Shell signs oil and gas exploration deal with Sierra Leone

Shell has signed an agreement with the government of Sierra Leone to explore for oil and gas in its offshore basin, marking its entry into the West African country just five months after Italian energy giant Eni did the same.

The deal, signed on April 22 at an energy event in Paris by Thomas Praeger, Shell's exploration manager for global new entries, and Foday Mansaray, director general of Sierra Leone's Petroleum Directorate, marks another step forward for the country's emerging hydrocarbons sector.

According to a copy of the deal sheet obtained by Platts, the Reconnaissance Permit Agreement between Shell Exploration Company and the Sierra Leonean government covers 18 exploration blocks, some of them in ultra-deep water.

In November, Eni signed an agreement of its own to explore five offshore blocks: G-113, G-129, G-130, G-131 and G-132.

Some of the Shell blocks, including G-114, G-133 and G-112, neighbor those now held by Eni.

It was not immediately clear what exploration activity Shell had agreed to carry out, but Eni committed to advanced geological and geophysical studies at a minimum, with no commitment to drill a well.

"Shell routinely engages with governments through non-binding MOUs to access data and assess potential opportunities," said a Shell spokesperson. "Such engagements do not constitute a commitment to proceed, and any future steps would be subject to internal governance, regulatory processes and due diligence."

Exploration renaissance

Sierra Leone does not currently produce any oil or gas but is hoping to become a West African exploration hotspot, having seen large discoveries in nearby Ivory Coast, Ghana and Senegal turn those countries into exporters in recent years.

It comes amid what some in the industry are describing as an "exploration renaissance", with oil and gas majors currently on the hunt for new frontiers across Africa.

Sierra Leone has historically hosted eight wells, and four non-commercial discoveries, dating back to the 1980s.

However, the coronavirus pandemic, Ebola epidemic, energy transition narratives and challenging deepwater economics have constrained drilling, Mansaray previously told Platts -- part of S&P Global Energy -- in an interview.

He added that the country's crude is light and sweet, making it comparable to Nigeria's Qua Iboe export grade.

Government estimates put Sierra Leone's oil resources at 44 billion barrels, half of it recoverable.