AFRICAN ENERGY • ISSUE 87 • JUNE 2005

1: Polisario raises the Saharan stakes with licensing round play [p.23]
2: Max moves north [p. 22- 24]
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AFRICAN ENERGY • ISSUE 87 • JUNE 2005

Polisario raises the Saharan stakes with licensing round play [p.23]

The Polisario Front’s government-in-exile, the Sahrawi Arab Democratic
Republic (SADR), has launched a licensing round, offering oil companies the
chance to stake a claim to exploration acreage in a future independent state.
Twelve blocks are on offer, lying offshore between Morocco – which is sticking
to its historic claim on the former Spanish colony – and Mauritania, which
retired hurt from the conflict in 1979. Sizes range from about 15,500km2 to
23,000km2, in water depths of up to 3,600 metres.

Morocco, which occupies the territory, has yet to make a significant oil find
of its own, and Total’s departure from the Dakhla Offshore permit – the one
closer to Mauritania of the Saharan blocks awarded by Morocco’s state Office
National de Recherches et d’Exploitations Petrolières (Onarep, now mutating
into Onhym) – suggests this acreage might not be all that prospective –
although political considerations also weigh heavy on every decision about the
Sahara. But the possibility of hydrocarbons gives the Polisario independence
movement the bargaining chip to set against Morocco’s influence that some
analysts believe they have never had in the past (especially given that the
lure of the Sahara’s phosphate reserves are not what they were in the 1970s).

While there are hopes that Mauritania’s success can be replicated in the
disputed territory, no exploration can be carried out on the ground until its
status is resolved. Companies are invited to sign a production-sharing
contract, plus an assurance agreement covering the period between the signing
of a PSC and what the government-in-exile hopes will be the SADR’s formal
recognition.

The area has already been licensed by Morocco, which claims the territory as
its own. Total has let its agreement for the 114,500km2 Dakhla Offshore permit
lapse, but Kerr-McGee Corporation has renewed its reconnaissance agreement for
the 110,400km2 Boujdour Offshore permit, and industry sources say the company
is planning a 3D seismic survey, despite a campaign by Polisario supporters to
force the Oklahoma City-based indie to relinquish its acreage (AE 84/29). Max
de
Vietri’s Baraka Petroleum has just signed a deal to carry out preliminary work
on the Cap Juby licence, which includes 400km2 of the disputed territory.
Meanwhile, Vanco Energy Company’s dry hole on the supposedly promising and
gas-prone Shark prospect is the latest indication that Morocco itself may not
be all that prospective.

Licence fees
A plan put forward by former US Secretary of State James Baker III, during his
period as the United Nations special envoy to the Western Sahara, has failed
to shift the impasse over the territory’s status. But in the meantime,
companies signing with the SADR will pay fees of at least $25,000/yr for each
block, providing the government-in-exile with a useful revenue stream. Emhamed
Khadad, advisor to the SADR President Mohammed Abdelaziz, said his government
would follow the principles of the UK-led Extractive Industries Transparency
Initiative.

“My government is inviting oil companies to open discussions with us to agree
licenses to explore the potential for oil and gas in our waters,” Khadad told
a presentation in the Wellington Arch at London’s Hyde Park Corner. “This
initiative is to prepare for the day when the SADR will enjoy sovereignty over
all its rightful territory, including offshore waters; the day when at last
justice will have been done.

Fusion Oil & Gas signed a technical co-operation agreement with the SADR in
2002. When Fusion was taken over by UK indepedent Sterling Energy, the
agreement was not pursued. Polisario’s representative in Australia, Kamal
Fadel, said Fusion’s technical report had been “quite encouraging and positive
”. He added: “We have been getting some interest from oil companies.

Fusion’s old management team, now reborn as Ophir Energy Company, attended the
London presentation. Managing director Alan Stein has, in the past, spoken
bullishly about taking over the Saharan acreage (AE 80/5). Ophir’s 50%
partner, black economic empowerment powerhouse Mvelaphanda Holdings, might
help exploit South Africa’s closer relations with the SADR to some effect.
South Africa formally recognised the SADR in September 2004.

Also present at the London roadshow were Premier Oil – which was involved with
Fusion in the old deal, and is still looking to build up its West Coast
portfolio – as well as Woodside, which is taking a lead role in Mauritania,
and South Africa’s Sasol. The PSC, which offers standard industry terms, was
drawn up with the help of Guy Allinson, a consultant from the Petroleum
Engineering Department at the University of New South Wales, and of an
Australian legal firm.

Polisario gets round its lack of a capital city headquarters by inviting
applications via the licensing round website, www.sadroilandgas.com. They can
also be sent to a post office box in Australia. SADR representatives will be
publicising the licensing round at industry conferences, and hope to make
awards by year-end.

Polisario officials said they had tried to open a dialogue with Kerr-McGee,
but without success. The US company has been the target of campaigners against
Morocco’s occupation of the territory, who note that Washington’s
ground-breaking free trade agreement with Morocco notes that the US government
does not recognise Rabat’s sovereignty over the Western Sahara.

The question of Western Sahara has hampered regional relations for decades. A
summit of the moribund Arab Maghreb Union (UMA), scheduled for Tripoli in late
May, which had hoped to revive the regional body after more than a decade, was
the latest to be cancelled over the apparently intractable issue.

—THALIA GRIFFITHS with JON MARKS

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AFRICAN ENERGY • ISSUE 87 • JUNE 2005

Max moves north

[p. 22-24]

Australian entrepreneur geologist Max de Vietri’s newly floated Baraka
Petroleum has signed a memorandum of understanding for exploration of the
offshore Cap Juby permit, which crosses the maritime border into the disputed
Western Sahara.

The 3,591km2 permit, in water depths up to 200 metres, is mainly in Moroccan
national waters, with less than 400km2 in Saharan territory. The agreement
gives Baraka the exclusive right to evaluate the field for six months, and
then the option to negotiate a full exploration agreement.

Unlike US operator Kerr-McGee, which has resolutely pretended there is no
problem with exploring the disputed territory, Baraka – in typical Max style –
is being upfront about the potential for controversy presented by its
acquisition. “The company is aware of the perceived risk associated with
working in the region, but believes that through an understanding of local
customs and continued growth of existing long-term relationships with
governments at all levels in the region, it is able to manage and greatly
minimise such risk. A further example of this is presence of other major
petroleum companies who continue to expand their presence in West Africa,”
Baraka said in a statement.

According to Baraka, the Cap Juby heavy oil accumulation has estimated
reserves of 40m-70m barrels. The Winnow Lead has a potential for up to 300m
bbls oil in place and the Shazam Lead potential for up to 450m bbls OIP.

Baraka plans a $200,000 programme, including a reevaluation of available 2D
and 3D seismic data, to determine the Cap Juby heavy oil reservoir’s
structural complexities. The work will be carried out by Perth-based RISC, who
will present a recommendation by end-August.

“Given the advances in technology and the improving market conditions, not
least the increase in oil prices, believe that the Cap Juby offshore tenement
is an opportunity that we cannot pass up,” Max de Vietri said. Roc Oil held a
portion of the area, covering the Cap Juby heavy oil discovery and the Winnow
and Shazam Leads, from 1998 until 2000, but opted not to proceed with the
acreage, which also included areas now in the hands of Danish
conglomerate AP Møller-Maersk Group’s Mærsk Olie og Gas. Baraka said Roc’s
assessment was made amidst relatively poorer market conditions, with oil
prices below $15/bbl. Baraka’s shares fell in their first week of trading on
Australian Stock Exchange (ASX). They listed on 25 May A$0.175, but were
trading around A$0.0155 as African Energy went to press. The ASX listing
followed an initial public offering to raise A$17m, which closed
over-subscribed.

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African Energy online: http://www.africa-energy.com/
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Forwarded by:
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Norwegian Support Committee for Western Sahara
wsahara@...

*** Referendum now! ***

http://groups.yahoo.com/group/Sahara-update
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