A few notes on Africa E&P… Unexplored and unmissable

Notes on Africa (this is a follow up to my previous post from Dec 2010)East Africa deepwater…Big expectations in oil and gas from deepwater Mozambique and Tanzania after Anadarko’s Windjammer gas discovery confirmed the Rovuma basin as an emerging gas province.

With gas in nearby markets selling for $2-3/mcf, the lack of nearby infrastructure means that threshold commercial volumes will likely be high.

Much will be dependent on recovery rates per well (which can range from 50 bcf/d to 450 bcf/d offshore) but two subsequent gas finds (Barquentine and Lagosta) have already led to talk of there being enough gas to underpin an LNG development.

An even bigger prize is finding commercial oil after the Ironclad well penetrated a 38 metre column of oil and gas-saturated sands in one of two fan lobes of cretaceous sediments.

The ultimate prize would be the opening up of not only the Rovuma basin but also the other eight basins contained in the Mozambique channel which runs from Southern Tanzania to Madagascar.

Companies: (Mozambique) Anadarko, Tullow, Mitsui, BPRL, Videocon, Cove Energy, Eni, Statoil (Tanzania) Exxon, Statoil, BG, Tullow, Dominion, Aminex, Beach Energy, Orca Exploration, Artumas, Maurel and Prom.

Guyana basin – joined up stratigraphic? …

The Equatorial Atlantic Margin play has its origins when Africa and South America drifted apart. Following success in Ghana and subsequently Sierra Leone (with the Venus well), the industry is now turning its attention across the Atlantic to the stratigraphic potential of the Guyana basin, which stretches across Guyana, Suriname and French Guiana. The main challenge is to define prospective traps along the migration path from mature source rocks. Much of the multi billion barrel potential is thought to exist in stratigraphic traps in tertiary turbidite sandstones and deeper cretaceous fan systems similar to the Jubilee play.

This is real frontier exploration with promise.

Companies: Exxon, Shell, Total, Repsol, Tullow, Noble Energy, Murphy Oil, Inpex, Petro-Hunt, CGX Energy, Staatsolie (state energy company of Suriname)

West African pre-salt – Gondwana again

Many companies think that West Africa’s pre-salt geology mirrors that of Brazil.

The theory here is that the pre-rift geology below the sealing thick salt layer remained the same even after Gondwana separated to form Africa and South America. 3D basin modelling and geochemistry suggests a close match between West African and South Amercian margin basins in terms of pre-salt depositional sequences. This holds out the possibility of large pre-salt oil deposits in Angola, Namibia, Gabon and Congo.

Possibly the biggest proponent of this is Marcio Mello, CEO of HRT, who thinks that giant deposits in the pre-salt in Angola is “a certainty, not a possibility” with objectives in the Upper Cretaceous turbidite sandstones and syn-rift carbonates and sandstones identified that are analogous to the Tupi and Jupiter fields in Brazil. Sonangol and Petrobras recently started a joint preliminary study into the Angolan pre-salt and Sonangol has stated that it intends to drill one or two pre-salt wells by 2012. Petrobras and Cobalt hold African pre-salt acreage in Angola and Gabon whilst Repsol and Chevron are showing a strong interest through public statements they have made. It is early days yet but it does look like the risk capital will come.

Companies: Petrobras, Sonangol, Cobalt, Chevron

Finally, I have screened the entire sector of quoted E&Ps to look for companies with the largest acreage and drilling, still with no production, or development. These are the largest ones, which go from $98m market cap to $665m, a median of $100m equity.

A) None of them has any debt

B) All of them have cash to undertake 18 months of drilling commitments

C) None of them has pipeline projects.

D) Most own 100% of licenses and are operators, with rigs already committed.
E) All of them hold very large acreage with enormous prospectivity (and risk).

. Chariot Oil (Namibia). $640m equity value. Acreage 30,000 sq km. 100% operator. Cash for 20 months of drilling.

. Dominion (East Africa). $150m equity. Acreage more than 20,000 sq kms. Tanzania, Uganda, Congo (with Soco). Cash for 16 months of drilling.

. Tower (Namibia and Namibia). $98m equity value. 18,000 sq kms. Cash in balance sheet.

See: http://energyandmoney.blogspot.com/2010/12/africa-most-promising-frontier-area-for.html

About Daniel Lacalle

Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Author of bestsellers "Life In The Financial Markets" and "The Energy World Is Flat" as well as "Escape From the Central Bank Trap". Daniel Lacalle (Madrid, 1967). PhD Economist and Fund Manager. Frequent collaborator with CNBC, Bloomberg, CNN, Hedgeye, Epoch Times, Mises Institute, BBN Times, Wall Street Journal, El Español, A3 Media and 13TV. Holds the CIIA (Certified International Investment Analyst) and masters in Economic Investigation and IESE.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.