Independent leading search efforts off Ghana, Mauritania

Six discoveries complicate asset management

Th 6010oosdana1
Th 6010oosdana1
Dana is building a deepwater acreage position off the Ivory Coast, next to its Western Tano contract area.
Click here to enlarge image

Investor ideals are putting increasing pressure on small oil and gas producers. Every well must be a winner - preferably in a high-risk play - with a deepwater development in between to sustain the profile. British producer Dana Petroleum seems to be meeting these expectations, having recently drilled or partici-pated in six consecutive discoveries offshore the UK, Netherlands, Ghana, and Indonesia.

Other independents, however, have paid for their commitments. Project costs off Myanmar forced Premier Oil to bring in Petronas and Amerada Hess as part-owners. British-Borneo lost its independence altogether to Agip, following very high development expenditures in the Gulf of Mexico.

Aberdeen-headquartered Dana aims to stay independent through careful risk management.

The company has amassed 60 oil and gas properties worldwide since floating equity shares on the London Stock Exchange four years ago, yet it remains debt-free. "We're a very healthy company," notes Chief Executive Tom Cross. "Which means we can get out and explore without some of the inhibitions facing others our size." Dana regards itself primarily as an exploration outfit, with bankable assets totaling around 100 million bbl so far, and more in the pipeline.

Building positions

In the main, the company sticks to low-cost, proven petroleum systems, Cross says. Offshore, it is building a position as an operator in the under-developed provinces of West Africa. "Our strategy is to get in early and maximize our stake," Cross explains. "We have built 80-100% working interests in our five West African licenses, but as we make further discoveries, we aim to co-venture with larger oil companies to allow us to fast-track developments." This is the case offshore Ghana, where Dana is considering approaches from majors to farm-in to Dana's area.

Dana's production is rising steadily but at present is modest at 7,000 b/d, because none of its recent offshore discoveries has yet been exploited, but this is in the cards over the next two years. Unlike many of its peers, Dana has remained debt free. It has achieved this by periodically selling for cash its less strategic assets where value has already been maximized, such as stakes in gas discoveries off northwest England and southern Ireland.

"We had a nice gas-producing stream off Ireland," Cross says, "but we negotiated a divestment where Dana received a substantial cash premium, in addition to the entire future value of the gas up front. So, we banked the return for our shareholders."

Western Tano discovery

One of Dana's key achievements to date as an operator is an oilfield discovery last March in Ghana's Western Tano contract area, 20 miles offshore in 380 ft of water. The WT-IX well was drilled by the semisubmersible Ocean Liberator - within the Upper Cretaceous, a 150 ft gross oil column was encountered in a channel sand sequence.

A drill stem test over this interval flowed 20 degree API crude at up to 1,000 b/d. Subsequent analysis of bottom hole pressure suggests that artificially lifted development wells could produce at much higher rates.

The same well entered the Lower Cretaceous at 9,500 ft. Wireline logs and oil shows revealed a significant column of lighter oil in porous sandstones. However, an attempt to reach the base of the oil column by drilling beyond 10,400 ft was confounded by overpressure problems, causing the lower section of the well to be suspended on safety grounds without a flow test. "The pressures encountered were higher than expected," Cross says, "but this will be a real benefit to production, since it means there is plenty of reservoir drive." The well has been suspended for use as an oil producer, with further drilling planned within both the Upper and Lower Cretaceous.

Dana's acreage in the contract area extends over 2,300 sq km. 2D seismic has been acquired all across this acreage, and last year CGG shot 3D seismic over the shallow water area prior to the WT-1X well. Now, Dana and its partner, Ghana National Petroleum Corporation (GNPC), plan a further 3D survey over the prognosed deepwater fan structures, which is expected to lead to exploration drilling in 2001-2002. These fan systems are thought to contain potential prospects ranging between 400 million to 1 billion bbl.

Development near

At this stage, the first Western Tano discovery appears to be a sizeable shallow water field. It could be developed via a single platform or tied back subsea to planned production facilities on GNPC's North and South Tano oil and gas fields just a few km away. Tano gas is due to be piped to a new power station at Effasu as Ghana strives to lessen its dependence on imported oil for power generation. Dana expects low development costs at around $3-4/bbl.

Following its March 2000 discovery, in April, Dana won operatorship of the adjoining deepwater license in Ivory Coast waters, Block CI-100. Large fan structures in Western Tano are thought to extend westwards into this 1,900 sq km tract. CI-100 is also on the path of Shell/Chevron's proposed West African gas gathering pipeline. Dana will initially undertake geological and geophysical studies followed by seismic acquisition so it will be ready to integrate drilling with the program in Ghana.

In May 1999, Dana also won, as operator, three major production sharing contracts offshore Mauritania for blocks 1, 7 and 8. Dana's acreage covers 34,000 sq km representing more than 40% of Mauritania's offshore petroleum license territory. Dana holds an 80% interest throughout and its partner is Australia's Hardman Resources. Recent seismic interpretation indicates the presence of a major deepwater fan system spanning blocks 7 and 8, including a 1 billion bbl-plus Tertiary prospect. Drilling in the neighboring blocks by operator Woodside Petroleum is expected early in 2001.

European potential

Although Dana does not operate in northwest Europe, the region still accounts for 80% of its earnings. "Long term, we expect to have the majority of our earnings concentrated in Europe and the US," Cross comments. "As partners come into our exciting frontier licenses, we will consider receiving payment in either cash or cash equivalent - such as North Sea or US production."

Dana has built reliable producing interests in the UK North Sea in stalwart fields, such as Claymore and Victor, and following three recent discoveries, it has two new UK development opportunities in Orca Beta (gas) and Goosander (oil). The latter will be a sub-sea tieback to Shell's Kittiwake infrastructure and was recently announced by Shell as a fast-track development for 2001. Dana has also partnered with Wintershall in a potentially large gas discovery in block A15 in the Dutch sector of the North Sea.

In the deepwater Atlantic Margin, Dana has built an enviable license position for a company of its size. In total, it holds 12 blocks, six across UK Tranche 53, operated by Elf, and a further six operated by Statoil in Ireland's Porcupine Basin. With 3D seismic already shot and interpreted, both areas expect to see wells drilled next spring/summer.

This August, Dana gained an indirect interest in 11 blocks offshore the Faroe Islands. In 1997, Dana forged an alliance as strategic partner, technical advisor and key international shareholder of the Faroes Oil and Gas Company, Foroya Kolvetni (FK). This relationship was extended earlier this year and Dana now holds a 20% stake in FK. In partnership with Agip, FK has just been awarded some of the most highly-prized blocks under the first Faroese licensing round covering 700 sq km in water depths of around 1,000 meters. Drilling in the Faroes in expected to begin next spring.

More in Regional Reports