4 April 2014

Rwanda: Govt Renews Interest in Petroleum Exploration

The government has renewed interest in petroleum prospecting four months following termination of prospecting works by Vanoil Energy Limited.

Vanoil, a Canadian company, was the sole petroleum explorer in the country since 2010, but its activities came to an end in January after reaching a mutual agreement with the government.

While analysts believed this could have signaled the end of Rwanda's petroleum dreams, rich information was left behind by Vanoil and it has rekindled the country's hopes, sources said.

"We got good data while Vanoil was operating in Rwanda, indicating the possibility of Rwanda having oil wells. They also produced reports concerning the relation between environment and exploration of petroleum in Lake Kivu," the Minister of State for Mining, Eng. Evode Imena, said yesterday.

He was speaking at a validation workshop for a draft law on petroleum exploration and production.

"These pointers are important for future explorations because Lake Kivu has methane gas, potentially it has oil too but has a wide range of settlements around it. So we have to be ready to ensure that all the exploration and production activities are within what we can control," Imena said.

The minister further indicated that several international companies have contacted government with the desire to continue from where Vanoil left off, although he did not mention their names.

He said the main challenge that affected oil exploration in the country was lack of a law governing the sector. Yesterday, a Bill was discussed witha view to expedite its enactment into law.

"We don't have a law governing exploration and petroleum production. What we had with Vanoil was a technical evaluation agreement, which was covering some of the issues that will be governing this draft legislation that we are validating," Imena said.

"What happened with Vanoil is that we were not able to conclude the project even as we wanted it to be concluded. Both sides decided to agree to disagree."

Draft law

The draft law on petroleum exploration and production provides that a company interested in exploration activities will be given a licence valid for up to two years after specifying the amount of work it would do and the minimum amount it will spend.

If the tenure expires before the company gets expected results, it has a right to apply for an extension of up to three years. However, it would only be given rights to explore half of the area in which it operated.

The reason for this is "to make it possible for government to sell the other portion of the area to other prospecting companies," according to John Gara, the chairperson of the National Law Reform Commission.

After the three-year extension, a company is allowed to make one final request for another three-year licence.

Gara said after eight years of exploration, a company will have reached a point of at least discovering or indicating oil potential area, or relinquish its exploration duties.

He added that the draft law clarifies ownership of petroleum assets as belonging to the State.

"If you own a piece of land and oil is discovered there, it is not yours. You own your land and can still use it for your activities, but that should not interfere with production activities," Imena said.

"If it happens that you should leave, the compensation you get will only be for the land and assets you have on the land such as your house, but not for the oil discovered there."

Michael Biryabarema, the deputy director-general of Geology and Mines Department, said once discovery of petroleum is made in an exploration area, the company will in three months from the date of discovery provide a notice to the minister in charge of natural resources stating the deposit's potential for commercial interest.

"When a discovery is made, the holder of the exploration licence can apply for a production licence. The government can then either enter a profit sharing agreement, concessions agreement or equity participation," Biryabarema said.

The draft law also obliges the company to give priority to Rwandans while employing workers for managerial and supervisory positions and obliged to train them while they work.

The East African Rift Valley is the main factor for renewed interest in petroleum exploration. Exploration activities are ongoing in only one bloc.

Since 2008, government has endeavored to determine whether there may be a petroleum deposit under Lake Kivu.

According to previous exploration results, a sedimentary basin of about three kilometres thick exists in the northern and central part of Lake Kivu, which is a positive indication of petroleum potential.

Additionally, an oil slicks Radar study on L. Kivu indicated possible occurrences of long chains of hydrocarbons, which are responsible for the formation of petroleum.

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