Belford Dolphin drillship of the coast of East Africa. (Cove Energy)
The East African offshore sector is attracting the oil and gas industry’s biggest players on expectations of big finds in the region.
United States group Anadarko’s announcement on Wednesday that its gas discoveries made offshore Mozambique to date hold combined recoverable gas reserves of “at least” 10 trillion cubic feet (283 billion cubic metres) will further heighten interest in the region.
Anadarko said the Camarao well, the fourth successful find in the Rovuma Basin, located near the Tanzanian maritime border, encountered approximately 73 m of natural gas pay in an “excellent” quality reservoir. The find connects with two other discoveries made over the past couple of years in the vicinity, Windjammer and Lagosta. The fourth find on the Offshore Area 1 licence was made at the Barquentine well.
And even better news could be on the way. “We are optimistic that our current resource estimates will increase, as we still have significant exploration and appraisal work ahead of us, including the evaluation of two newly acquired 3D seismic datasets and expanded prospect opportunities,” Bob Daniels, Anadarko’s senior vice-president of worldwide exploration, said in a statement on Tuesday.
The company already has enough gas for a minimum of two LNG trains, each with a capacity of 5 million tons per year. Management has even set up an LNG development team for the project with a view to taking a final investment decision in 2013. While the company hasn’t released any further information on the project, it is easy to spot a pair of Indian firms – Bharat Petroleum Corporation Limited and Videocon – among Anadarko’s partners on the licence, suggesting a potential eventual destination for the gas. The Indian companies each own a 10% stake in the licence, sharing ownership with Anadarko (36.5%), Japan’s Mitsui & Co. (20%), Mozambique’s state-run ENH (15%), and Cove Energy (8.5%).
Unlike West Africa, which has traditionally attracted the lion’s share of oil and gas investment, East Africa is perfectly positioned to supply the Asian and Middle Eastern gas market. Gas prices in Asia remain high as they are linked to the oil price, and demand there is expected by many analysts to remain strong over the next decade. VTB Capital, for example, released a report in September titled Gas: Recovery Advancing, which outlined rising Asian demand for LNG, driven by China, Indonesia and Thailand among others.
On the other side of maritime border with Tanzania, UK-based BG Group and Ophir Energy have had similar drilling success. BG announced its third offshore gas discovery in April. The find was made on the Chaza-1 well in Block 1, in which BG owns a 60% stake and is now operator after taking over from Ophir during the summer. The other two finds, Pweza and Chewa, are located 200 km north of Chaza in Block 4. The group is appraising its finds there.
Tanzania, aside from gas discoveries made in Mnazi Bay and near Songo Songo Island, is also under-explored. Royal Dutch Shell earlier this week bought into two deep-water blocks owned by Brazil’s Petrobras in a sign of its prospectivity. The supermajor now owns interests in a strip of blocks stretching from the Kenyan border to halfway down Tanzania’s coastline. The only block that it is not involved with in the sector is Dominion Petroleum’s Block 7, where the London-listed company announced on Wednesday that it had farmed out a 20% stake to UAE investor Mubadala Oil &Gas. Further down the coast, Statoil and ExxonMobil hold licences along with BG and Ophir.
Further north, meanwhile, France’s Total in September farmed into five offshore licences in the Lamu Basin: Blocks L5, L7, L11a, L11b and L12. The group bought a 40% interest in each, picking up 20% from US-based Anadarko, 5% from Cove Energy and 15% from US oil and gas investment group Dynamic Global Advisors.
Despite the recent success, such frontier drilling work is still very risky. “BG’s gas discoveries have gone some way towards de-risking exploration in the region, which has been very important in pushing exploration forward, especially considering that at over $100 million per well any mistake would prove very costly indeed,” Justin Jacobs, an oil and gas analyst with Business Monitor International, told Interfax. The security of oil and gas vessels operating in these regions could also be a concern.
But the majors have shown themselves willing to take on more risk in exploration over the last couple of years, as is being demonstrated in East Africa.
The lure of East Africa
Belford Dolphin drillship of the coast of East Africa. (Cove Energy)
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The East African offshore sector is attracting the oil and gas industry’s biggest players on expectations of big finds in the region.
United States group Anadarko’s announcement on Wednesday that its gas discoveries made offshore Mozambique to date hold combined recoverable gas reserves of “at least” 10 trillion cubic feet (283 billion cubic metres) will further heighten interest in the region.
Anadarko said the Camarao well, the fourth successful find in the Rovuma Basin, located near the Tanzanian maritime border, encountered approximately 73 m of natural gas pay in an “excellent” quality reservoir. The find connects with two other discoveries made over the past couple of years in the vicinity, Windjammer and Lagosta. The fourth find on the Offshore Area 1 licence was made at the Barquentine well.
And even better news could be on the way. “We are optimistic that our current resource estimates will increase, as we still have significant exploration and appraisal work ahead of us, including the evaluation of two newly acquired 3D seismic datasets and expanded prospect opportunities,” Bob Daniels, Anadarko’s senior vice-president of worldwide exploration, said in a statement on Tuesday.
The company already has enough gas for a minimum of two LNG trains, each with a capacity of 5 million tons per year. Management has even set up an LNG development team for the project with a view to taking a final investment decision in 2013. While the company hasn’t released any further information on the project, it is easy to spot a pair of Indian firms – Bharat Petroleum Corporation Limited and Videocon – among Anadarko’s partners on the licence, suggesting a potential eventual destination for the gas. The Indian companies each own a 10% stake in the licence, sharing ownership with Anadarko (36.5%), Japan’s Mitsui & Co. (20%), Mozambique’s state-run ENH (15%), and Cove Energy (8.5%).
Unlike West Africa, which has traditionally attracted the lion’s share of oil and gas investment, East Africa is perfectly positioned to supply the Asian and Middle Eastern gas market. Gas prices in Asia remain high as they are linked to the oil price, and demand there is expected by many analysts to remain strong over the next decade. VTB Capital, for example, released a report in September titled Gas: Recovery Advancing, which outlined rising Asian demand for LNG, driven by China, Indonesia and Thailand among others.
On the other side of maritime border with Tanzania, UK-based BG Group and Ophir Energy have had similar drilling success. BG announced its third offshore gas discovery in April. The find was made on the Chaza-1 well in Block 1, in which BG owns a 60% stake and is now operator after taking over from Ophir during the summer. The other two finds, Pweza and Chewa, are located 200 km north of Chaza in Block 4. The group is appraising its finds there.
Tanzania, aside from gas discoveries made in Mnazi Bay and near Songo Songo Island, is also under-explored. Royal Dutch Shell earlier this week bought into two deep-water blocks owned by Brazil’s Petrobras in a sign of its prospectivity. The supermajor now owns interests in a strip of blocks stretching from the Kenyan border to halfway down Tanzania’s coastline. The only block that it is not involved with in the sector is Dominion Petroleum’s Block 7, where the London-listed company announced on Wednesday that it had farmed out a 20% stake to UAE investor Mubadala Oil &Gas. Further down the coast, Statoil and ExxonMobil hold licences along with BG and Ophir.
Further north, meanwhile, France’s Total in September farmed into five offshore licences in the Lamu Basin: Blocks L5, L7, L11a, L11b and L12. The group bought a 40% interest in each, picking up 20% from US-based Anadarko, 5% from Cove Energy and 15% from US oil and gas investment group Dynamic Global Advisors.
Despite the recent success, such frontier drilling work is still very risky. “BG’s gas discoveries have gone some way towards de-risking exploration in the region, which has been very important in pushing exploration forward, especially considering that at over $100 million per well any mistake would prove very costly indeed,” Justin Jacobs, an oil and gas analyst with Business Monitor International, told Interfax. The security of oil and gas vessels operating in these regions could also be a concern.
But the majors have shown themselves willing to take on more risk in exploration over the last couple of years, as is being demonstrated in East Africa.