Norwegian Oil For Development In Nicaragua

6.9 N i c aragua Project:

Assistance to Petroleum Sector-Phase IV

Country facts: Official Name: Republic of Nicaragua

Cooperating institution: Instituto Nicaraguense de Energia (INE) INE is the state organization which is responsible for regulations, norms, control and taxation of the electricity and hydrocarbon sectors. The main cooperation between the INE and the Norwegian Petroleum Directorate (NPD) is connected to the Department of Hydrocarbons in INE (Direccion General de Hidrocarburos, DGH), which is regulating both the upstream and downstream activities. By 1. March 2007, the hydrocarbons division of INE has been transferred to the Ministry of Mines and Energy, and Vice Minister Lorena Lanza is in charge of the division. Goal: to contribute to the economic and social development and poverty reduction by identifying and developing new fields in the use of the country’s natural resources, Objective: to contribute to secure an environmentally sound exploration and possible exploitation of petroleum resources by creating capacities, at Nicaragua’s government level. Project period: 2005 - 2007 Total Budget: NOK 2.25 mill

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Capital: Managua Chief of state: President Daniel Ortega Saavedra (since January 2007). The president is both chief of state and head of government. Population: 5 570 129 (2006) Petroleum sector, key figures: Average oil production: 0 Annual gas production: 0 Organisation of the sector: In 2007, the former INE has been transferred to the Ministry of Energy and Mines (CNE), which is regulating the hydrocarbons sector

6.9 The programme Specific objectives are: • Updating of the petroleum database • Implementation of the monitoring system • Analysis of new seismic data • Updating and improving of the national contingency plan for emergencies related to the exploration and exploitation activities • Training to INE’s staff through seminars, work-shops, and courses abroad • New promotional campaign Major risks: There is the possibility, but with a low probability, of external risks related to political unrest. • There is a low probability for institutional risks, such as loss of qualified staff assigned to the Programme and affected recurrent costs as a result of budget limitations after the end of the Grant period.

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Contact: CNE: Lic. Lorena Lanza, Vice Minister, Ministry of Energy and Mines, [email protected] Ing. Veronica Artiles, Head of Petroleum Information Department, [email protected] NPD: Mr. Fridtjof Riis, Project Coordinator, [email protected]

The main specific objective of the phase III of the cooperation was to assist INE in their first licensing round in 2003 and the negotiation of exploration and production licences in 2004-2005. INE entered into negotiations with 4 companies. In 2005 one license contract has been signed with one company, OklahomaNicaragua SA (Indoklanicsa), in the onshore Pacific. In 2006 further three contracts were signed with the companies MKJ and Infinity for 4 areas in the Caribbean Margin. The Indoklanicsa onshore concession is now operated by the Canadian company Norwood, which started a drilling campaign in the end of 2006. An oil and gas discovery was reported in February 2007. The situation of the concessions in the Caribbean is presently being discussed by the central government and the local authorities of the Caribbean side, and there has been no exploration activity there. The current programme is a prolongation until 2007 of the institutional cooperation between INE and NPD. The cooperation continues with technical assistance and training. The contract for the cooperation will be signed in 2007

Activities in 2006 In 2006, there was no NPD activity of significance, since the political situation prior to the elections has not been clear. NPD has been in contact with INE and with the embassy to follow the process of establishing the new phase IV of the programme.

Cooperating Institution NORAD

Costs 2006 No costs to be reported.

Brief history of the project The institutional cooperation between the INE and the NPD was initiated in 1989, as a part of support to the petroleum sector. No petroleum exploration had taken place in Nicaragua since the 1970’s. In the first phase of the programme (1989-1995), it was prioritized to organize and enlarge the existing data base and to evaluate the petroleum potential in order to prepare for renewed exploration. The programme has been prolonged in order to continue the institutional cooperation during the licensing round, negotiation phase and the following up of the new licences. The licensing round is based on the recent Petroleum Act, which was elaborated with the support of the Inter American Development Bank, and approved in 1998.

Plans 2007 The Nicaragua project is awaiting the signature of the contract between CNE and NORAD. It is expected that the project will start up in the end of the second quarter, and that it will involve training, assistance on updating of the data base systems, assistance in monitoring of the exploration activity and setting up a contingency plan. It is expected that the project will need approximately 4 weeks of assistance. A further delay cannot be ruled out.

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