For more information visit www.petroleumagencysa.com.

South Africa has launched a new licensing round for oil and gas exploration kicking off with a road show to attract foreign investors. The licence round was opened in March by way of information seminars held in Johannesburg, London, Houston, as well as exhibitions in London and Long Beach, California. This may be followed up with a telephonic marketing of the offshore exploration blocks.

There has been "encouraging interest" in the round, although companies prefer to remain anonymous until their bids are submitted so as not to alert competitors to their plans. The round was opened for six months and closes on the 28th September 2007, with the deadline recently having been extended to allow exploration companies the opportunity to evaluate the attractiveness of the acreage on offer.

While no bids have been submitted yet, a number of potential investors have shown interest, and there have been visits to data rooms in London and Houston, as well as visits to the Petroleum Agency in Cape Town.  There have also been requests for data.

"An ideal bid would be one that comes from a company or consortium with proven capability in exploration, and with financial capability to meet the commitments of its work programme.  The bid would address the specific exploration challenges of the acreage in question through for example acquisition and interpretation of further data followed by a drilling programme designed to test identified prospects," says Dave van der Spuy, resource evaluation manager at the Petroleum Agency SA.

There are four areas with acreage on offer off the west and south coasts. Area A is 21 000km² in extent and is in relatively shallow water.  It offers opportunities for gas although there may also be the possibility of oil.  There is a large gas prospect identified as well a number of leads in different geological settings.

Area B is about 40 000km² in extent and is a frontier, unexplored area that would be attractive to a company or group comfortable with deep water and high risk.  It offers opportunities for oil.

Area C is just less than 15 000km² in extent.   It is in shallow water and offers a number of opportunities for oil close to existing producing fields and infrastructure.

Area D is about 12 500km² in extent, also in shallow water.  It offers exploration opportunities in an area where previous exploration has encountered both oil and gas, but no commercial discovery has been made as yet.

Investment could typically begin with seismic acquisition, followed by drilling in what will most likely be shallow water wells, with the deeper wells carrying a higher price tag, followed by appraisal and development.  Typical projects could amount to hundreds of millions of rands.

The royalty rate, as stipulated in the Mineral and Petroleum Royalty Bill, is 1,5% for deep water (more than 500m) and 3% for shallow water. These rates compare well with other countries and legislation governing royalty rates is expected to be in place soon, so as to stimulate investor confidence.

Petroleum Agency SA is a subsidiary of CEF and acts as a government agency for attracting investment in oil and gas exploration and production. CEF also manages the operation and development of the oil and gas assets and operations of the South African government. CEF, through its integrated oil company subsidiary, PetroSA, is involved in the exploration for oil and gas onshore and offshore in South Africa and the rest of Africa.

For more information visit www.petroleumagencysa.com.