HOUSTON (Reuters) - The Dominican Republic’s first oil licensing round will be a success if it awards more than two of the 14 blocks on offer this year, a government official said at an event disclosing the Caribbean nation’s fiscal terms.
The licensing round, which began on Wednesday with disclosure of contract terms, comes after Brazil, Guyana and Mexico attracted billions of dollars in oil investment. Cuba and Panama also have taken steps to lure producers with new areas and by making seismic exploration data available.
Dominican Republic offers simple terms that provide low risk and low cost of entry for operators willing to commit to minimum investment, said Alberto Reyes, Dominican Republic’s vice minister of hydrocarbons.
Licensing terms include a minimum investment of $2 million for onshore blocks and $4 million for offshore blocks. Bidders can propose their own geographic blocks in the next two months if they do not like the original areas, he said.
The country is providing seismic exploration data for all the areas on offer. First awards are expected to be released by late November.
The Caribbean is attracting wider interest as nearby discoveries and competitive investment terms have emerged, said energy analysts.
“This is mostly a frontier area with good potential, and in some cases with good business environment,” said Carlos Bellorin, an analyst at researcher IHSMarkit.
About a dozen major oil producers, including U.S., Chinese and European companies, have expressed interest in bidding, said Reyes. Executives from Repsol SA, Total, CNOOC Ltd, Noble Energy Inc and Exxon Mobil Corp were signed up to attend Wednesday’s launch.
“From the interest we have gathered, I’m pretty sure we’ll award more than two blocks,” Reyes said. “There is reasonable interest in the Caribbean and we’re right in the middle of the Caribbean Sea, our basins are facing Colombia and Venezuela,” two nations with significant oil production.
Juan Agudelo, director of upstream consulting at Wood Mackenzie, which worked with the Dominican Republic on its licensing round, said Exxon’s massive oil discoveries in waters off Guyana have helped put the spotlight on oil in the Caribbean.
Indeed, energy exploration is one way to boost the economy.
“Countries just want to develop their hydrocarbons resources and attract investments to improve their economic development,” said Agudelo.
Dominican Republic expects to attract investment by offering itself as low-cost, business-friendly country.
“We have a stable economy, a lot of infrastructure including eight airports, and have the second-biggest natural gas demand in the region,” said Vice Minister Reyes.
Reporting by Gary McWilliams in Houston and Marianna Parraga in Mexico City; Editing by Matthew Lewis and Bernadette Baum