After years of political upheaval and brutal civil wars, particularly in Liberia, Sierra Leone and Côte d’Ivoire, the region is now beginning to experience a more positive environment for oil and gas development.
Jeanne M. Perdue, Contributing Editor
The Gulf of Guinea is one of the world’s most important deepwater plays. Oil production there is expected to climb rapidly during the next 10 years. China has indicated great interest in West African oil resources, and it recently became Africa’s second-biggest trading partner behind the US.
US President Barack Obama’s recent visit to Ghana was an indicator of how his country intends to secure its West African oil and gas interests and give China some serious competition. During that visit, Obama made it clear that, if the US wants to compete with China in Africa, it will need to commit more to projects like the 421-mi-long West African Gas Pipeline, which is scheduled to begin delivering gas early next year from Nigeria’s Niger River Delta to Benin, Togo and Ghana.
According to Patrick Morris, CEO of Canadian producer Gold Star Resources Corp., West Africa currently offers “unparalleled opportunities” for both majors and independents. Morris said the recent discovery of the giant Jubilee Field in Ghana, coupled with Obama’s new African foreign policy, has helped to make West Africa a “desirable destination for oil and gas exploration and production.” Seismic surveys are underway, and drilling rigs are being relocated to the area.
GHANA
Ghana will begin pumping crude oil next year and expects to begin producing about 500,000 bopd by 2014. The recently sanctioned Jubilee project, with resources of around 1.2 billion boe and valued at $15 billion, will put Ghana on the road to becoming a significant new oil province. Field operator Tullow Oil plans to produce first oil in the second half of 2010.
On July 13, 2009, the Minister of Energy in Ghana formally approved the Phase 1 Development Plan and Unitization Agreement of Jubilee Field. It is estimated that this first phase of development will produce more than 300 million bbl of oil. The plan calls for up to 17 wells, including up to nine oil producers (five have been drilled already), five water injection wells and three gas injection wells. The eastern extension of Jubilee Field is due to be appraised with two wells in the second half of 2009. Three-dimensional seismic data in the region is currently being processed and interpreted to evaluate surrounding prospectivity and to optimize the location of the nearby Teak exploration well, scheduled to spud in the fourth quarter of 2009.
Jubilee Field will be developed using an FPSO with the ability to deliver 120,000 bopd, inject water at a rate of 230,000 bpd and handle up to 160 MMcfd of natural gas for export or re-injection, thereby eliminating gas flaring. Design work on the FPSO and subsea facilities began in July 2008, and several contracts have been awarded to equipment providers.
Jubilee Field straddles the boundary of the West Cape Three Points and Deepwater Tano Blocks offshore Ghana. According to the Unitization Agreement, Tullow’s initial equity interest in the Jubilee Unit Area as operator is 34.70%. Other partners are Kosmos Energy (23.49%), Anadarko Petroleum (23.49%), Sabre Oil & Gas (2.81%), the EO Group (1.75%) and the Ghana National Petroleum Corp. (GNPC, 13.75%).
Kosmos is backed by private equity firms Warburg Pincus and Blackstone Group, which invested $300 million in 2004 and led an additional $500 million funding in 2008. Kosmos Energy, which recently secured $750 million in loans from a consortium of eight banks, still plans to sell its stake in Jubilee, which could be worth $3 billion–$5 billion.
So far, Royal Dutch Shell, BP, Chevron, ExxonMobil, Italy’s Eni, India’s ONGC Videsh, China National Offshore Oil Corp. and GNPC have indicated interest in buying Kosmos’ Jubilee stake. The bid deadline has been extended to give bidders time to digest major developments.
Ghana’s government also approved GNPC’s petroleum agreement with Vanco Ghana Ltd. and Lukoil Overseas Ghana Ltd. for the Cape Three Points deepwater block offshore. The agreement was approved by the Ghanaian Parliament following the agreement’s endorsement by the Committee on Mines and Energy. The committee described the contract as “an improvement over the original Vanco agreement ratified by the House in 2002.”
In the new petroleum agreement, operator Vanco would have 28.339% interest and Lukoil would have 56.661%. GNPC has 15% carried interest through exploration and development, with the option to take an additional 5% interest upon commercial discovery. The agreement provides a five-year exploration period. Within the first three years, the contractor will have to acquire, process and interpret a minimum of 1,500 sq km of new 3D seismic data and drill at least two exploration wells in the contract area—a minimum $100 million investment. In fourth and fifth years, $45 million will need to be invested for seismic data reprocessing and an additional exploration well.
Under the new agreement, the state will be the sole owner of any associated gas produced from the contract area, and GNPC will have the right to take off all associated gas for its own use. Partners will pay GNPC $200,000 annually during the first five years and $300,000 per year during the development and production periods to help GNPC develop a training program to teach Ghanaians management and technical skills associated with petroleum operations.
LIBERIA
On June 12, 2009, Gold Star Resources acquired International Resource Strategies Liberia Energy Inc. The Canadian junior firm plans to develop new fields onshore Liberia.
Gold Star President and CEO Patrick Morris commented: “The Liberian political environment has stabilized, and we’re seeing a more positive reception from local governments encouraging investment in new oil exploration projects. Gold Star Resources intends to set the trend for junior resource companies seeking to gain a profitable presence in Liberia and elsewhere in West Africa. Larger energy companies are competing for offshore resources all along the African coast, but have not expressed any true interest for any onshore oil and gas exploration. That’s fine with us. We see substantive exploration opportunities onshore.”
Liberia’s National Legislature ratified two production-sharing contracts for the National Oil Company of Liberia, one with Nigerian oil company Oranto Petroleum Ltd., worth $30 million for offshore Block LB-14, and one with Anadarko Petroleum Corp., worth $154 million for offshore Block LB-10. On July 23, 2009, these two agreements were signed by Liberian President Ellen Johnson-Sirleaf, enabling the two companies to begin operations immediately. Seismic surveys must begin within six months, and at least one well must be drilled, according to the terms. Johnson-Sirleaf lauded members of the National Legislature for passing the bills, describing them as important instruments for Liberia’s development agenda.
ANGOLA
Angola is the second-largest oil producer in sub-Saharan Africa after Nigeria. OPEC President and Angolan Oil Minister Jose Maria Botelho de Vasconcelos (Fig. 1) recently said his country should be allowed to exceed OPEC’s output quotas to fund post-war reconstruction, comparing the situation to Iraq.
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Fig. 1. Angolan Oil Minister and OPEC President Jose Maria Botelho de Vasconcelos.
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“We lived through nearly 30 years of war, and our cities are undergoing reconstruction,” he said at a trade fair in Luanda. “We are trying to get from the organization some understanding relative to this situation.”
OPEC’s quotas and lower oil prices have hit Angola hard, as the nation relies on oil for more than 90% of its income. Its OPEC quota is reported to be 1.517 million bpd, but production was close to 1.8 million bpd in June. Angola’s civil war ended in 2002, and the country joined OPEC in 2007 and took over the presidency in January of this year.
In May, Angolan national oil company Sonangol and BP announced the Oberon oil discovery in ultra-deepwater Block 31—the 18th discovery in that block. It is located in the southern portion of Block 31, about 335 km northwest of Luanda and 4.3 km northeast of the Dione discovery. The Oberon-1 well, drilled in a water depth of 1,624 m, reached a TVD of 3,622 m below sea level. Well tests confirmed reservoir flow capacity of 5,000 bpd. Operator BP holds a 26.67% interest. Partners include Esso E&P Angola (25%), Sonangol (20%), Statoil Angola (13.33%), Marathon (10%) and Total (5%).
On July 2, 2009, Chevron announced that its subsidiary Cabinda Gulf Oil Co. Ltd. and its partners commenced crude oil production ahead of schedule from the Mafumeira Norte project offshore Angola. Located in 49 m of water about 24 km off the coast, the Mafumeira Norte project is the first-phase development of Mafumeira Field, located in Area A of Block 0. The project entails 14 wells tied in to the existing Kungulo water injection platform, and it is expected to reach peak production of 30,000 bpd of crude oil and 30 MMcfd of gas in 2011.
The engineering, procurement, construction and installation contract for the Mafumeira Norte platform was awarded to Sonamet Lobito, a joint venture between Sonangol and Acergy—its first such contract—and fabrication was completed at Sonamet’s Lobito yard in southern Angola. Chevron has a 39.2% interest and is the operator of the Block 0 contractor group, which includes Sonangol (41%), Total (10%) and Eni (9.8%).
DPS (Bristol) Ltd. announced first oil from the D-111 jackup rig stationed at Morsa West Field, offshore Angola. Sonangol’s Morsa West marginal field development project was awarded to Angola Drilling Co. (ADC) after having been rejected as uneconomic by other companies. However, working closely together, DPS and ADC have managed to supply a viable and economic shallow-water solution in the form of a jackup rig with a 20,000-bpd central processing facility.
DPS had Engineering, Procurement and Construction (EPC) responsibilities for all process and utility systems onboard the central processing facility, which included surveying the original rig to ensure that the required processing and power- generation systems could be installed, the subsequent design and supply of the integrated system, as well as infield and export flow assurance studies.
“This brownfield project has tested every aspect of the company’s capability,” said Matt Banks, operations director at DPS. “The pipe laydown area on the cantilever deck could not be used for process equipment, which greatly limited the space for installation. This led to the design and 3D modeling of an innovative layout, enabling the process facility to be shoehorned into an already tight footprint.”
Two Chinese national oil companies, CNOOC and Sinopec, have agreed to purchase a stake in an offshore Angolan oil block from Marathon Oil, forming a 50/50 venture and paying $1.3 billion for a 20% stake in the block, which has already yielded 12 discoveries. Marathon will retain a 10% working interest in the block, which is operated by Total (30%). Other partners include ExxonMobil (15%), Portugal’s Galp (5%) and Sonangol (20%). All other partners in the block have rights of first refusal over the sale, which means they could step in and buy the 20% stake at the same price the Chinese companies offered. The transaction is expected to close by year end.
CONGO
Murphy Oil Corp. made a new oil discovery at the Turquoise Marine-1 prospect located in the Mer Profonde Sud (MPS) Block, offshore the Republic of Congo. The well was drilled to a depth of 12,060 ft and encountered more than 136 ft of net oil pay. The discovery is about 17 mi from Azurite Field, where Murphy is the operator.
“This marks our second discovery in the MPS Block; the rig now moves to the Diamant Marine-1 prospect, which lies even closer to Azurite Field,” said CEO David Wood. “We will be looking at appraisal and development options for Turquoise Marine-1 in the coming months and seeking to optimize the existing Azurite Field infrastructure.”
Murphy serves as operator and has a 50% interest in Turquoise Marine-1 and the MPS block. Partners are PA Resources, with a 35% stake, and Societe Nationale des Petroles du Congo, with a 15% stake.
Total’s Moho Nord Marine-4 well proved a 163-m, high-quality oil column in the Albian F structure, 4.4 km northwest of the Tertiary structure tapped last year by the MHNM-3 well in the northern part of the Moho-Bilondo license.
The new discovery, 75 km offshore in 1,078-m water depth, flowed 8,100 bpd of oil through a 52⁄64-in. choke. Total claims the well confirms the existence of significant Albian resources in this part of the license. The company started production from the southern part of Moho-Bilondo in April 2008. Preliminary development studies for Moho Nord are underway.
EQUATORIAL GUINEA
Noble Energy and its partners plan to spend $1.3 billion to produce oil and gas from Aseng Field in Block I offshore Equatorial Guinea. Partners include PA Resources (6%), Atlas Petroleum (29%), Glencore Exploration (25%) and national oil company GEPetrol (5%). Technical operator Noble Energy has a 40% interest, and its share of the total spending will be $530 million, with the majority to be invested in 2010 and 2011.
Formerly known as Benita, Aseng Field was originally discovered in 2007 and was thought to be a gas condensate reservoir. Two appraisal wells were then drilled in the structure, with the first well identifying the oil resource and the second well determining reservoir limits. A plan of development submitted to the government in late 2008 has now been sanctioned.
Initial development of the Aseng oil project will include five subsea wells flowing to a leased FPSO moored in 3,100-ft waters. The FPSO will be designed to handle 120,000 bpd of liquids, including 80,000 bpd of oil. In addition, the vessel will be capable of reinjecting 170 MMcfd of natural gas, as well as produced water, back into the reservoir to maintain pressure and maximize oil recovery. Hydrocarbon storage on the FPSO will be about 1.5 million bbl of oil and condensate.
Noble has secured two rigs to support the Aseng development work. The Atwood Hunter semisubmersible rig is scheduled to arrive in mid-2010. A contract was signed in late July for a second rig, the Pride South Pacific, which is to be delivered in the first quarter of 2010.
First oil, at a rate of 50,000 bopd, is expected by mid-2012. Over the life of the project, Noble expects to recover 100–120 million bbl of hydrocarbon liquids, with initial reserve bookings beginning this year. In addition, there is an estimated 450–550 Bcf of gas resource at Aseng that will be produced as part of an integrated gas project once the pressure maintenance phase is completed.
NIGERIA
The Nigerian National Petroleum Corporation (NNPC) has discovered crude oil at its Oil Mining Lease (OML) 64 situated in Delta state. The well was drilled to a depth of 11,150 ft and encountered six major hydrocarbon intervals, three of which are oil-bearing with a net thickness of about 50 ft. Oil production rates range from 1,284 bopd to 3,110 bopd with zero water content.
Russian President Dmitry Medvedev visited Nigeria in June to discuss how Gazprom can help put an end to gas flaring there. Medvedev was the first Kremlin leader to visit Nigeria since diplomatic ties were established nearly 50 years ago. During the visit, Gazprom signed a cooperation agreement with NNPC to enhance the development of the Nigerian gas industry, build new pipelines, develop infrastructure and terminate gas flaring.
Medvedev said Moscow could invest up to $2.5 billion in Nigeria’s energy sector as Russia tries to catch up with China in gaining a share of Africa’s natural resources. “Gazprom is ready to adjust its activities in Nigeria to the guidelines of the National Gas Master Plan that has been approved by President Umaru Yar’Adua,” he said. Gazprom is also keen to get involved in the Trans-Saharan Pipeline, which is aimed at bringing Nigerian gas to Europe.
Chevron is investing $3 billion a year in existing and new oil and gas projects in Nigeria. ExxonMobil has plans to invest $60 billion in Nigeria over the next several years. However, higher royalty and tax clauses in the proposed energy reform bill, along with continued offshore attacks and pipeline sabotage by militant groups, are making them think twice.
The reform bill, in the works for more than a decade, contains changes initiated by Yar’Adua that would allow the government to renegotiate existing deepwater contracts and repossess unexplored fields already contracted to companies. Yar’Adua brought former OPEC Secretary General Dr. Rilwanu Lukman out of retirement to help draft the legislation. “Some of the provisions in the old law are archaic, out of date,” Lukman said. “We want to create a win-win situation for everybody. If our new terms and conditions are too harsh, it doesn’t help us.”
Nigeria has lost billions of dollars in oil revenue due to militant attacks in the Niger Delta. On June 8, 2009, the Movement for the Emancipation of the Niger Delta (MEND), a major militant group, sent oil workers a notice to vacate the region or risk being attacked. On June 25, 2009, Yar’Adua granted amnesty to the militants in an effort to bring peace, security, stability and development to the area. Yar’Adua offered presidential pardon, education and training to those who lay down their arms by Oct. 4, 2009, as well as the release of militant leader Henry Okah from jail.
The very next day, MEND fighters attacked Shell’s Afremo offshore oil field, and, on June 29, 2009, they attacked Shell’s Forcados oil platform, leaving the facilities on fire. Shell’s communications director for Africa, Olay Lisone, told Reuters that “in the past 10 days we have had five attacks that have reduced our oil production to around 140,000 bpd,” or about half of what Nigerian production was earlier in the year. On July 3, 2009, Shell announced that it had completely shut down its entire operations in the Western Niger Delta due to the attacks on its workers and infrastructure.
Finally, on July 15, 2009, MEND declared a 60-day ceasefire following the release of Okah by the government. However, foreign oil majors still face issues when trying to do business in Nigeria.
Using “local content” or native workers on oil and gas projects is one of these issues. Shell E&P Africa VP Markus Droll called Nigeria’s requirements for local content too aggressive. “If you set 20% local content today, it can’t be 40% tomorrow; that takes time,” he said. “If you set too aggressive a target, you will fail and everyone will say, ‘I think we told you it can’t be done in Nigeria.’ We must look for the right pace of Nigerian content; we need a stable and predictive investment climate, and, above all, we have to get a more secure operating environment, especially in the delta. I think I am not exaggerating or overstating the point if I say that security today is our biggest challenge.”
He said Shell’s Bonny and Port Harcourt developments east of the Niger Delta are producing less than 150,000 bpd when they could be producing 800,000 bpd or more. He bemoaned the fact that the country has abundant gas resources to meet both domestic and export requirements, but the world-class Nigerian Liquefied Natural Gas (NLNG) plant is virtually empty owing to inadequate gas supply.
“That also has survival implications in terms of long-term contracts that NLNG has made with various customers around the world,” Droll said. “What is happening in NLNG today is that we cannot send enough gas to keep the company going. … We worry about security of jobs for our own employees; and we worry about the jobs for the contractors.”
The FPSO Armada Perdana sails from the Keppel shipyard in Singapore in August 2009 for Allied Energy’s Oyo Field in OML 120, which lies about 70 km off the coast of Nigeria. First oil production (about 25,000 bpd) is expected during the fourth quarter of 2009. The FPSO is capable of processing 45,000 bopd, can store up to 1 million bbl of processed oil, and has topsides equipped for water and gas injection.
After arriving at the Keppel shipyard in May last year, the vessel underwent fabrication, installation and integration of a 12-point-spread mooring system, riser balcony, topside facilities and the upgrade of accommodation and auxiliary support systems. The fast-track conversion project was on time and on budget ($1 million), and boasted 1.8 million man-hours without a lost-time injury.
At the christening ceremony in Singapore, Kase Lawal, chairman and CEO of CAMAC International Corp., parent company of Allied Energy, said that more than $1.1 billion has been invested to develop Oyo Field since its discovery in 1995. Lawal said the field also contains vast gas resources and that various options are being evaluated, considering Nigeria’s preference of local use for power generation.
“We are in preliminary dialogue with some stakeholders in the development of our gas resources, including LNG, LPG and power, but this is still at initial levels,” Lawal said.
SÃO TOMÉ AND PRÍNCIPE
China Petrochemical Corp. (Sinopec) has made an offer to pay $7.22 billion for Addax Petroleum Corp. The deal would give Sinopec a 36% stake in Iraqi Kurdistan’s prolific Taq Taq Field as well as the Joint Development Zone (JDZ) that straddles the offshore border of Nigeria and São Tomé/Príncipe.
According to IHS Herold, several senior officers and directors have already entered into lock-up agreements representing 38% of the total outstanding diluted shares, so prospects are good that the merger will go forward. The Chinese government has until Aug. 24, 2009, to approve Sinopec’s offer.
In the JDZ, Addax Petroleum has a 40% interest in Block 1, a 14.33% interest in Block 2, a 15% stake in Block 3, and is the operator of Block 4 with a 38.3% interest. Once the acquisition is complete Sinopec will hold a 43% stake in Block 2 of the JDZ and will “immediately become the dominant player in São Tomé and Príncipe’s oil sector,” according to IHS analysts.
“With access to significant capital reserves and promises of tax breaks from the government, China’s NOCs are formidable competitors, routinely bidding 30% over the market value for companies they seek to acquire. The 47% premium for Addax will likely prove irresistible to the company’s senior management and shareholders alike,” said China energy analyst Tom Grieder of IHS Global Insight.
“By taking on personnel and operations from Addax, Sinopec can also develop its deepwater expertise,” said Grieder. “Sinopec is planning to drill its first deepwater well in the South China Sea in 2010, and the experience provided by Addax could help the company in other deepwater ventures across the globe.”
Sinopec is drilling its first exploration well in the JDZ this summer after a lengthy delay caused by the shortage of deepwater rigs since 2006, when the production-sharing contract was signed. The TransOcean Sedco-702 deepwater rig arrived at Block 2 in early July and started drilling immediately. The prospect reportedly has 275 million bbl of reserves.
São Tomé and Príncipe’s National Oil Agency (ANP) is seeking interested parties for an auction of oil exploration blocks in the country’s exclusive economic area. ANP Chief Executive Luís Prazeres said the deadline for carrying out the auction depended on National Assembly approval of a legislative package.
In June, Prazeres and Minister of Natural Resources Cristina Dias attended the annual AAPG conference in Denver, where they presented the 14 blocks up for auction in São Tomé and Príncipe’s offshore area. According to Prazeres, companies already involved in the JDZ, such as Sinopec, have shown interest in the area.
NAMIBIA
Russian explorer Sintezneftgaz Namibia hit a gas discovery with potentially 14 Tcf in Block 1711 of the Kunene prospect offshore Namibia while drilling for oil. Sintezneftgaz partnered with Energulf Resources, PetroSA, Kunene Energy and Namibia state-owned Namcor to drill the Kunene-1 well, the first in the block.
According to Namibian Petroleum Commissioner Immanuel Mulunga, “It was not possible to fully evaluate the hydrocarbon potential of the penetrated sections due to operational problems during testing. The reservoir quality of the tested zones was not very good, perhaps due to nearby igneous activity.”
Exploration activities will continue to establish more accurately the quantities and commerciality of the hydrocarbons in the block.
CAMEROON
Cameroon signed three exploration agreements with foreign oil companies within two weeks in July: one with Noble Energy and Petronas for the offshore Tilapia Block in the Douala/Kribi-Campo Basin, one with Total E&P Cameroon for the offshore Lungahe Block in the Rio del Rey Basin, and the third with Glencore Exploration. Cameroon currently produces about 85,000 bopd, which it hopes to increase with these projects.
Malaysia’s Petronas and US firm Noble Energy signed a seven-year, $119 million oil and gas exploration deal for Tilapia. The area off the coast of the main port of Douala has estimated reserves of 40–70 million bbl of oil, according to the national oil company. During the first three years, the companies will invest $61 million to acquire, process and interpret at least 600 km of 2D seismic data and will drill two exploration wells. Depending on the results, the program could be extended by two additional periods of two years to drill another exploration well. If commercial hydrocarbons are discovered, Cameroon could take a 25% stake in the production. Noble Energy and Petronas are already partners in the Yoyo gas project.
Total E&P Cameroon signed a deal on July 14, 2009, with the Cameroon government permitting oil exploration in the 83.6-sq-km Longahe Block in the southwestern area of Rio del Ray. The agreement grants Total 100% interest to explore for oil and gas for two years, renewable once, for an estimated cost of $10 million. If oil is found, the consortium will enter production for 20 years, with possibly a 10-year extension. Total E&P, which accounts for nearly 65% of Cameroon’s oil output, will invest 75% at the start of the project, while Cameroon will be responsible for the remainder.
The third deal with Glencore Exploration is also in the Rio del Rey Basin— in the Bolongo Block. The three-year, renewable agreement involves the acquisition, processing and interpretation of at least 350 sq km of 3D seismic data as well as the drilling of one exploration well in the block, an estimated investment of $40 million.
IVORY COAST
Vantage Drilling Co. announced that its Sapphire Driller jackup rig has been awarded a contract by Foxtrot International for a drilling program off the Ivory Coast upon completion of construction and commissioning in Singapore. The contract will start in August 2009 and last three to six months, with revenues estimated to be worth about $13.6–$23.8 million.
A second, unnamed customer has signed a contract with Vantage for another ultra-premium jackup rig for a six- to 12-month drilling program offshore West Africa in 2011. Vantage may use one of its four Baker Marine Pacific Class 375 jackups for that job. These rigs are independent-leg, cantilever, non-harsh-environment jackups with a drilling depth of about 30,000 ft, capable of operating in 375-ft waters.
Anadarko Petroleum Corp. plans to take the drillship Belford Dolphin (Fig. 2) from the Gulf of Mexico to West Africa. The first port of call is the Venus prospect offshore Sierra Leone, followed by the South Grand Lahou prospect off the Ivory Coast. The final destination for the Belford Dolphin is Mozambique in late 2009, where Anadarko plans to do a multi-well, deepwater prospecting program in the Rovuma Basin. 
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Fig. 2. Anadarko is mobilizing the drillship Belford Dolphin from the Gulf of Mexico to the Venus prospect offshore Sierra Leone.
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