must be adhered to by operators, with exploration licence extensions conditional on agreed exploration works being completed in a timely manner.