Niger hopes for oil riches under northern desert

Niger plans to award oil exploration permits by the end of next month for a vast block under the Sahara desert it hopes will turn it into Africa's newest crude producer.

The landlocked former French colony is one of the poorest states on earth but is sandwiched between oil producers Nigeria to the south and Libya and Algeria to the north. This has raised expectations among its population for a future oil bonanza.

Some 20 firms are bidding for its most prized asset, the 27,000 square km Agadem block near the border with Chad, which has proven reserves of 324 million barrels so far but needs more to become commercially viable.

"In a month's time you will probably know who the Agadem permit has been awarded to," Ousseini Assane Boureima, head of petroleum exploration at the ministry of mines, told Reuters in a weekend interview.

"By the end of August at the latest," he said.

China National Petroleum Corp. (CNPC), the Chinese state company which is already exploring two other concessions in Niger, Malaysia's Petronas, South Africa's state-owned PetroSA, British firm Burren Energy and UK-based Tullow Oil are among the hopefuls.

Industry sources say CNPC wants sole rights for Agadem in return for building a refinery and pipeline to export the oil.

U.S. industry giant Exxon Mobil Corp. had been exploring Agadem in a joint venture with Petronas but the licence lapsed in May 2006 and Exxon pulled out after disagreement with the government over demands including the building of a refinery, Boureima said.

The company or companies that win the Agadem concession will have to commit to a rapid exploration programme.

"They will have to carry out intensive exploration with the aim of requesting a production license within a timeframe which we expect to fix at three years," Boureima said.

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Industry executives have estimated in the past that at least another 500 million barrels need to be found in the Agadem concession before exploitation is commercially viable.

The simplest option would be to build a link to the existing 1,000 km (620-mile) pipeline carrying oil from Chad to the Gulf of Guinea for export, but a pipeline across North Africa to the Mediterranean coast or south to Benin are also possibilities.

"Up to now there haven't been any real studies (into the cost), that has been the problem with Agadem," Boureima said.

"But with the current world oil price -- and it seems it will stay high for some time, if not increase -- a total of 500 million barrels in Agadem should be enough (to make it commercially viable)," he said. This would be less additional oil than had originally been thought necessary.

Agadem is seen as the most promising concession in Niger because it forms part of the same geological rift system from which eastern neighbour Chad has started producing oil.

CNPC has drilled two test wells in the 71,000 square km Tenere concession, which cuts across the Sahara east of the town of Agadez, but both were dry. It was likely to start drilling a third well there by the end of the year, Boureima said.

The Chinese company had also completed seismic studies on part of its 60,000 square km Bilma concession as a first stage of exploration activities there.

Algerian state-run firm Sonatrach had just finished an environmental impact study on its 23,000 square km Kafra concession. But security concerns in the desert region, where Tuareg-led rebels have carried out recent attacks, meant no decision on possible seismic studies had yet been taken.