P.2 ~ Opportunities still beckon for investors of all sizes offshore Africa

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Last July, Oando Energy Resources acquired ConocoPhillips' upstream Nigerian interests for $1.5 billion, the largest transaction to date for any African independent E&P company. The assets include interests in two deepwater blocks. One, operated by ExxonMobil, is in the offshore Niger Delta, close to the Agbami and Bonga fields. The other, operated by Shell, includes the Chota and Bolia discoveries. The deal netted Oando proven offshore reserves of 128 MMboe. Oando now has 500 MMboe of reserves and aims to double its current production eventually to 100,000 b/d.

According to Adetokunbo Akindele, head of corporate development, the Toronto Exchange-listed company had to raise $500 million to complete the deal. "We found that a lot of people don't want to invest in Nigeria, particularly in non-listed companies" he said, due in part to perceptions over the Niger Delta disturbances, Boko Haram's insurgency in northern Nigeria, and uncertainty over the country's next elections.

Akindele said African independents looking to raise funds are always asked if they can meet their capex and opex targets. The lower oil price has led some companies to become takeover targets, he said, "particularly those with massive overheads on projects which cannot meet its obligations." It has also impacted local oil service companies. "One contractor has five rigs," he said, "but only one is operating, as no one can afford the rates." But smaller companies specializing in indigenous plays can also produce oil with lower operating costs, Akindele claimed. "They know the area better than the majors, and they know what to do to get the resources to the market."

London-based Ophir Energy has been one of the pioneers of deepwater exploration offshore West and East Africa over the past few years. Dr. Mike Fischer, the company's president--Africa, related how the company bid successfully for deepwater blocks 1, 3, and 4 in the Mafia Deep basin off Tanzania in 2005-06, an area attracting little interest at the time. Initially, the company had just enough in the bank to pay for the license fees and a subsequent seismic survey. Later, it attracted funds to operate wells that brought East Africa's first deepwater discoveries on the Chaza, Pweza, and Chewa gas fields.

In 2009, the company brought BG Group into its three blocks, with the latter operating all wells beginning in 2011. The partnership has now drilled 16 exploratory and appraisal wells, and conducted five drillstem tests, with no dry holes to date. "In addition, our blocks are mostly covered with 3D seismic," Fischer said, "with a lot of 2D data, and we have established a working petroleum system."

To date, the partners have discovered a total of 17 tcf of gas, he added, while Statoil and ExxonMobil have uncovered a similar volume on block 2, sandwiched between blocks 1 and 3. The two consortia are cooperating on a scheme to develop Tanzania and East Africa's first onshore LNG plant to harness the gas.

Getting to this point in an area which had experienced little prior offshore activity and which is prone to raids by pirates involved building strong relationships with Tanzania's government and navy. "We have also had to work with the government to develop production-sharing arrangements in order to monetize the gas," he explained.

Another challenge was the lack of support infrastructure, which meant it was taking too long for vessels to get out of port in Tanzania to support the exploration programs. "We responded by transforming the old port that handled cashew nuts into a world-class port," Fischer said.

There is pressure throughout Africa's emer- ging offshore to build local engineering capabilities. "As a 50-strong company, we couldn't take on [the] training of large numbers of Tanzanians," Fischer explained. "But we have worked to do this via our lead service providers. And as the LNG project develops, that is the real opportunity for local employment and training. Our office in Dar es Salaam will be staffed entirely by locals."

Off Africa's west coast, Ophir has discovered sufficient gas in relatively shallow water off Equatorial Guinea for what could be the continent's first floating LNG project. Offshore Gabon, the company has drilled several wells in the deepwater subsalt, attracting Petrobras as a partner. Although there have been no successes to date, "we are gradually understanding how the play works," Fischer said, "and we plan more wells there."

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