INTERNATIONAL REPORT: Billions flowing into Western Africa for development, more exploration
Highly prospective area becoming more so
Saipem 10000 drilling on Astrid Marin offshore Gabon for the Vanco Gabon Group.
The majority of the analysts expect West Africa to be the hottest exploration and production theater on the globe this year. Development drilling will begin to take the place of exploration drilling as major new deepwater fields are opened up.
Operators are investing billions of dollars to begin production in new deepwater discoveries, a trend that is bound to continue as more large plays are discovered. A promising financial climate will act as a catalyst to exploration activity, particularly in the deepwater fields, which contain an estimated 535 billion bbl oil equivalent (BOE).
Angola and Nigeria will continue to be very active, accounting for the vast majority of offshore development expenditure in the region. These two are followed by Equatorial Guinea and Gabon.
Ghana, Angola, and Nigerian state oil companies are opening up their oil markets to private investors. Sonangol and Namcor have announced a series of technical seminars to promote the Namibe Basin offshore Angola. And neighboring Namibia is hoping to follow suit. If African countries can sustain competitive terms and contracts, and minimize political risks to E&P activity, the future looks very bright
Political repression and pervasive corruption have been a constant in Equatorial Guinea for years. The situation hasn't changed much in the past year, but the recent oil boom is drawing attention away from the issue of political uncertainty.
If the government is able to capitalize on the surging business climate of the oil industry, 2001 will be a good year. So far, politics has not stood in the way of progress. Triton Energy is one investor that has not been put off by the prospect of dealing with the country's unstable government.
Triton leads the pack in Equatorial Guinea, where a discovery well in Ceiba field in September 1999 indicated the presence of the 500 million bbl deepwater find. Triton took Ceiba from discovery to production in a record 14 months and has continued with appraisal drilling, which has turned up more oil in greater concentrations than the original well. Not surprisingly, Triton's good fortune has attracted additional interest to the region.
Another investor offshore Equatorial Guinea is South Africa, whose state-owned Sasol has an unofficial agreement with Equatorial Guinea to drill for oil and gas off the coast. If the agreement is approved, Sasol will have a 10% share in Block L off the Equatorial Guinea coast. Preliminary activity could begin soon, with drilling operations possibly starting in 2002. These successes coupled with the current investment climate should bode well for Equatorial Guinea in the coming year.
Gabon is one of the most politically stable of the African countries. It is also the third largest oil producer in sub-Saharan Africa. Until now, the bulk of the oil discovered in Gabon has come primarily from near-shore activity. In February of this year, Vaalco Energy, Inc. announced its intention to complete its open hole logging program to more precisely determine the quality and productivity of the reservoir the company discovered on the Etame Marine Prospect.
The ET-3V well encountered oil pay at 1,855 meters. While the well was not flow tested, the partners are confident it will flow at rates exceeding the 3,500 bbl tested in the discovery well the Etame No. 1.
To date, deepwater activity has been insignificant, but Vanco Energy and the Vanco Gabon group are banking on changing the statistics. Exploration activity in the past year was slow, but the Vanco Gabon Group, comprising Total, Unocal Corp., Vanco, Kerr-McGee Corp., and Reading & Bates Development Co., explored the deepwater Anton and Astrid Marin permits off southern Gabon in 1998. At that time, Schlum-berger Geco-Prakla was contracted to gather 3D seismic data over a 4,400 sq km area in water depths of 1,000-3,000 meters. The seismic survey was followed by the drilling of exploration wells that set records for deepwater drilling in Africa.
Angola has been a hot spot for West African deepwater exploration. There were a number of discoveries last year, and the country is becoming a major deepwater producer. Favorable results will continue to push oil production up, and new drilling in unexplored areas is underway.
With all of the deepwater discoveries, a development and production boom is expected. Success here is based on the assumption that the Angolan government will not complicate matters by making terms for future field developments unfavorable. A lot of money earmarked for development and production projects is rolling into the country.
TotalFinaElf SA's Girassol field should see first oil later this year with an expected flow rate of 200,000 b/d. The company is conducting engineering studies on the nearby Dalia field, which is in 1,300 meters of water in Block 17, 135 km offshore. The company predicts that Dalia could have greater production potential than Girassol. A significant amount of money is going into proving that prediction.
Chevron's deepwater Lobito discoveries have also turned up significant amounts of oil, making Chevron the biggest operator in the oil industry. Although Chevron does not hold as much acreage as other players, it has made efficient use of its real estate. Chevron is also the only company that has an Angolan field onstream, having brought Kuito into production at the end of 1999.
Pride International's deepwater drillship Pride Africa drilling on TotalFinaElf SA's Girassol field offshore Angola.
The company plans to continue investing in exploration and development in Block 14, which covers 1,560 sq miles and contains the Benguela-Belize and Tombocco fields. Technip, an Angolan company, has been awarded an engineering contract for developing these fields. Water depths are 1,100-1,400 ft for the Benguela-Belize discovery and about 1,700 ft for Tombocco.
Nigeria continues to be the most active spot in West Africa. Drilling activity was up slightly last year and will continue to be high in the coming year. There has also been considerable development. Late in the first quarter of this year, Shell Nigeria Exploration and Production Company Ltd. awarded major contracts to four European companies for the development of its $2.4 billion deepwater Bonga oil and gas field.
Bonga represents a sizable share of Shell's $8.5 billion oil and gas investment program in Nigeria. When it is developed, the field will send Nigeria's crude reserves up by about 600 million bbl. Bonga should see first oil in 2003.
Nigeria also leads the pack in terms of seismic activity this year, a result in part of seismic commitments following last year's deepwater round and in part due to preparatory work preceding the next deepwater round. If the country gets its wish, exploration and development will begin targeting gas instead of oil. Despite the large oil finds in its waters, Nigeria is looking to gas as an economic mainstay for the future.
In mid-March, Fusion Oil & Gas PLC signed a petroleum concession contract with the Republic of Cameroon for exploration of the deepwater Ntem permit, the first deepwater tract awarded by the Cameroon government. Ntem is in the Southern Douala/Kribi-Campo basin and covers an area of 2,080 sq km in water depths of 1,000-1,800 meters. One positive indicator is the success of the field's northern neighbor, Triton Energy's Ceiba field, which has been extremely profitable.
The Ntem contract has three two-year exploration terms. Fusion's initial activity will be to shoot 2D and possibly 3D data over the permit area in the first term to take more thorough stock of the field. Existing seismic data suggests the field will be profitable to develop. With the favorable investment climate in full swing, now is the time to find out if the field warrants more attention.
Sao Tome and Principe
Another new West African frontier is the tiny island of São Tomé and Príncipe whose northern shelf abuts the highly prospected deepwater of Nigeria.
São Tomé authorities are implementing a framework for exploration licensing, which will no doubt spur seismic activity when it is formalized. Geographical proximity to big plays could augur well for E&P.
The most recent activity here is Houston-based Anadarko's active exploration in the promising West African deep offshore fairway. The company has scheduled the Frida prospect in Marine IX block offshore Congo for drilling at the end of the year. Well location will be determined following a 3D seismic survey that is currently underway.
The World Bank reportedly announced the inability to advance more loans or credits to Côte d'Ivoire because the country has fallen behind on its repayments by more than six months and owes the International Development Agency $6.1 million. Internal political issues could keep the country from making good on those loans any time in the near future.
But E&P action offshore hasn't shut down. Vanco Energy Co. is expanding its presence in deepwater with the signing of production sharing contracts off Côte d'Ivoire with state-owned Petroci EP SA for Blocks CI-109 and CI-112, covering 2.3 million acres. These two agreements mark the first award of Côte d'Ivoire deepwater blocks this year. Terms of the agreement call for 2D and 3D seismic surveys and at least three wells on each block by 2008.
New and renewed activity are taking place offshore Ghana. Dana Petroleum PLC had planned to run a 3D seismic survey earlier this year and to conduct other work on its West Tano contract area 20 miles offshore.
Ghana National Petroleum Co. also re-initiated oil and gas production from Saltpond Field, 120 km southwest of Accra, in hope of reaching the remaining 1 million bbl of reserves. The gas in this field hasn't been utilized.
At about the same time that the Saltpond Field activity got underway, the Devon/Santa Fe alliance completed a site survey and was waiting for a jackup working in Cote d'Ivoire to spud the Dolphin-1 well, located in the Keta permit in 100 meters water depth.
NORTH AFRICAN ACTIVITY
While the bulk of Africa activity and investment is taking place off West Africa, other areas are seeing new exploration and some development.
Morocco is almost fully dependent on foreign suppliers of oil, but the country is attracting a lot of interest. Shell, Lasmo, Enterprise, Conoco, Kerr-McGee, Vanco, Energy Africa, Taurus, Vanguard, Lone Star, and Samir already hold exploration or reconnaissance rights, and a number of these companies are making exploration plans.
The country has 620,000 sq km of sedimentary basins, but only 26 exploratory wells have been drilled along Morocco's 3,500-km coastline. None of these is in deepwater. Now, promising seismic data, the first significant offshore 3D activity ever shot off the Atlantic coast, is heightening interest in both shallow and deepwater plays. A bidding round that took place late last year and concluded in April, will allow Morocco to announce winners of the three shelf blocks and eight deepwater blocks in the Atlantic in June.
Energy Africa is continuing activity in the Tiznit Offshore Area (which covers about 6,000 sq km) and is expanding activity into neighboring blocks. Enterprise Oil has secured exploration permits in the same region.
The country has identified energy goals and is working to attract investment, most overtly by improving fiscal terms and bringing its power generation grid up to speed to pave the way for using any gas discovered.
Overall, drilling and exploration off Algeria were almost non-existant in 2000. There was some seismic activity at the end of last year when Western Geophysical (now WesternGeco) shot a multi-client 2D survey in association with Sonatrach, the Algerian National Oil Company.
The survey included gravity and magnetic data in conjunction with high-fold seismic over 6,000 km of Algeria's offshore areas.
Egypt saw a fair amount of activity in 2000. There were 65 offshore wells drilled last year, 25 of them exploratory, which resulted in six offshore oil successes and eight offshore natural gas successes. In light of this positive turn of events, the Egyptian government has announced its intention to become a major gas exporter.
Unfortunately, it is quite possible that this ambitious goal could suffer a setback. Royal Dutch/Shell saw no success with its deepwater drilling, and the country's call for bids for a number of licensing blocks might not attract the kind of interest initially anticipated.
Despite that, state oil firm EGPC (Egyptian General Petroleum Company) is looking for 572 miles of 2D seismic lines and 654 sq mi. of 3D seismic offshore, and the drilling forecast for the coming year is for 45 wells offshore.
SOUTH AFRICAN ACTIVITY
South Africa is the largest consumer of energy on the African continent, with the bulk of its energy coming from coal. Economically, the country would be better off if a larger part of the mix came from gas. With the goal of decreasing dependence on coal and increasing gas usage, the South African Department of Minerals and Energy says the gas industry in the region is expected to expand over the next ten years.
Pioneer Natural Resources South Africa Ltd. is at the forefront of South African oil and gas development. The company tested its first exploratory well in 450 ft water depth on the Boomslang prospect (E-DQ1) and encountered significant volumes of oil and natural gas.
Pioneer's test of a portion of the discovered oil leg interval flowed at rates up to 3,120 b/d and 2.6 MMcf/d of gas. These successes have fueled Pioneer's determination to move forward with South African investment. The company has initiated the acquisition of a 1,193 sq km 3D seismic survey covering the entire Boomslang prospect and is planning to drill a second appraisal well in the second quarter of this year. Initial development drilling should begin in the second half of 2001, and first oil production could take place as early as the end of next year.
While most of the African continent was alive with exploration and development, Tanzania was relatively quiet. With the conclusion of its first competitive bidding round to explore hydrocarbons in the Mafia Deep Offshore Basin, Tanzania is about to see a great deal more activity.
The Mafia blocks are in water depths ranging from 500 meters to 3,300 meters, covering 64,050 sq km. Late last year, the Tanzanian Petroleum Development Corporation (TPDC) and Western Geophysical put together a well data package for prospective bidders. High-resolution seismic data indicates the possibility of numerous plays in the area.
The bidding round drew a lot of interest, partly because of the contents of the data package and partly because the Tanzanian government is making investment very enticing. The production sharing agreement, now in place in Tanzania, works out of gross production from the contract area. The company deducts 70% of the maximum oil cost, then splits the profit of the balance of oil with TPDC. Since TPDC pays royalties and income tax for itself and the company, the operator, in effect, pays no royalty. This can constitute a major increase in profitability, an undeniable plus for the companies bidding on the available blocks.
Vanco Energy is preparing to step out into new exploration territory off Madagascar. After a year of evaluation, the company signed a contract for the Majunga Offshore Profond Block in the deepwater Majunga Basin offshore Madagascar, which until now has been a little-explored region.
The basin covers 3.67 million acres off the northwestern shore of the island. No drilling will take place immediately. Instead, Vanco will continue to gather geophysical data, initially a two-year 2D seismic survey, which began in May.
Vanco believes this deepwater area (1,000-3,000 meters) looks very promising. This block is the first license Vanco has been awarded offshore East Africa, a new frontier for the company.