Identifier
Created
Classification
Origin
06BAMAKO520
2006-05-08 12:46:00
CONFIDENTIAL
Embassy Bamako
Cable title:  

PROSPECTORS PREDICT MALIAN OIL BY 2008

Tags:  ECON EIND EPET ML PGOV PINS PREL SENV 
pdf how-to read a cable
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R 081246Z MAY 06
FM AMEMBASSY BAMAKO
TO RUEHC/SECSTATE WASHDC 5360
INFO RUEHZK/ECOWAS COLLECTIVE
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RUEHLC/AMEMBASSY LIBREVILLE 0018
RUEHPO/AMEMBASSY PARAMARIBO 0009
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C O N F I D E N T I A L SECTION 01 OF 04 BAMAKO 000520 

SIPDIS

SIPDIS

DEPT FOR AF, AF/W, NEA, EB, INR
PARAMARIBO FOR DCM MARY BETH LEONARD
LIBREVILLE FOR GLENN FEDZER
PARIS FOR AFRICA WATCHER

E.O. 12958: DECL: 05/08/2016
TAGS: ECON EIND EPET ML PGOV PINS PREL SENV
SUBJECT: PROSPECTORS PREDICT MALIAN OIL BY 2008

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Classified By: Rebecca Jovin, Political Officer, U.S. Embassy
Bamako, for E.O. 12958, Reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 04 BAMAKO 000520

SIPDIS

SIPDIS

DEPT FOR AF, AF/W, NEA, EB, INR
PARAMARIBO FOR DCM MARY BETH LEONARD
LIBREVILLE FOR GLENN FEDZER
PARIS FOR AFRICA WATCHER

E.O. 12958: DECL: 05/08/2016
TAGS: ECON EIND EPET ML PGOV PINS PREL SENV
SUBJECT: PROSPECTORS PREDICT MALIAN OIL BY 2008

BAMAKO 00000520 001.2 OF 004


Classified By: Rebecca Jovin, Political Officer, U.S. Embassy
Bamako, for E.O. 12958, Reasons 1.4 (b) and (d).


1. (C) Summary: One and a half years after oil and gas
exploration in northern Mali resumed, those searching for
&black gold8 may be on the brink of success. To date, the
Malian government has opened approximately 700,000 square
kilometers of land to oil prospecting. Recent estimates by
Australian-owned Baraka Petroleum, which leads the race for
Malian oil, suggest that oil may be flowing by the barrel
from Mali no later than 2008. For landlocked and
poverty-stricken Mali, oil reserves could mean a considerable
economic boost. With oil prospecting centered on Mali's
politically fragile northern regions, many see a real
opportunity for economic diversification, development and
growth. At the same time, however, some have serious doubts
about the economic viability of extracting oil and gas from
Mali's isolated North and further fear that the discovery of
oil could upset the already delicate balance between Mali's
central government and the Tuareg populations of the North.
End summary.

-------------- ---
A FRESH START FOR MALI'S OIL EXPLORATION EFFORTS
-------------- ---


2. (U) The Malian government has worked feverishly since 2004
to revive oil exploration and join the club of West African
oil producing nations. The 2004 adoption of a new
hydrocarbon code, the delineation of some 700,000 sq.
kilometers of prospecting land throughout northern Mali, and
the creation of a national oil research and exploration
authority (AUREP) under the Ministry for Mines, Energy, and
Water, have greatly accelerated exploration activities.

Since its inception, AUREP has managed to attract five major
oil investors, most notably Max de Vietri's Baraka Petroleum
Limited. Baraka has production-sharing agreements with the
Malian government for five of the total 18 designated
prospecting blocks. De Vietri, Baraka's CEO and Managing
Director, has more than 10 years of oil exploration
experience in West Africa and is already successfully
extracting oil in Mauritania's offshore area of Chinguetti.


3. (U) The exploration blocks set by AUREP are concentrated
in five major areas, the largest being the Taoudenni Basin,
which is located north of Timbuktu and covers an area of
several hundred thousand square kilometers across the
Mauritanian-Malian border. Additional blocks are situated in
the Nara Trough, which extends north to south between
Timbuktu and Segou; the Gao Graben in central Gao region; and
the Tamesna and Iullemeden Basins, which together cover the
eastern part of the Kidal and Gao regions and stretch across
the Niger-Mali border. To date, Mali has signed
production-sharing agreements for 11 of the 18 blocks, with
two Taoudenni blocks currently under application. The vacant
blocks include two additional blocks in the Taoudenni Basin,
one in the Iullemeden Basin, and two in the Macina Delta at
the southern-most extension of the Nara Trough.

--------------
AUSTRALIAN BARAKA LEADS THE WAY
--------------


4. (U) Leading the race for Malian oil is de Vietri's Baraka
Petroleum Limited. The Australian company was the first to
sign production-sharing agreements with the Malian government
in the fall of 2004, resurrecting the quest for hydrocarbons
in Taoudenni after some two decades of neglect. Of the five
oil companies currently conducting exploration activities in
Mali, Baraka Petroleum's subsidiary, Baraka Mali Operations
Limited, has the largest share of prospecting licenses. Its
five blocks (numbers 1, 2, 3, 4, and 9) total 193,200 square
kilometers of Mali's Taoudenni Basin. Baraka is also
conducting oil exploration in two blocks on the Mauritanian
side of the Taoudenni basin, giving the company exploration
and development rights over a total of 272,000 square
kilometers. During the initial four-year term of Baraka's
prospecting licenses, the company will invest an estimated
USD 51.7 million in exploration and drilling activities.
According to the licenses, which outline the conditions for

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recovery of costs and production-sharing between the Malian
government and the license holder, a well must be established
in each block within four years. Two wells already exist in
Baraka-owned blocks 2 and 3. Wells also exist in blocks 14
and 15 along the Niger border and in block 11 in the Gao
region.


5. (U) In 2005, two other Australian firms, Trans Ocean
Securities and Sphere Investments, joined the list of oil
prospectors operating in Mali. Mali Oil Development, which
is the majority owned by Trans Ocean Securities, acquired
block 11 in Gao and intends to spend USD 10.4 million in
exploration activities over four years. Mali Petroleum, 95%
owned by Sphere Investments, acquired exploration rights for
block 8 in Taoudenni and block 10 in Gao. Mali Petroleum
intends to spend USD 24.4 million in research and drilling.
In late 2005, the South African company Energem acquired
exploration rights for USD 23.7 million worth of research and
drilling in blocks 12 and 13 in the Nara Trough south of
Timbuktu. Another South African firm, Energetic Petroleum,
intends to spend USD 12.5 million for exploration in block 14
in the Tamesna Basin near the border with Niger.


6. (U) According to company and press reports, Baraka's
geological and seismic studies in Taoudenni have yielded
encouraging results. These studies mark the first
comprehensive reviews of the Taoudenni Basin. Baraka is now
conducting a USD 3.7 million airborne survey of its blocks
through the New Zealand-based company Kiwi Air. The survey
is currently scheduled for completion in August 2006,
followed by what will likely be another month of data
analysis. Though the research has not yet reached the end
stage, Baraka is optimistic about the prospects for oil and
gas discovery in the region. In a March 2006 report, the
company announced that it had identified &large hydrocarbon
prospective trends" in the Basin. According to Baraka
officials, the preliminary results suggest similarities
between Taoudenni's features and those of the Ahnet and
Illizi Basins in neighboring Algeria. The Ahnet and Illizi
Basins currently produce approximately 1.23 million barrels
of crude oil and 445,000 barrels of condensate per day.
Baraka has identified a total of 40 oil and gas leads
requiring further analysis in the surveyed area. Estimates
suggest that Mali could be looking at roughly 900 million
barrels in oil reserves to be extracted over a period of 25
years from the Taoudenni basin.


7. (C) In the race for Malian oil, Baraka maintains a
considerable lead over its competitors who are all still in
the early research stages. In a recent meeting with PolOff,
AUREP Director Mamadou Simpara expressed dissatisfaction with
the work of the South African owned Energem group and
indicated the possible termination of Energem's
production-sharing agreement. (COMMENT: Thus far, we have
received no indication that the Energem licenses have been
revoked. END COMMENT) Simpara would not comment on Energetic
Petroleum's performance, stating that it remains too early to
determine how successful the company will be. Simpara noted
the absence of American investors and stressed the need for
Mali to work with &credible8 oil exploration companies.
According to Simpara, American-owned Vanco Energy initially
expressed interest in several exploration blocks but withdrew
after learning that the blocks had already been acquired by
other competitors. Simpara also raised the possibility of
holding an investors, conference in the United States on
Mali's oil exploration prospects, though a date for the
conference has not yet been set.

-------------- --------------
MALIAN AND BARAKA OFFICIALS INCREASINGLY CONFIDENT
-------------- --------------


8. (C) While it is still too early to celebrate, the Malian
government and its oil investors have become increasingly
public with their confidence in the imminent discovery of
Malian oil reserves. At an October 2005 conference to mark
the signing of the first production-sharing agreement between
Baraka and the AUREP, conference participants called Mali an
&opportunity that has only just been discovered by the
world.8 In late April 2006, Baraka CEO de Vietri met with

BAMAKO 00000520 003.2 OF 004


Prime Minister Ousmane Issoufi Maiga to discuss progress on
the oil exploration front. De Vietri later reiterated his
confidence in Mali's oil potential on national television.
Kiwi Air has privately echoed Baraka's conviction in
discussions with Embassy officials. Confidence levels at
Baraka appear so high that de Vietri invited the Malian
Minister for Mines, Energy, and Water, Ahmed Diane Semega, to
travel to the North to survey the situation personally.
According to press reports, the Minster returned from the
Tamasna and Taoudenni Basins on April 26 with great optimism
and enthusiasm. Though no official numbers have been
released, reports suggest that the Ministry is convinced of a
considerable presence of oil and gas reserves. De Vietri has
repeatedly said that he expects oil to be flowing from fields
in northern Mali by 2008.

--------------
COMMENT
--------------


9. (C) The discovery of oil and gas reserves undoubtedly has
the potential to transform the Malian economy. The country
spends hundreds of millions of dollars on oil imports each
year, amounting to approximately 20 percent of all imports.
In meetings with Embassy officials, AUREP Director Simpara
and government representatives in the North have been quick
to note the potential benefits of oil exploitation, in
particular for Mali's poverty-stricken northern population.
Many northerners see oil discovery not only as a potential
boost for Mali's national economy, but as a chance to
generate local employment and infrastructure development.


10. (C) However, not everyone is as optimistic. According to
a senior official at TOTAL Mali, the economic viability of
extracting oil and gas from the geographically isolated areas
of Mali's North is questionable at best. Many consider
Mali's investment climate to be inhospitable. Furthermore,
at an estimated USD 4 million per kilometer of pipeline, it
will be difficult for the GOM to attract investors willing to
absorb the high costs associated with the construction and
securing of pipelines stretching all the way to the
Mauritanian or Algerian coasts. Regional political
instability and terrorist activities in neighboring countries
are also significant impediments to extracting and
transporting oil from what is already one of the most
inhospitable climates on earth. There is also the risk that
a change in government could mean the expropriation, in whole
or in part, of a company's assets or an entire industry. Any
profitable venture therefore hinges heavily on the discovery
of significant reserves, continued high oil prices, and
positive investor assessments of the risks associated with
investment in a historically unstable neighborhood. Under
these circumstances, it is plausible that Mali, at the end of
the day, may end up with merely a comprehensive geological
study to add to the new AUREP archives rather than the hoped
for cash cow.


11. (C) Having followed the history of oil discoveries in
Africa, Malians are well aware of the dangers associated with
oil production. In the politically fragile regions of
northern Mali, the discovery of oil has the potential to
either help resolve long-standing inequalities or further
exacerbate them. Due to widespread unemployment, poverty,
and poor infrastructure, many northerners regard the GOM's
commitment to the people of northern Mali with skepticism.
In recent weeks, references to increased &autonomy8 for
northern Mali have resurfaced. Most believe that these
references are likely inspired, at least in part, by the
increased pace of oil prospecting in the region (septel).


12. (C) Oil exploration and the future development of
northern Mali are inextricably linked. Absent tangible
social and economic benefits, few in the North are likely to
embrace the expanded presence of security forces that would
invariably accompany the exploitation of reserves from oil
fields in the north. Recent posturing regarding greater
northern autonomy suggests that, even though no oil is
expected to flow until 2008 at the earliest, the GOM may need
to begin taking steps now to convince Tuaregs of its
commitment to northern development and the transparent

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distribution of oil money.
McCulley