Until recently, big oil companies gave little thought to south Saharan African beyond the coast of Nigeria and Angola

There is a rapid change in the Nigerian and Angolan petroleum markets, especially after the significant find off the Atlantic coast of Sierra Leone, where both Anadarko Petroleum and U.K-based Tullow received exploration licenses, and another strike in Uganda (a promising country in oil production), where Tullow operates.
So the questions to address, how much oil is there? Is it reflected in the stock prices? This prospect will be more definitely appraised as new wells are drilled over the next year, but there is a persuasive case that the potential could top a billion barrels in West Africa. If that proves out, then shares of Tullow and Anadarko remain undervalued. One of the wells generating excitement called Venus, along side the coast of Sierra Leone. Few holes have been poked in the in the new West Africa prospect, so Venus location is creating a possible bookend that with the large Jubilee field at the prospect’s other end off the coast of Ghana (discovered in 2007), the entire 1100 kilometers coast could hold hydrocarbons. The other recent significant strike, made by Tullow, is in the Lake Albert area of Uganda.

Oil estimates
Christopher Brown, the lead analyst for sub- Saharan African for Wood Mackenzie, noted that the exploration licenses to drill in that region are more valuable than they were few months ago. Wood Mackenzie does not comment on how much oil is in the entire prospect, but Anadarko and Tullow’s analysis said that the Jubilee field in which they own 24 percent and 35 percent stakes respectively, holds from 600 million to 1.8 billion barrels. The Jubilee field is expected to come online in the third quarter of 2010 and produce 120 thousand bpd.
In Uganda, Tullow has found about 700 million barrels of oil, though the entire amount has not been audited. There is probably another 1.5 billion barrels to be found in Uganda and that Tullow is looking for a partner to bring its Ugandan finds into production and Tullow total production should grow from 60 thousand boepd to 200 thousand boepd in the short medium term.

Rigs working In West Africa
There are approximately 60 rigs working off West Africa compared to 46 in October 2004. These include 12 drill-ships, 20 semisubmersibles and 28 jack-ups. Angola leads the West African countries with 19 rigs, followed by Nigeria with 15 rigs. The numbers drop off with Gabon, Cameron and Congo each with six rigs. Ghana with three, Cote Divoire with two, and Equatorial Guinea, Sao Tome Principe with one each. Transocean owns 13 jack-ups and 12 semisubmersibles working off the West African coast. The current average of earning is about $338 thousand per day.

Future Of ultra-deepwater
Big companies are interested in ultra deep-water exploration in Africa that is why they are battling to get the big share of the oil cake.
In Nigeria, Afren provided an additional operational update regarding an acquisition of interest in the Nigerian offshore OPL 310 license. Currently, Ebok-5 is drilled by Transocean Adriatic jack up drilling unit. This represents the start of the initial development phase of the Ebok field, which carries the following drilling targets and objectives:

• Fault block west, one well appraisal (Ebok-5) with recoverable resources of 25 mmbbls
• One appraisal (Ebok-6) well with recoverable resources of 8 mmbbls
• D2 reservoir (fault block 1&2) 5 production wells to be drilled with recoverable resources of 27 mmbbls
• D1 reservoir (fault block 1&2) one production well to be drilled with recoverable resources of 26 mmbbls

Following completion of the initial development phase, production of 15 thousand bopd is set to be delivered in 2010. Afren plans to drill one appraisal well at Okwok field in mid 2010.
Earlier, Afren has extended its partnership in Nigeria with Oriental Energy Resources Ltd and formed its first Nigerian partnership with Addax Pet, to jointly develop the Okwok field.
Moving to Angola, the country rises as West Africa’s production leader. The strength of West Africa’s offshore development, particularly in Nigeria and Angola, is propelling the region to grow faster than any other in the energy industry. Industry experts predict annual project spending will hit $13 billion by next year. Nigeria’s production has dropped off by 20 percent since 2006. The movement for the Emancipation of the Niger Delta has attacked and kidnapped major industry employees, which has led to the production decrease. It currently produces about 1.7 MMB/D, down from about 2.6 MMB/D. The country’s natural gas production comes in around 185 TCF. Angola’s domestic product has expanded by more than 10 percent annually and reached to 1.8 MMB/D in Q1st, 2009.
The richest oil blocks in Angola are examples to attract investors to work in this country. For instance,

• Esso Angola and its ventures partners in block (15) are celebrating 15 years of safe and successful operations in Angola, which maximize the value of the country’s resources, creating long-term benefits for the Angolan people. The block surpassed one billion barrels in cumulative production in September 2009, and is currently producing over 600 thousand bpd. Esso Exploration Angola Ltd is the operator of block 15 with 40 percent interest, the other co-ventures are BP Exploration Ltd 26.67 percent, Eni Angola Exploration 20 percent and Statoil Angola 13.33 percent.
• BP Exploration Angola announced the 18th discovery in block (31). The well test results confirmed the capacity of the reservoir to flow in excess of 5000 bpd under production conditions. BP Exploration Angola is the operator holds 26.67 percent; the other interest owners in block 31 are Esso Exploration & Production Angola with 25 percent, Sonangol with 20 percent, Statoil Angola with 13.33 percent, Marathon Int. Pet Angola with 10 percent and the remaining 5 percent to TEPA Ltd.
• Total announced that its subsidiary, TEBA Ltd discovered oil on block (17/06), in the deep waters, Gardenia-1 is the first discovery and produced 4000 bpd during tests. Sonangol E.P is the concessionary of block (17/06), TEBA is the operator with 30 percent stake, partners are; Sonangol 30 percent, SSI LTD 27.5 percent, ACREP Bloco 5 percent, Falcon Oil Holding Angola 5 percent and PARTEX Oil and Gas Corp 2.5 percent.
• Eni and Sonangol announced oil discovery in block (15/06), Cabaca Norte -1 well. It produced 6500 bpd during production tests. The successful discovery due to ENI’s deepwater experience and use of its proprietary technology to minimize the technical risks. ENI is the operator and has 35 percent stake, while Sonangol owns 15 percent, SSI 20 percent, Total 15 percent, Falcon Oil Holding Angola, Petrobras Int and Statoil Angola each with 5 percent.

In addition to Nigeria and Angola, Uganda is now considered as the newcomer in oil field, after remarkable exploration success by the two companies Tullow Oil Plc and Heritage Oil Ltd that drilled about 15 wells in the Lake Albert basin of Uganda with 100 percent success rate. Reserves reach about one billion of oil equivalent. The two companies have long talked of exporting the lake Albert oil to world market through Kenya, by rail to the port of Mombassa and eventually through a large pipeline to carry 200 thousand bopd, but this would require about 1200 kilometer pipeline.
The waxy nature of the crude necessitates a combination of chemical treatment and heating to keep the oil flowing. But, the size and expense of the project would put a tremendous strain on the two companies, so they had to find a partner from International oil companies in order to sell part of its stake. The Chinese Oil Co (CNOOC) has interest to enter the Ugandan Oil Project. But, such entrance requires Ugandan official approval, which, among its conditions, requires the operator to build a local refinery, the pipeline and share of the oil block costs. Such requirements may count for $5-billion investments. Chinese companies will face stiff competition from oil majors. In addition, China is facing opposition in other African countries over some oil acquisitions and criticism over its decision to bring its own labor and technical problems in its projects.
Also Iran, the U.S particularly ExxonMobil Corp and other countries have all expressed interest in helping Uganda exploit the resources, a move that has raised suspicion over their generosity. The U.S oil giant is joining France’s Total, Eni of Italy and China state-owned CNOOC as a potential partner pre-selected to enter the Ugandan oil project.
The fourth country that is worth our attention is Ghana. Jubilee oil field is the largest Ghanaian field. Oil majors show interest in the stakes put up for sale by Kosmos Energy LLC and Tullow Oil. Ghana will start producing from the offshore Jubilee oil field in over a year. Tullow appraised one well that was drilled by the use of Atwood Hunter semisubmersible rig in a water depth of 1079 meters. Following the conclusion of operations, the rig moved to drill another development well. The results of drilling, wire line logs and samples of reservoir fluid confirm that the Jubilee field is estimated to have between 600 million to 1200 million barrel of reserves. In addition to Kosmos, the field’s other partners include Tullow Oil Plc and Anadarko Pet Corp. It is worth mentioning that operations were not affected by the decision of operator Kosmos Energy to sell its 30 percent stake in the field. ExxonMobil agreed to pay $4 billion for the stake, but that could be disrupted by China National Offshore Oil Co., which is contemplating a rival bid in collaboration with Ghana National Pet Corp.

By Mostafa Mabrouk
Vice Chairman Assistant for Economic Affairs, Ganope