Zambia’s Minister of Mines and Minerals Development has extended the bidding deadline for invitation of bids for petroleum exploration of 23 blocks due to several requests from the international oil companies to allow more time to submit their tender documents. The bidding deadline has been extended to November 6, 2009.
The bidding date was postponed as potential investors asked for more time to raise funds.
The ministry will soon start issuance of licenses after final bidders are selected.
According to Zambia’s law, exploration companies should begin work within 90 days after being granted license to explore, failing which will result in the withdrawn of the exploration license rights.
It may be recalled that in July 2009, the Zambia government issued an international tender for local and international oil companies to explore 23 blocks in its North-Western, Western and Eastern provinces. The deadline for expressions of interest was August 7, 2009, after which evaluation was to be done and exploration was expected to commence soon after the contract is awarded. The government wanted to start exploration before the end of 2009.
It may be noted that as per the bidding rules, interested parties can bid for up to seven exploration blocks each and must conditionally pay a non-refundable fee of $10,000 for each of the offered block. The bidders should exhibit a proven ability to raise the necessary funds, assets, machinery and equipment. Other requirements include technical expertise to explore and produce oil and dispose of petroleum in an environmentally sustainable manner.
The southern African country announced the discovery of oil in 2007 after numerous tests on soil samples showed traces of oil and gas in the mineral-rich North-Western province and Eastern and Western provinces.
Preliminary geological surveys were conducted in all of the three provinces. In the geological study, 31 soil samples were collected from the area and sent to Germany for analysis and the micro-bio analysis showed that 12 sites were positive for oil while six were positive for gas. Oil and gas was discovered along the Angolan border in the northwestern section of the country. Of these two shares wide borders with oil-rich Angola and all of them confirmed the presence of oil.
Though the experts have already demarcated the areas into blocks, the country is yet to verify the size of the reserves and whether they are commercially viable. The exploration companies have to identify how much oil is present in the blocks and whether they can be explored for commercial purposes.
In June 2009, Zambia’s President Rupiah Banda appointed a seven-member committee of ministers to oversee licensing, exploration and production of oil and gas in the country.
The launch of the bidding round has been postponed several times in order to allow the Zambian government to set up a series of laws to ensure the country, and to ensure that Zambian residents receive the most benefit from any production that may result from exploration.
Initially, the southern African country had imposed a ban on oil exploration activities pending a passage of a comprehensive law to define oil blocks and enable foreign firms to tender for their areas of interest. In 2008, the country amended the Petroleum Act to provide guidance on exploration and production of oil and gas and to add clauses to attract investors in the sector.
The parliament passed the Petroleum Exploration and Production Law after technical inputs by a committee, which was formed to finalize work on the petroleum policy.
According to the new law, foreign firms would be expected to train and employ locals and stick to strict environmental, health and safety regulations. The government will also set up a state national oil firm to regulate activities in the industry.
The new law grants the Zambia’s President powers to repossess land presently held by traditional leaders and award it to a foreign investor to conduct oil exploration.