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Mali: Straight out of Conflict into Exploration

Mali can barely be called “post-conflict”—despite the rhetoric following the conclusion of 11 August runoff elections—yet oil exploration deals are already being cut in the north. Indeed, they were being made even before the election, a bit on the sly. So what can we expect?

Exploration is targeting the extremely volatile North—the scene of the recent bloody conflict—and what we can expect will depend on how well the government does in turning separatists into hydrocarbon stakeholders. It could be brilliant. It could be the foundation for a revived conflict.

This is the situation in Mali right now:

Despite elections, there has been no tangible change in the security or economic situation. The only significant outcome of the elections is that it unleashes $4 billion in foreign aid, which will remain in the capital city.

The North remains largely controlled by separatists and sporadic fighting is still a problem. Jihadist forces continue to find easy recruits in Mali regardless of ideological lines, simply because they can pay fighters more.

Fractious groupings loosely linked to al-Qaeda in the Islamic Maghreb (AQIM) are regrouping and uniting based on where the biggest funding flows from smuggling are. They pose an increasing threat to Niger, Chad, Mauritania, Algeria, Morocco, Libya and Tunisia.

Economic growth remains at a 10-year low—and this would be even lower were it not for continued gold production. In 2012, GDP dropped by 1.2% for the first time in over a decade.

Energy Dealing

The elections ushered in former Prime Minister Ibrahim Boubecar Keïta as Mali’s president. He was the French pick, and the obvious favorite to win. And he was cutting energy deals before the elections even started, though this was done through the transitional government.

Those pre-election agreements were officially ratified in mid-August, right after the elections. The winners of prime exploration licenses in Mali’s restive North include:

•    Czech-based New Catalyst Capital Investments, which will commit $69 million for exploration
•    Ireland-based Circle Oil PLC, which will invest 7.7 million euros
•    UK- and Canadian-based Raven Resources Group, which will invest $50 million over a seven-year license period for Block 6 through its subsidiary, Corvus Resources Management Limited.

Mali Oil BlocksItaly’s Eni has been there since 2006, when it acquired five exploration licenses in Mali’s portion of the Taoudeni Basin in partnership with Algerian state-run Sonatrach and Australian-based Baraka Energy and Resources Limited. These blocks are in a completely unexplored area and cover over 190,000 square kilometers.

Algeria’s Sonatrach is probably key here, and it’s had its eye on Mali’s northern potential for some time. Over the next four years, Sonatrach has promised to invest $11.5 million in Mali exploration.

Canada’s Selier Energy is also hoping to become a bigger player in Mali’s new semi-tamed North. Right now, the company has an interest in Block 18 in the Taoudeni Basin, covering some 19,300 square kilometers with an exploration investment commitment of over $11 million.

Australian-based Sphere Energy operates Blocks 8 (in the Taoudeni Basin) and 10 (in Gao Graben) through its 95% subsidiary Mali Petroleum SA.

Then we have Canadian-based Simba Energy, with Block 3 in the Taoudeni Basin.  

The Taoudeni Basin

The Taoudeni Basin

Though there are five sedimentary basins in Mali, all the excitement surrounds the Taoudeni Basin--the largest sedimentary basin in Northwest Africa, extending from Mauritania to Algeria, across all of Northern Mali. There are two recognized petroleum systems within the basin: the infra-Cambrian and the Silurian.

There are high expectations surrounding the Taoudeni, which was first penetrated with drilling in the eighties. In 2006, five blocks here were evaluated and the thought to have around 6 MMboe as well as some 9 Tcf of gas. But that was only five blocks (out of a total of 14) and doesn’t even come close to giving us the bigger picture. At the same time, seismic data from then shows excellent potential for further exploration. Geologically, there are some nice similarities here with sweet spots in Sudan, Libya, Niger and Algeria. Not much at all has been done since 2006, largely for security reasons in the untamed North, and with drilling and seismic advances over the past years, we expect things to move along quickly now.

What to Expect

There is a theory floating around that the Malian government attached itself to the “war on terror” in order to bring attention to the oil potential of the North. If that is true, it worked. There has always been a slow interest, but it hasn’t really galvanized here until now. Now, the bloody conflict has brought Western security forces to Mali, and this provides some sense of stability for investors, however misplaced.

There is also an opportunity here for Mali, if the government plays its cards right. The separatists in the North—the Tuareg—could be brought in as stakeholders in oil exploration and production, and this could go a long way to resolve the security situation and further increase investor confidence. Oil could be just the thing that develops the North—if done properly. If it creates jobs, it could lead to the return of Malian refugees from neighboring countries, and in the end, a smaller base of recruitment for terrorist groups operating in the region.  We will be monitoring the new president’s moves closely to see how he fares in de-risking exploration in the North.

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