Vanco Energy is getting deep cheap.

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Vanco betting on Angolan play crossing into Namibia

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Vanco's new License Area 1711 offshore Namibia. The company is betting on an extension of the Angolan play across the Namibian border.
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Vanco Energy is getting deep cheap. The company has signed a Petroleum Agreement with the Government of Namibia for a License Area 1711 offshore Namibia, expanding the company's gross acreage offshore West Africa to 25 million. The License Area 1711 covers 8,931 sq km in the Namibe Basin off the northern coast on the border shared with Angola. A portion of the license lies onshore with the primary area of interest in water depths greater than 200 meters. Vanco said that early seismic indicated at least one large structure, probably Cretaceous in age and the company plans to acquire 2D and 3D seismic during the initial two-year period.

Bev Edwards, Chief Engineer, Surface Oper-ations for Vanco said that buying the acreage in Namibia was a innexpensive way to get in on the highly prolific Angolan play. "Property in Angola is over-priced," he said, "while the prices in Namibia are next to nothing, and they are on the same play."

The only other active offshore play in Namibia is the Kudu gas field in the southern portion of the country. However, Kudu has run into problems. The field's operator planned to market the gas to neighboring South Africa, but following a recent gas discovery in that country, the market for the product has dried up. Edwards said that Vanco will target oil in their license.

Vanco is the operator with 88%, with partners state-owned Namcor (9%) and Pamue Investment (3%). This is the first license awarded since the country converted to an open bidding system last year and is the only license offshore Namibia except Kudu in the southern portion.

1999: A stellar discovery year

1999 was a very good year for oil and gas discoveries. According to World Petroleum Trends 2000, a report from IHS Energy Group, 1999 was the best year for oil discoveries since 1991, despite the dramatic downturn in global exploration drilling. The report states that one huge find in Iran, the 5-6 billion bbl recoverable Azedegan Field, accounted for nearly 30% of the total oil discovered outside North America in 1999.

The report said that the oil discovery rate in 1999 confirmed two trends observed during the 1990s:

  • The global oil discovery rate is being maintained despite lower levels of exploration drilling.
  • Exploration effort efficiency has increased throughout the decade with a 505 increase on the discovery rate in the first half of the 1990s.

For gas, the report pointed out that the rate of gas discoveries globally has consistently been higher than that for oil and the increase in exploration efficiency in the second half of the decade was higher than that for oil.

However, the report did warn of failure to replace reserves. It said that from 1990 to 1994, 62% of produced oil was replaced by new discoveries, while that rate dropped to 53% in the second half of the decade, according to the report. It added that for the top 10 non-OPEC producers, only Angola and Brazil have succeeded in replacing their production by new discoveries in the past five years.

Furthermore, of the 10 most active countries in numbers of wildcats drilled, only two were in the top 10 in terms of amount of oil discovered.

Sakhalin 5 break-up

Russia's Rosneft and BP Amoco are at odds over a plan by the Russian Ministry of Energy to split the highly prospective Sakhalin 5 area offshore Sakhalin Island, Russia, into several blocks. The Sakhalin 5 area covers some 20,000 sq km of contract area and includes the East-Shmitovsky block.

Some time back, Rosneft and BP Amoco signed a contract to jointly bid on the contract area when it became eligible for development under the production sharing law. Following the announcement by the government, Rosneft has lent its support, while BP Amoco has stated it is against the idea.

Rosneft reportedly contends that the area is too large for a single operator and the government should allow several companies to operate the area. BP Amoco on the other hand said that the split increased the risk and decreased the attractiveness. Rosneft also added that if BP Amoco decides against bidding on the project, the company will bid on its own.

The government is expected to grant Sakhalin 5 approvals for development under the production sharing law this year. A tender for development is anticipated to follow soon after.

Kazakh Oil: good or bad?

There is some sincere uncertainty in the Kazakhstan oil patch at the moment. Following the drilling of the first well on the massive Kashagan structure in the Caspian Sea by the Offshore Kazakhstan International Operating Company (OKIOC), some controversy has arisen. First is the reserves size. While OKIOC has remained mum on the actual size of the find, Nursultan Nazarbayev, President of Kazakhstan has been boasting that it is the largest discovery in Kazakhstan - if not the world.

Following a visit to the Sunkar rig on the field, Nazarbayev said that Kazakhstan is on the verge of the largest oil and gas discovery in the world over the past 30 years. "This field has six times more oil than the next largest field in Kazakhstan, Tengiz - and I am telling you the pessimistic figures," he was quoted as saying. This follows a statement made earlier in the year by the head of the state oil company, Kazakhoil, that the find showed reserves over 50 billion bbl, compared in size with the 70 billion bbl Ghawar Field in Saudi Arabia. If verified, it would make Kazakhstan one of the world's top energy holders.

OKIOC representatives, however, said that they do not have sufficient information to make estimates on potential reserves without appraisal drilling. The company did confirm oil shows during logging, but added that the vast majority of the structure remained unexplored.

But, while the President was making his visit offshore, in the US, according to Newsweek magazine, the FBI began an investigation on whether a US businessman and counselor to Nazarbayev had illegally funneled $35 million from three oil companies to high-ranking Kazakh officials, including the President.

The magazine says it has a Justice Department document, which details alleged payments by BP Amoco, ExxonMobil, and Phillips of over $65 million to offshore accounts and shell companies controlled by the businessman. Supposedly, $35 million went to Kazakh officials or their families.

The report said that the investigation initially began in Switzerland where an investigation was underway on money laundering allegedly involving high-ranking officials in the former Soviet republics. It is not known yet whether the investigation will target the oil companies as well, but they have been reported as giving full cooperation to the investigation.

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