George Michael could have been singing about the oil and gas industry: “You gotta’ have faith, faith, faith … ”
The Dominican Republic certainly showed faith when it launched its first-ever oil and gas licensing round in July.
Exploration in the country dates back to the early 1900s, with little success. Minor oil production from two small fields was recorded during the 1940s and additional drilling occurred in the 1990s, but official estimates have consistently put Dominican Republic proved reserves at zero.
Relaunching exploration in the country was a direct mandate from President Danilo Medina’s office, said Nisael Dirocie Matos, director of regulation, importation and uses of hydrocarbons in the Dominican Republic Ministry of Energy and Mines in Santo Domingo.
Dirocie Matos said the ministry hopes to attract investors in a competitive bidding round, with low cost of entry, frontier exploration opportunities, competitive and simple terms, transparent rules and flexible contracts.
Several other Caribbean-area countries, including Jamaica and Cuba, have recently tried to lure industry investment and expertise to kickstart hydrocarbon activities.
Steps to Attracting Industry Interest
Efforts toward a licensing round in the Dominican Republic date back several years, and the country created a virtual how-to manual for luring industry interest.
First, it contracted with Schlumberger to create a comprehensive national hydrocarbons database of information about the country’s oil and gas potential, including results from various studies dating back to 1904.
According to Alberto Reyes, vice-minister of hydrocarbons, the database drew on 1,491 maps and figures, 805 seismic profiles, 212 oilfield registers and more than 11,370 miles (18,300 kilometers) of 2-D seismic, plus other geophysical, seismic and geological information.
It includes data from 84 oil wells and perforation structures, he said.
Next, the ministry made the database and related information freely available on its website, along with a slide show created by Schlumberger, “Areas of Interest for the Hydrocarbon Exploration Industry.”
The slide show details geological and seismic data for six potential hydrocarbon basins: Enriquillo, Azua, San Juan, Ocoa, Cibao Oriental and San Pedro de Macoris. A seventh basin, Llanura Oriental, is mentioned but not highlighted.
Then the ministry reached an agreement with international research and consulting firm Wood Mackenzie to roll out the bidding round with an industry roadshow presentation in Houston on
“This is why we contracted Wood Mackenzie, to make sure that we follow the best practices in the industry by offering an attractive package,” Dirocie Matos said.
The licensing round offers 14 total blocks:
- San Pedro Basin – four offshore blocks
- Cibao basin – six onshore blocks
- Enriquillo basin – three onshore blocks
- Azua basin – one onshore block
Dirocie Matos described the Cibao basin as lying along the country’s northern strip, the Azua and Enriquillo basins in the southwest bordering Haiti, and the San Pedro de Macoris Basin offshore to the southeast.
Expected closing of the current licensing round is in December 2019. Initial contract phases for evaluation are two years onshore and three years offshore, and license terms include a minimum investment of $2 million for onshore blocks and $4 million for offshore blocks.
Exploration license periods will apply for up to eight years onshore and 10 years offshore, divided into three work-phase periods with a possible one-year extension per period, subject to the ministry’s prior approval.
A Minimum State Participation Tax sets the lower end of the country’s share at no less than 40 percent of cumulative undiscounted profits.
After years of gathering data and laying the groundwork, the Dominican Republic was finally able to introduce its first oil and gas licensing round, with assistance from Schlumberger and Wood Mackenzie.
And a lot of faith.
“In the roadshow last week we had more than 20 companies from more than 10 different countries attend and show interest in our licensing round,” said Dirocie Matos, with representatives from Total, Shell, Repsol, Exxon Mobil, Eni, Apache, Tullow Oil and other companies at the event.