Madagascar to become oil producer in 3-4 years

Sep 30, 2005 02:00 AM

Madagascar is expected to start producing crude oil for the first time within the next 3-4 years, the government said.
Several blocks on land and offshore to the west and south of the huge Indian Ocean island are expected to yield 60,000 bpd at the start of production, Elise Razaka, director general of the Office of National Mines and Strategic Industries, told.

Razaka said Madagascar currently consumes about 10,000 barrels of oil a day, so the expected production would leave it with a substantial export surplus.
"There is a very good chance that within 3-4 years, we will have crude oil production coming out of Madagascar," Razaka said. "But much depends on the price of petrol. If it keeps going up, the petrol companies may start sooner."

Madagascar, located off the southeast coast of Africa, is known to have oil and gas reserves, but they are inadequately mapped and drilling there is only at an exploratory stage. However, interest from the oil giants is growing rapidly, spurred by record highs in world oil prices, which in August breached $ 70 a barrel.
A promising seismic study conducted in 2004 by privately held US exploration company Vanco Energy has also generated a rush of interest. In July, US oil major ExxonMobil boosted its oil and gas presence in Madagascar by taking a 70 % interest in two licences held by small UK-listed oil explorer Sterling Energy.

Razaka said the initial production could change based on factors including world crude prices and the still-unknown extent of the deposits.
"The rate of production will depend on the petrol companies but probably we will have somewhere near 50,000 bpd offshore and another 10,000 onshore, depending on the size of the reserves," he said.

He said new technology for extracting oil obtained from bituminous shale rock meant Madagascar's onshore deposits were commercially viable at anything over $ 30 per barrel.
"Below $ 30, we lose money because of the energy needed to blast the petrol out of the rock," he said.
He said in the case of one onshore block: "We are almost certain we have 3 bn barrels."

Besides Exxon, Norway's Norsk Hydro had already invested in offshore blocks, he said. The government was in the process of negotiating concessions with several other oil giants, including Chevron Texaco, Royal Dutch Shell, BP, Total, Norway's Statoil and China's National Petroleum Corporation, he said. American explorer firm Nopic is doing a seismic survey off the west coast.
Razaka said oil could become Madagascar's major foreign currency earner, bigger than any of its mineral projects.

The impoverished island is being explored by mining companies looking for gold, gemstones, nickel and bauxite. In August, Rio Tinto confirmed it would go ahead with a $ 775 mm ilmenite mine in the south.
"Suppose we can get 100,000 bpd at $ 60 per barrel. That's $ 6 mm a day, much of it going to Madagascar" said Razaka. "Compare that with $ 20 mm per year that government expects from (Rio Tinto's) ilmenite mine."

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