Oil firms flow to West Africa

Nov 22, 2002 01:00 AM

by Monica Perin

The waters off West Africa are bubbling with oil exploration activity. Modern wildcatters are flocking in waves to this hot new frontier, with many Houston firms in the forefront.
Discoveries to date point toward the presence of enormous reservoirs know as "elephant fields," and one energy industry compares the region to the "Persian Gulf in the 1960s." But the West African black gold rush is unique because the charge is being led more by independent prospectors than by major producers. The big players have concentrated on the Niger and Congo river deltas, while the rest of West Africa has been dominated by independents.
"West Africa is where more deep-water oil has been found in the last five years than any place else in the world -- and that makes it a very attractive place for investment," says Scott Griffiths, senior vice president for exploration at Houston-based Ocean Energy.

The company made the first important oil discovery in Equatorial Guinea with a significant strike in the Zafiro Field, which the company calls its "crown jewel." This year the field accounts for more than 25 % of Ocean Energy's total oil production and most of the company's growth. "Equatorial Guinea is our core producing asset," says Griffiths.
Houston-based Marathon Oil claimed a stake in Equatorial Guinea this year with two major acquisitions. Marathon acquired the interests of CMS Energy Oil & Gas for $ 993 mm in the first quarter, followed in June by the acquisition of Houston-based Globex Energy for $ 155 mm.
The two acquisitions gave Marathon a total of 300 mm boe in Equatorial Guinea, along with a 63 % interest in the Alba Field, which produces 250 mm cfpd of natural gas and is estimated to hold 5 tcf of gas. Marathon also has oil production and interests off Gabon and Angola, while Ocean Energy has exploration and production activities offshore of Nigeria, Angola and the Ivory Coast.

Nigeria and Angola currently lead West Africa in supplying the United States with 15% of its oil -- about the same amount imported from Saudi Arabia. African oil imports to the United States are expected to increase to 25 % in the next decade.
Africa's oil fields are just now beginning to be seen by the federal government as strategically important since they could significantly reduce US dependence on Middle Eastern oil. A seismic second look Major oil companies did quite a bit of seismic work off the coast of Africa in the 1970s and '80s, but wrote the area off as gas-prone and not economically viable for oil. In addition, the technology of the time was not advanced enough to drill in deep water.

But that all began to change in the 1990s, when new technological breakthroughs for deep-water drilling began coming online. "A lot of the deep-water technology being used by the industry now was developed in the Gulf of Mexico. A lot of barriers were overcome there," says Ocean Energy's Griffiths.
Some independents began taking another look at seismic data the majors had gathered in Africa and noticed that a lot of the geology was similar to formations in the Gulf. One of those was United Meridian Joe Bruso, now president of Sovereign Oil & Gas, was assigned to establish an international oil and gas division for United Meridian in 1991.
"We went to countries that were not on the flavour-of-the-month list. They were countries that were not seeing much investment at the time. The majors had come and gone," Bruso told earlier this year.
Setting an example for other independents to follow, United Meridian used existing data generated by the majors to begin evaluating reserves in West Africa. "Anybody who has worked in the Gulf of Mexico would feel right at home working with the geology in Nigeria," Bruso told.

Despite decades of substantial production, however, Bruso described Nigeria as still so under-explored that "it looks like Texas and Louisiana in about 1940." Bruso and partner Jim Allen formed Sovereign Oil in March 2000 to focus on the Nigerian shallow water and onshore fields. Meanwhile, in early 1998 Ocean Energy acquired United Meridian and its Ivory Coast oil and gas fields.
And in Equatorial Guinea, Ocean Energy is in an expansion mode. The company plans to drill 20 wells in a new expansion of the Zafiro Field and is looking to increase its acreage in the Corisco Bay block, says Griffiths. In Angola, Ocean Energy is the only US independent that is a project operator.
With partner ExxonMobil, Ocean Energy is drilling two deep-water exploratory wells in Angola's Kwanza Basin -- both bn-barrel prospects. Being the first to acquire acreage in these areas has been a big advantage for independents like Ocean Energy, Griffiths says.

The countries are eager for investment and development, so they offer very attractive terms initially. But once oil is discovered, the terms get tougher, Griffiths says. Investment in West Africa's deep water is expected to increase from $ 2 bn spent in 2001 to more than $ 5 bn by 2004. And the figure could soon double from there, according to The Offshore West Africa Report published by Douglas-Westwood, a British firm.
"West Africa is becoming increasingly important to a lot of US companies," says Griffiths. "It's a core building block of our company. We see a very bright future there."

The acceleration of exploration and production activity in West Africa is generating related commercial business in Houston.
Jarvis International Freight, a Houston-based freight-forwarding company, plans to begin two passenger and cargo flights daily to West Africa. The flights will mark the first direct air service to West Africa. And Jarvis will be the first freight forwarding company to ship cargo into Malabo, the capital of Equatorial Guinea, says Jose Martinez, the company's sales manager.
Jarvis is leasing two 747-400 planes capable of holding 200 passengers and cargo. The 15-hour direct flight will go from Houston to Malabo. From there, the planes will probably continue to Nigeria and Luanda before retracing their route back to Houston. Jarvis is also arranging continuing flights to many other destinations from Morocco to South Africa using African Airlines. "They're just waiting for this," Martinez says in reference to people in the Houston petroleum industry.

Up until now, Houston passengers and cargo bound for West Africa had to go through Europe -- a trip that takes three days. Crews of offshore drilling platforms rotate on a regular basis and will likely be using the new service, along with other customers. The planes will fly business/first class and coach.
Martinez says Jarvis has been planning this new venture for more than a year, based on market demand from current exploration and drilling activities in West Africa. The need was especially great in Equatorial Guinea, where the US government recently reopened an embassy that had been closed for a number of years.
Founded in 1984 by company President Ralph Wiseman, Jarvis has until now been a freight-forwarding and logistics company handling the shipping and tracking of heavy equipment for oilfield services companies such as Kellogg Brown & Root and Weatherford.

The growing ties between West African oil and local expertise were also evident at an oil and gas conference in Houston that brought together federal officials and US energy executives with oil ministers and other officials of nine West African countries. The event, held at the Westin Galleria Hotel, was sponsored by ExxonMobil and ChevronTexaco.
"All of this activity relating to West Africa is happening in Houston, not in London or Dubai or Rio de Janeiro," says Janice Van Dyke Walden, vice president of Vanco Energy in Houston. "The synergy is here because all the people that are needed to do it are here."

Source: American City Business Journals Inc.
Market Research

The International Affairs Institute (IAI) and OCP Policy Center recently launched a new book: The Future of Natural Gas. Markets and Geopolitics.

Cover_242-width

The book is an in-depth analysis of some of the fastest moving gas markets, attempting to define the trends of a resource that will have a decisive role in shaping the global economy and modelling the geopolitical dynamics in the next decades.

Some of the top scholars in the energy sector have contributed to this volume such as Gonzalo Escribano, Director Energy and Climate Change Programme, Elcano Royal Institute, Madrid, Coby van der Linde, Director Clingendael International Energy Programme, The Hague and Houda Ben Jannet Allal, General Director Observatoire Méditerranéen de l’Energie (OME), Paris.

For only €32.50 you have your own copy of The Future of Natural Gas. Markets and Geopolitics. Click here to order now!


 

Upcoming Conferences
« November 2018 »
November
MoTuWeThFrSaSu
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30

Register to announce Your Event

View All Events