DGH Continues Concession Contract Signing

Nicaragua's hydrocarbons department DGH expects to sign a six-year exploration and production concession contract with US oil company MKJ Exploration within the next few weeks, DGH director Fernando Ocampo told BNamericas.

DGH is waiting for MKJ to confirm attendance for a meeting that is scheduled next week, in which they will make final revisions on the contract before sending it to Nicaragua's President Enrique Bolaños for approval.

MKJ's contract will be on one of the two 4,000 sq. km. offshore areas in the Caribbean for which it has concession rights. MKJ will likely sign for the other area before year-end, Ocampo said.

The process for the second area will be much faster than that for the first, as the contracts require only minor changes, he added.

After the contracts are signed, MKJ must carry out environmental studies on the blocks.

US company Infinity won the concessions for two more offshore Caribbean blocks, which measure 4,000 sq. km. and some 3,000 sq. km. DGH is now finalizing contract negotiations with Infinity, Ocampo said.

"It will take a few months to sign the contract [with Infinity] as there are some pending contract aspects," he said. "In the Caribbean there are good indications of gas in the areas that MKJ and Infinity are involved in," Ocampo said. In those areas there is also evidence of 26-28 degrees API crude.

DGH signed the first concession contract with Industria Oklahoma Nicaragua, which is a special purpose subsidiary of US-based company Empire Energy, on April 23 of this year. A preliminary environmental report is expected to be submitted to DGH by end-October. "This could indicate that the environmental studies are completed by year-end," he said, adding that exploration would then start on Oklahoma's 2,350 sq. km. onshore Pacific block.

The MKJ, Infinity and Oklahoma blocks are five of the six in Nicaragua's first bidding round.

Texas-based Greathouse Trust 2000 was negotiating contracts with DGH for the sixth block, but DGH annulled the contract because of internal problems at the US firm, Ocampo said. DGH's work plan calls for at least one exploratory well to be drilled in each of the five blocks within two years of signing the contract.


DGH could launch a second oil exploration tender in two years. However, the process is not being rushed. "We want to enrich information about Nicaragua's hydrocarbon potential, which would give us more elements to offer investors," Ocampo said. Unlike the first tender round, DGH would likely select the areas for the second tender, he concluded.

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