* Deal adds heft to Liberia's oil sector
* Interest in West Africa rising after string of finds
* Concerns linger over fairness of Liberian contracts
By Richard Valdmanis
DAKAR, March 8 Liberia will sign off on a deal
giving oil major Exxon Mobil and its partner Canadian
Overseas Petroleum Limited rights to develop an offshore
oil block, a presidential spokeswoman said on Friday.
Landing the world's largest private sector oil company will
add heft to Liberia's nascent oil industry. The deal comes as
the impoverished West African state is seeking to overhaul its
petroleum policy and bolster transparency.
"The president feels that this deal is in the best interests
of the country and she is scheduled to sign it later this
afternoon," the spokeswoman for Liberia's President Ellen
The accord for offshore Block 13 will need to be ratified by
parliament, something which is likely in the coming weeks.
Interest in West Africa's offshore energy sector has surged
after Ghana struck oil in 2007. Companies have since announced a
string of smaller finds in regional neighbours like Sierra Leone
Chevron, Anadarko, and African Petroleum
also have rights to offshore blocks in Liberia. None have
identified commercial reserves, though African Petroleum said
last year it struck a "potentially large" reservoir on its Block
9 and was pursuing further exploration.
Liberia's state run oil company NOCAL negotiated the latest
deal, announcing on Thursday that it would give the state a 10
percent free equity stake and royalties of between 5 and 10
percent once production began.
It will also require Exxon and COPL to jointly pay a $50
million up-front signing bonus to Liberia's government.
COPL shares gained more than 20 percent on Thursday after
the announcement, reflecting the importance of the Liberian
project on its relatively small portfolio of projects, while
Exxon shares slipped 1 percent.
The terms are slightly better for Liberia than those of some
previous oil deals, some of which waive royalty payments or
offer reduced tax rates and state equity share.
But the latest deal still falls short of the country's
current laws, which call for royalties of no less than 10
percent and a free stake for the state of 20 percent.
Governance watchdogs, including the U.S.-based Revenue Watch
Institute, have highlighted the problem of poor nations flouting
their own laws in oil and mining contracts, either to attract
foreign investment or induce bribery payments.
Liberia is in the process of overhauling its petroleum and
mining laws. Officials have declined to say whether the overhaul
will lower existing royalty, tax, and state share requirements,
or if existing contracts will need to be renegotiated.
Liberia's Extractive Industries Transparency Initiative
(EITI) is auditing more than $8 billion worth of oil, mining,
and agriculture contracts amid mounting pressure on President
Sirleaf to clean up the sector.
Liberia is one of the world's poorest and least developed
countries after 14 years of on-off civil war, which ended in
2003, left its infrastructure in ruins. The government is hoping
a recent flood of foreign investment will help it rebuild.
Block 13 was previously held by little-known UK energy firm
Peppercoast Petroleum which agreed to give up its rights after
missing its drilling targets.