East Africa Excites

A string of impressive discoveries from offshore Mozambique to Tanzania has heightened expectations for East Africa’s hydrocarbon potential. While the companies drilling offshore in the region that are in it for the long term must in some cases plow significant investment into liquefied natural gas (LNG) infrastructure to reach markets, these are huge finds, guaranteed to reshape the futures of the companies—and countries—involved.

Leading the charge offshore Mozambique is Anadarko Petroleum Corp. The company estimates the resource in place at its Prosperidade (meaning prosperity) complex in the deepwater Rovuma Basin at 30- to 50 trillion cubic feet (Tcf) of natural gas. The company has more than tripled its estimated recoverable resources for the complex in the past year. Eni, also operating offshore Mozambique, has put its resource in place at 40 Tcf.

Anadarko describes its discovery complex as a world-class reservoir, with huge structures and high-quality, thick, continuous sands. The nine wells it has drilled to date—all successes—have tested Eocene and Oligocene formations.

To give an idea of the bounty at hand, the Lagosta-3 appraisal well (36.5% working interest for Anadarko), the eighth well, encountered 577 net feet of gas pay. Lagosta-3 is about two miles west of the original Lagosta discovery well. The nine wells are in water depths from 4,500 to about 7,000 feet.

Says Frank Patterson, Anadarko’s vice president of exploration, “This is shaping up to be one of the more important gas discoveries in recent history anywhere in the world. And, the quality and continuity of the reservoir make this ideal for LNG. We’re really excited about that.”

While interest in Mozambique’s significant potential has been sharpened by recent well results, operators have only scratched the surface. “The other thing that is exciting to us from an exploration management standpoint is we are just getting started,” says Patterson. “There have not been that many wells drilled in the basin yet. This is a huge opportunity for us, our partners and the country of Mozambique.”

Until 2011, the biggest year in the East African oil and gas industry was 2004, when production began from fields in Tanzania and Mozambique. That year, Songo Songo Field, discovered by Agip in 1974, began flowing gas to Dar es Salaam, Tanzania’s capital, after a 30-year wait. Also in 2004, a pipeline was completed between Mozambique’s Temane and Pande fields and Sasol’s Secunda facilities for use in gas-to-liquids conversion.

Today, an array of companies like Cove Energy, Wentworth Resources, Ophir Energy, Pan-continental, Premier Oil, Africa Oil, Solo Oil, Afren Energy, M&P Exploration & Production Tanzania, and Lion Petroleum are also involved.

Smaller players are likely to monetize their assets early, and the competition is already fierce. Cove Energy recently put its 8.5% interest in Anadarko’s operated license up for sale, and a bidding war ensued, with Shell Oil bidding $1.6 billion, and Thailand’s PTT Exploration & Production countering at $1.8 billion. At press time, Cove also had a statement of intention from a consortium of two Indian state companies on the table.

Patterson notes, “Cove has done a great job and has been a good partner for us on the technical side and working with us the entire way. The company has a minor position, and there was always an expectation it would consider monetizing early.

“We see this in two ways. First, it gives us an idea of what the market value of this opportunity is, which I think is pretty phenomenal, if you’re watching what’s going on. Second, it is an opportunity to possibly bring in another party that may have a longer view and different experience than us in LNG, and that might be beneficial.”

Analysts estimate that if Cove goes for $1.8 billion, it implies Anadarko’s interests are worth at least $7 billion.

The exploration path

Anadarko’s acreage position offshore Mozambique encompasses some 2.6 million acres. It has two rigs operating there currently, and is just finishing up Barquentine 4, the final well in its appraisal program in the Prosperidade complex in Offshore Area 1.

The company’s partners in its series of discoveries (Camarao, Windjammer, Barquentine and Lagosta) there include Japan’s Mitsui E&P, with 20%.

“It is our ninth successful well in Prosperidade,” notes Bill Tedesco, Anadarko’s manager, East African exploration. “Our appraisal plan has done everything we expected so far. It is proving up really high-quality rock over a large expansive area that is going to deliver high rates for the future LNG plant.”

A second rig will be doing drillstem tests for the rest of the year. The first drillstem test of the Barquentine 2 flowed 90- to 100 million cubic feet per day, and it was facility-constrained. “That was what we were hoping to see,” says Tedesco. “Now we’re confident in our well design that we can flow 100- to 200 million per day when we go to production.”

After drilling Barquentine 4, the rig will shift to drill the Atum and Golfinho exploration prospects, north of the Prosperidade complex. “These are chasing the same play types we are seeing in the Windjammer and Barquentine areas,” says Patterson. “There is a possibility this is all part of one massive accumulation.”

When that drilling program is complete, the company will test deeper Paleocene at the Orca prospect. “The interesting aspect of the Paleocene is that we haven’t even estimated resources in it yet. And, we’ve encountered pay in two of our wells to date in Paleocene.”

Scheduled next for tests are southern prospects, Barracuda and Black Pearl, in Offshore Area 1. “As soon as that (work) is complete, there is a very good chance we’ll be moving the rig up to Kenya to start our exploration program in the latter part of the year,” notes Tedesco. “We’ve just now gotten our 3-D seismic in, and we see multiple play types. Some are similar to those in Mozambique, but some are quite a bit different. We’re going to have a lot of opportunity up there as well.”

Anadarko has contracted for a newbuild drilling rig that will be available in late 2013, which will be dedicated to development drilling for its LNG project. It will use the two rigs it currently has until the new rig arrives. “We will possibly keep one of the two rigs occupied in East Africa with the new rig. Our goal is to keep a two-, maybe two-plus rig program going for several years,” says Patterson.

Eni has also made impressive finds offshore Mozambique. In late March 2012, the company announced a giant offshore gas discovery in Area 4, at the Mamba North East 1 exploration prospect. The well added 10 Tcf to the resource base in the area, bringing estimated resource in place to 40 Tcf.

Mamba North East 1 is 50 kilometers off the Capo Delgado coast, in a water depth of 1,848 meters (6,098 feet). The well was drilled about 15 kilometers northeast of the Mamba South 1 giant discovery and 12 kilometers southwest of the Mamba North 1 find. During 2012, Eni plans at least another four wells in nearby structures to fully assess the upside potential of the complex.

Eni is the operator of Area 4 with a 70% participating interest. Co-owners are Galp Energia (10%), Korea Gas Corp. (10%) and ENH (10% carried through the exploration phase).

The LNG option

East Africa is isolated from most major natural gas markets, and domestic energy markets are limited. Natural gas pipelines could be built to South Africa, but the primary outlet for natural gas will be LNG.

“It’s a really spectacular basin (Rovuma) with a very high discovery rate so far and very large reserves. The play is well-positioned for the Asian market. It can also service the European market. It’s a nice midway point for India, the Far East and Europe,” says Anadarko’s Patterson.

Eni has said it would invest $50 billion to de- velop its 40 Tcf of natural gas in its offshore Mozambique discovery with an LNG project. The company would target Asian markets.

BG and Ophir would need at least 9 to 10 Tcf of recoverable reserves to sanction an LNG facility. Analysts estimate that BG Group could spend from $10 billion to $20 billion in Tanzania in the second half of the decade.

Anadarko expects to make a final investment decision on an LNG project in 2013. “Everything is on schedule at this time. Onshore, we’re in the middle of working toward a front-end engineering and design (FEED) study for up to a six-train LNG facility. We will design it so that we will be able to expand it. We’ll start with two to three trains,” Patterson says.

“We’re working with all the LNG contractors that have put in all the big LNG plants around the world. We feel confident that this is right in our wheelhouse from a project-management standpoint.”

The offshore portion of the LNG project will be similar to Anadarko’s projects in the Gulf of Mexico and other areas where it operates. The field is in about 5,000 feet of water.

“No new engineering technology is needed here. We have a lot of expertise and project management skills associated with that type of project. It will include large wells hooked up in daisy chains basically in a subsea development. Floating production facilities might be used for compression,” Patterson says.

Tanzania

Moving north along the coast, companies are finding significant pay in Tanzania. BG Group and Ophir Energy estimate their reserves offshore Tanzania at nearly 7 Tcf. The license areas are blocks 1, 3 and 4 in the Mafia Deep Offshore Basin and the northern portion of the Rovuma Basin.

BG Group made its fourth gas discovery, Jodari-1, on Block 1, offshore the southern coast. Preliminary evaluation of the well results indicated gross recoverable resources of 2.5 to 4.4 Tcf. BG Group (60% and operator) and Ophir (40%) have hit with all four wells they’ve drilled to date in the country.

Jodari-1 is about 39 kilometers offshore in water depth of 3,795 feet. It is part of a three- to four-well exploration program, which includes the acquisition of 2,500 square kilometers of 3-D seismic data in Block 1. The next target for drilling is the Mzia-1 site in the same block.

Aminex has an onshore gas discovery in Tanzania, but hasn’t released reserve estimates. Offshore, its subsidiary, Ndovu Resources, had two discoveries out of four wells drilled in the Nyuni production-sharing agreement (PSA) area. In late February 2012, the company reported a gas discovery, Ntorya-1, in 82 feet of gross sand interval with a 10-foot net gas-bearing pay zone in sandstones having 20% porosity at the top. A 54-foot lower sandstone interval with possible gas pay also was encountered.

On offshore Block 2, Statoil Tanzania, operating with a 65% interest, and its partner, Exxon Mobil E&P Ltd., with 35%, made a gas discovery at Zararani-1. The companies estimate gas in place at 5 Tcf. Also active is Dominion Petroleum, which has said it may seek farm-in partners for its Block 7.

Kenya, Madagascar

Offshore Kenya will host stepped-up activity in 2012. Anadarko, which was an early entrant in the country, has acquired 2-D and 3-D data. “The 3-D data has been key,” says Tedesco. “We haven’t yet selected where we are going to drill one to two wells, but it will be well within our Kenya boundaries.”

In addition to Anadarko’s drilling program, slated for later in the year, Apache, operating with a 50% interest, is expected to begin drilling by midyear on the Mbawa prospect on Block L8, offshore in the Lamu Basin. Origin Energy (25%), Pancontinental (15%) and Tullow Oil (10%) are other partners in the block.

Afren Energy plans to drill an offshore exploratory well in both Block L17/18 offshore Kenya and the adjoining Tanga Block in Tanzania in the second half of the year. Afren holds a 20% share in the license, which is operated by Tullow.

The action in Madagascar remains on the drawing board. Exxon/Mobil, the operator, with 50%, BG (30%), SK Innovation (10%) and PVEP Corp. (10%) hold the 15,840-squarekilometer Majunga Offshore Profonde Block. The block, considered to be oil-prone, forms a largely unexplored frontier basin.

Comoros, which is a group of islands between northern Madagascar and Mozambique in the Mozambique Channel, has awarded its first-ever oil exploration license to privately owned Bahari Resources Ltd. The acreage is adjacent to areas 1 and 4 in Mozambique’s Rovuma Delta. Under the agreement, Bahari will undertake a phased seismic and drilling program.

The government is developing regulations for its exploration efforts, and expects to put a petroleum code in place by 2013. It hopes to hold a licensing round within two years.