- Within one week, two oil companies have signed oil and gas exploration deals with the government of Mali that oblige them to invest millions of US dollars n the search of petroleum in the country's vast desert. Both Algeria's national oil company SONATRACH and the Canadian owned Selier Energy say that the vast Taoudeni basin, at Mali's borders with Mauritania and Algeria, shows great potentials for major oil and gas discoveries.
The Bamako Mining and Energy Ministry on Monday announced it had signed an energy concession deal with Algeria's SONATRACH, a state-controlled company that has long experience with hydrocarbon exploration and production just north of Mali, in similar geological and envirnomnetal conditions as the Taoudeni basin. SONATRACH also operates in comparable basins in Niger and Libya.
Today, the Canadian company North Atlantic Resources announced that its 100 percent-owned subsidiary Selier Energy Ltd has been granted the 19,259 square kilometre Block 18 oil and gas exploration permit in the Macina graben, also at the southern edge of the Taoudeni basin, in north-eastern Mali. North Atlantic Resources is already engaged in large-scale gold mining in Mali - gold now being the country's main export commodity.
The existence of hydrocarbons in Mali has been known since the 1970s, when very scattered seismic and drilling tests gave strong indications of oil resources. But a turbulent political history and the very remoteness of the Malian part of the Sahara desert have prevented further serious investigations into the possibility of worthwhile oil production in the country.
By now, however, new horizons have been opened. With very high oil and gas prices on the world market, Mali's possible onshore energy resources could be viable for production and exports. Mali since the 1990s has also developed into one of Africa's most stable, liberal and transparent democracies, becoming highly trustworthy among investors. Finally, a recent World Bank funding of an oil pipeline from land-locked Chad through Cameroon opens up the possibility of considering pipelines from the Malian Sahara, through Algerian oil and gas fields, connecting the Taoudeni basin to the European market.
The Bamako government, within this new situation, therefore has been able to not only secure two oil exploration companies to look into the Taoudeni basin's potentials, but also obtained guarantees of a minimum investment in explorations during the next four year. Both SONATRACH and Selier have been obliged to invest millions of dollars on Malian soil during these years.
Under the Malian-Algerian agreement, SONATRACH has pledged to invest francs CFA 5.75 billion (US$ 11.5 million) during the first four years on the project. This amount was to cover research in geology, geophysics and drilling, and possible gas and mineral prospection from 2007 to 2010, as a minimum.
Under the Malian-Canadian deal, Selier must spend a total of US$ 11.2 million dollars in exploration of the permit within four years according to the following schedule: US$ 800,000 this year, US$ 1.7 million in 2008, US$ 1.7 million in 2009, and US$ 7 million in year 2010. The agreements with SONATRACH and Selier are seen as favourable to the Malian government, given the fact that no commercial oil and gas discoveries have been made in the country so far.
On the other hand, also the two foreign oil companies are very optimistic about the hydrocarbon potentials of the Malian desert. According to North Atlantic Resources, the Taoudeni basin shows geological similarities to basins with known onshore oil reserves in Niger, Chad, Libya and Sudan. In nearby Niger and Chad, a more intensive exploration of similar sites had recently led to major discoveries of oil and gas reserves, the company holds.
"When one considers the potential of the vast Taoudeni basin of Mali, which has similar geology to the intracratonic basins of Niger, Chad, Sudan, and Libya, but only 1 exploration well per 450,000 square kilometres of basin area and 1 line kilometre of seismic surveying per 180 square kilometres of basin area, Mali must be regarded as one of the last frontiers for onshore oil and gas exploration worldwide," Jon North of the Canadian company said in a statement released today.
Also on the Mauritanian side of the border of the Taoudeni basin, oil companies have shown a great interest lately. Only last year, Baraka Petroleum Limited reported that it had reprocessed seismic data produced in the 1970s to better evaluate the hydrocarbon shows thus detected in Mauritania's part of the basin. Satyavan Reymond of Baraka concluded that the basin "has considerable potential for oil and gas."
While the first serious investment in oil explorations in Mali is celebrated as a major victory for the Bamako government, civil society organisations nevertheless are concerned that Mali may not be ready for an oil discovery. The democratic but utterly poor country is plagued by weak government institutions and lack of up-to-date legislation. Most observers hold that the Mali government has the best of intentions in establishing a transparent democracy but simply lacks the capacity necessary.
A recent report by the development organisation Oxfam America described serious lacks in government capacity and legislation to assure sufficient transparency and local empowerment in treating the foreign mining companies exploiting Mali's gold resources. "Mali's gold exports have more than tripled in the last decade yet its citizens have so far seen little benefit from mining revenues," the Oxfam report stated.
North Atlantic Resources - which has won one of the two oil exploration permits in Mali - is among the gold mining companies mentioned in the Oxfam report. The Canadian operate five mining projects in the country, and despite agreements with the Bamako government that local communities are to benefit from the gold wealth, Oxfam found that little was done in practical terms. Oxfam however mostly blamed authorities for not passing sufficient information about gold revenues to local communities.
As the Oxfam report was presented in Bamako two weeks ago, the Minister of Mining and Energy also was present. In a speech, he again demonstrated the government's good intentions, promising more transparency and a serious look into the Oxfam report's conclusions. The Bamako government has also pledged to join the global Extractive Industries Transparency Initiative (EITI), which sets global standards for reporting revenues from mining, oil and gas exploration in developing countries.
The Minister said he had good reasons to hope that massive national wealth perhaps may be just around the corner - obviously thinking about the oil exploration deals his Ministry just was negotiating. He also made it clear his government was aware of the "resource curse" and that steps were being taken to avoid that for Mali - still one of the world's least developed and poorest countries.
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