Big Oil’s wishlist: The hottest oil auctions in 2020

2020 could see a number of high-profile oil auctions, and where 2019 was a mixed bag in terms of asset assets, this year is shaping up to be more promising.

As the new year promises to ring in what most suspect will be lackluster oil demand and moderate oil prices despite OPEC’s beefier production cuts, oil auctions for the upcoming year may seem a bit less exciting than they were at $100 oil, but that all depends on your medium-to-long-term outlook. 

Several countries are vying for a piece of Big Oil’s attention, with some offering prime areas up for grabs in 2020.

Here’s a shopping list of oil and gas assets going up for sale around the world after January.

Ukraine: Desperate enough to deal

Ukraine, in its attempt to decrease its dependence on natural gas imports, is looking to attract Big Oil to a series of blocks that cover 15,000 square kilometers next year, both offshore and onshore. The auctions will offer concessions as well as production sharing agreements (PSAs).

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Ukraine is home to almost a trillion cubic meters of conventional reserves, along with 5 trillion cubic meters of shale gas and tight gas reserves, most of which has been underexplored.

The country is looking to attract North American companies as well as deep-pocketed Chinese companies—the latter of which has spent years snapping up oil concessions to feed its 10 million bpd oil habit.

First up for grabs in February 2020, after being delayed from this year, will be 50-year PSA tenders for three blocks covering almost 4,000 sq km. The blocks include the Grunivska PSA block, the Ichnyanska PSA block, and the Ohtyrska PSA block with minimum 5-year period investment commitments of $18.5 million, $33.3 million and $18.5 million, respectively.

Ukraine concession agreements include royalties of just 12% for anything shallower than 5,000 meters, and 6% for anything deeper—this is down from the 55% royalty that Ukraine demanded back in 2014.

Somalia

In a controversial landmark for the East African nation, Somalia will hold its first ever oil auction licensing round next year, putting up 15 blocks that, according to its oil minister, show promising seismic research, and could contain 30 billion barrels of oil.

Big Oil may indeed be interested in one of the world’s most interesting oil continents--not least because the blocks being auctioned are not anywhere near the disputed border with Kenya.

Still, prospects have been dampened because Somalia is still experiencing unrest. Exxon and Shell already dipped their toes into Somalia prior to the security risks in the 1990s, and both oil majors have their eye on getting back in the Somalia oil game for the next licensing round.

US Gulf of Mexico: Steady as she goes

The US Department of the Interior’s Bureau of Ocean Energy Management (BOEM) will offer up for sale in Q1 2020 14,585 unleased blocks that encompasses 78 million acres as part of Lease Sale Number 254, which will be held in March 2020.

Up for grabs will be all available unleased areas that lie in federal waters off the GoM that are not part of the moratorium.

The sixth such sale under the 2017-2022 Outer Continental Shelf program will cover areas from the Gulf’s Western, Central, and Eastern planning areas and will cover leases deeper than 11,000 feet. The royalty rate for the auction will be 12.5% for blocks less than 200 meters deep, and 18.75% for all other blocks.

Lease Sale Number 256 will also be held in 2020, although the specifics of this auction are thin at this early date.

Brazil: The most expensive prize

Brazil had a couple of disappointing auctions in 2019, which threatened to undermine its plans to reduce its budget deficit which stood at $37 billion in 2019.

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November’s auctions generated a marked lack of interest by anyone other than China’s state-run oil companies and Brazil’s own state-run oil company, Petrobras. The auctions were expensive and came with complicated terms that needed to be worked out with Petrobras, and the pre-salt areas, while promising, are expensive to develop.

But that won’t stop Brazil from trying it again next year.

Brazil’s 17th bidding round will be held in 2020, as well as the 7th pre-salt round, which very well may take place without Petrobras’ preemptive right, which should increase the chances of a successful auction.

For 2020, Brazil has ambitious plans to offer 128 offshore blocks that total 64,100 sq km in that 17th round. It will be particularly attractive to companies with healthy risk appetites, because it will offer blocks located in new frontier basins and blocks beyond the EEZ in the Santos basin.

After the auctions were largely ignored by Big Oil, BP Energy Brazil’s president Adriano Bastos said that companies would likely snub Brazil’s 2020 auctions as well, as there are simply more attractive plays available elsewhere in the world.

Angola: Take II

Angola, Africa’s second largest oil exporter after Nigeria, has ambitious plans for licensing rounds in 2020, 2021, 2023, and 2025.

In January 2020, Angola will announce its next licensing round, expected to take place in July. This time around, up for tender will be all onshore blocks, with deep and ultradeep blocks up for grabs in later auctions.

Angola expects contracts to be signed for onshore winners by the end of 2020.

Already, Angola has attracted international oil majors, including BP, Chevron, ExxonMobil, and Total.

The blocks will help Angola increase its oil production significantly over the next five to seven years, according to an official from Angola’s National Agency of Petroleum, Gas and Biofuels.

A successful oil auction may lessen the blow of Angola’s lengthy recession, and could arrest its production decline, the likes of which is expected to lead to a near 7% drop is oil exports in 2020.

This 2020 auction list is not exhaustive, but includes some of the biggest auctions that will be on everyone’s radar next year.

This article was originally published on Oilprice.com