Oil exploration in Sierra Leone in 2011..Maybe a new frontier

          Oil and gas exploration has had a very short history in Sierra Leone. Although some seismic and G&G studies were carried out in in the past, there was not much potential seen for oil and gas deposits. All this changed with Anadarko’s Venus discovery in the deep waters offshore Sierra Leone in August 2009. Although this discovery was relatively thin (50 ft of net hydrocarbon pay), in water depth of 1800m, the discovery generated a lot of interest and opened up the potential for a multi-billion barrel oil frontier in West Africa. Linking the Venus discovery to the previous Jubilee find in Ghana which was discovered by Anadarko’s partner in that block, Kosmos Energy, gives a new interpretation of the petroleum geology in the region. The new Transform Margin (a place where 2 tectonic plates slide past each other) play was generating a lot of interest as it could potentially lead to a string of discoveries along its length. Although Venus was a significant discovery, it has still not been deemed to be commercial.

Figure 2: Map  showing the location of the Venus and Mercury discoveries. Blocks SL-06 and SL-07 have now been merged and are now together called Block SL-07B-10. Source: Anadarko

On the 15^th of November 2010, Anadarko announced that it had struck oil with its Mercury-1 well which encountered approx. 135 net feet of oil pay in two Cretaceous-age fan systems. The well was drilled to a total depth of approx. 15,950 feet in about 5,250 feet of water. In the primary objective, the Mercury well encountered approx. 114 net feet of light sweet crude oil with a gravity of between 34 and 42 degrees API, with no water contact. An additional 21 net feet of 24-degree API crude was encountered in a shallower secondary objective. This discovery is almost certain to be declared commercial, although it has not yet been announced. Both, Venus and Mercury, discoveries were in Block SL-07B-10. A third exploration well on the Jupiter prospect is planned to be drilled in Q4, 2011. Anadarko (55%) operates the block and the partners are Repsol YPF (25%), Tullow Oil (10%) and Mitsubishi (10%).

African Petroleum Corporation Ltd., has a 100% interest in Block SL-03. The block covers an area of 3,135 km and is located ~ 150 km from the Mercury-1 discovery and 85 km from the Venus discovery. The company is planning an extensive 3D seismic survey over the block in 2011 to firm up exploration prospects. It is understood that drilling would occur in 2012, after processing and interpretation of the seismic data. 

                              

Background
Sierra Leone has had a long history of strife, turmoil and civil war. It is bordered by Guinea to the east Liberia to the southeast, and the Atlantic ocean to the west. After more than a century of colonial rule, the country gained independence in 1961. Its history since independence has been marked by widespread corruption and economic, social and educational deterioration. It culminated with the beginning of a 10 year long civil war in 1991 that is estimated to have cost the lives of 50,000 people, besides displacing 2 million more and causing  civilian populations to endure violence at the hands of opposing factions. In 2001, with the help of United Nations forces, rebel forces of the Revolutionary United Front (RUF) were disarmed, and president Kabbah was re-elected to power, and he declared the civil war officially over. The current president is Ernest Bai Karoma, who was elected in the 2007 elections for a period of 5 years.

Figure 1: Map showing location of Sierra Leone (Red Polygon)

Economy
Sierra Leone is an extremely poor country and ranks 163 in its GDP compared to other countries in the world. 70% of the population is estimated to be below the poverty line (CIA). According to the CIA world factbook, its GDP in 2010 was $4.72 billion, a marginal increase from $4.498 billion in 2009 and $4.358billion in 2008. The biggest threat to its economic development is disruption of domestic peace and isolation from foreign aid. Economic and social infrastructure development has been severely stymied due to the long history of civilian unrest. However, relative peace since the end of the civil war in 2002, has offered the promise for economic rejuvenation and development of the country. GDP growth rate since 2002 has been between 4% and 7%. The country is endowed with rich mineral resources and the economy is overly dependant on mineral exploitation. Although agriculture employs most of the population, it accounts for only 42% of national income. The mineral extraction and exploitation industry generates most of the income although it has been managed poorly, with most of the income escaping formal channels, and used to fund rebel activities in the region. Diamond exports account for almost half of Sierra Leone’s exports, and remains the biggest source of earnings. A number of significant offshore oil discoveries in 2009 and 2010, could herald a new period of growth, although development of these reserves is still many years away.

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Angola Oil - South West Africa's Next Crown Jewel

INTRODUCTION
Angola is a huge country present on the south-west coast of Africa, bordering the South Atlantic Ocean, between Namibia and the Democratic Republic of the Congo. It was home to a 27 year civil war that is estimated to have cost the lives of up to 1.5 million people, and displaced a further 4 million. The war came to an end following the death of Jonas Savimbi, the leader of the National Union for the Total Independence of Angola (UNITA), in 2002. President Jose Eduardo Dos Santos, the leader of the Popular Movement for the Liberation of Angola (MPLA), the main opponent against Savimbi, consolidated his hold on power and despite promising to hold presidential elections in 2009, has since managed to pass legislation to hold elections in 2012.

Figure 1: Map location of Angola. Modified from Google Earth.

Oil and gas exploration started in the early 1900’s, but it wasn’t till 1955 that the first onshore commercial discovery was made at the Benfica field in the Kwanza basin. In 1966, the first offshore commercial discovery was made at the Limba field in the Lower Congo Basin. There was restricted exploration activity onshore due to the civil war that engulfed the country for a quarter century, and exploration efforts were more focused offshore. Deepwater exploration commenced in 1993, and in 1996 the first deepwater commercial discovery, the Girassol field, was made at the Lower Congo Basin, in Block 17, by a consortium led by Total. In 1999 exploration moved to the ultra deepwater and the first commercial ultra deepwater discovery, the Plutao field, was made in 2002 in the Lower Congo Basin.

GEOLOGICAL BACKGROUND
Angola has three main sedimentary basins; the Kwanza, Namibe and Congo basins. Although all three basins have the pre-requisites for hosting hydrocarbons, only the Congo and Kwanza basins have so far yielded them in commercial quantities. Most of the exploratory success has come from the northern portion of Angola, where it seems the geology has favoured the northern blocks. One noteworthy example is Block 0 that lies offshore the Cabinda province, to the immediate north of the Congo river. Chevron operates Block 0 which provides about 20% of Angola's crude oil production. The mighty Congo river deposited huge amounts of sediment in the area along with vegetative matter that eventually turned into oil over geological time, increasing oil concentrations in this area. The block is divided into Areas A and B and together they contain 21 fields whose total production in 2010 was 365,000 boepd. Exploration in the southern blocks ceased after non discoveries in blocks 9, 21, 22 and 25 located offshore of southern Luanda. However, geologists in Sonangol, the concession holder and national oil company of Angola, are keen to begin comprehensive surveys of blocks in the Namibe Basin, which they believe has untapped resources.

Figure 2: Sedimentary Basins of Angola. Source, Ministry of Petroleum, Angola.

RESERVES AND PRODUCTION
Angola is an oil-dependent state with oil production and its supporting activities contributing about 85% of GDP. Angola has maintained a high growth rate of ~8% over the last 8 years due in large part to oil exports. In 2009 Angola became the leading producer of crude oil in Africa, overtaking Nigeria which experienced extreme sectarian violence and attacks on oil infrastructure. However, at the beginning of 2010, based on EIA data, Nigeria had the highest reserves in Africa, at 37.2 bboe. According to the BP statistical review, Angola’s proved reserves at the end of 2009 were 13.5 bboe and production at the end of the same year was 1.7 mmboe/d. This was up from 0.7 mmboe/d in 1990. The oil minister of Angola has put the reserves as on Dec 2009 at 13.1 billion barrels. Exploration has mainly focused offshore due in a large part to the civil war that divided the country. However, the northern city of Soyo and the disputed Cabinda Province are also host to some proven oil reserves. Angola became a member of OPEC in 2007. According to the EIA, Angola produced 1.82 mmboepd making it the largest crude oil producer in Africa and placing it seventh among OPEC members. Angola has had increasing production capacity from earlier discovered fields coming online but despite this, Angola maintained output at approximately 200,000 bbl/d below capacity, as a response to OPEC’s most recent production allocation. In the first quarter of 2011, EIA estimated Angola supplied 1.7 mmboe/d, which again placed it second behind Nigeria at 2.13 mmboe/d in African crude supply.

Figure 3 – Opec production for Q1 2011. Source: EIA short term outlook, May 10, 2011. Graph, Derrick Petroleum Services.

EXPLORATION
Angola, home to the 3^rd largest proved reserves in Africa after Libya and Nigeria, has had its fair share of exploration, mostly focused offshore and in the deep offshore. The turning-point in the history of oil exploration and production in Angola came about with the commercial discoveries in the deep waters of Block 17 and neighboring Blocks 14, 15 and 16. In 1996 when the reserves of Girassol were discovered in deep water on Block 17, Angola went from being a solid but average oil producing country to a hotspot in the global search for major oil reserves. Oil exploration and production in Angola mainly occurs in the offshore blocks, which are divided into 3 bands; Blocks 0 – 13 are shallow water blocks (Band A); Blocks 14 – 30 are deepwater blocks (Band B); and Blocks 31 – 40 consitute the ultra-deepwater blocks. Angola is also planning to throw up new blocks for exploration in 2011, after deliberation on the terms governing access to its highly prized pre-salt blocks. The pre-salt in Angola is thought widely to be analogues to the pre-salt in Brazils offshore basins which has had many substantial discoveries. Due to the fact that the South American and African continent were joined together in the geological past, many experts now believe that the pre-salt in Angola has potential to host huge reserves of hydrocarbons. In addition, the salt in Angola occurs both onshore and offshore, in contrast to the salt in Brazil which only occurs offshore.

Onshore exploration has been stymied due to the long civil war in the country. The Cabinda province was the site of most onshore exploratory efforts which were halted during the civil war.  At this time the only basin in operation is the Lower Congo, in the onshore area of the Congo River, also known as the Soyo area. However, Angola is now planning new improved policies to tap into its onshore resources and to create a positive atmosphere for drilling onshore.

EXPLORATORY WELLS IN 2011
Unless stated otherwise all data below is from the Derrick Petroleum- Planned Exploration Wells Database. According to this database, updated daily, there are a number of wells planned to be drilled in 2011. 25 wells over 10 blocks are scheduled to be drilled, with most exploratory drilling occurring offshore. 16 of these wells are in the deep offshore with the rest in the shallow offshore. The operators in these blocks are BP, ENI, Sonangol, Vaalco Energy, Petrobras, Maersk Oil, Cobalt International, Chevron, Pluspetrol and Total.

Table 1: Table showing companies planning exploratory drilling in 2011 and beyond. The number of columns has been minimized to fit the table on the page. The actual database has many more parameters listed and recorded. Source, Derrick Petroleum- Planned Exploration Wells Database.

Block 15/06
Eni has a 35% working interest and is the Operator in Block 15/06, while Sonangol E&P is the Concessionaire. The other partners of the Contractor Group are Sonangol Pesquisa e Produção (15%), SSI Fifteen Limited (20%), Total (15%), Falcon Oil Holding Angola SA (5%), Petrobras International Braspetro B.V. (5%) and Statoil Angola Block 15/06 Award AS (5%). Six discoveries have been made in the block so far; Sangos, N'Goma, Cabaça Norte-1, Nzanza-1,Cinguvu-1 and Cabaça south east. There are no more exploration wells to be drilled as the consortium is now planning development of discoveries.

Angola LNG II Upstream
Angola LNG II is a joint venture composed of Sonagas (22.8%), Chevron (36.4%), Eni (13.6%), Total (13.6%) and BP (13.6%) that will evaluate existing gas discoveries and explore further potential in the Angolan offshore, with the objective of supporting the feasibility of a second LNG train. The consortium plans to carry out a 3D seismic survey and drill 1 exploration well on the Angola LNG II area in 2011.

Block 5
Interoil is a 40% participant in Block 5, where Vaalco Energy Inc. is operator with an equal interest. Sonangol P&P (national oil company of the Republic of Angola) is also a partner with an interest of 20%. Block 5 is 5708 sq kms and is located in the Kwanza basin in the northern waters, offshore Angola. 95% of the block has a water depth of less then 200 mts. Three prospects, Kindele, Loengo and Jack have been mapped on the block. The gross mean unrisked resource potentials for these prospects are estimated to be 41, 93 and 41 mmboe respectively. The operator plans to drill atleast two prospects out of the three in 2011 and the third one in 2012.

Block 6
In Block 6 Interoil is participating with 20%, where Petrobras is operator with an interest of 40% and Sonangol, Initial Oil & Gas and Falcon Oil are partners with a total interest of 40%. Block 6 covers an area of 4930 sq km and is located in the northern area of Kwanza Basin offshore Angola. The water depth ranges from 50 to 500 m. 8 wells were drilled by the previous owners, which resulted in 2 heavy oil discoveries. The largest of these discoveries is the Cegonha heavy oil field. Petrobras is planning to drill 11 wells on its 3 operated blocks in Angola. Assuming 8 wells drilled on the other 2 blocks, 3 wells are expected to be drilled in this block in 2011.

Blocks 18/06 and Block 26.
The consortium plans to drill 8 wells on these blocks in Angola in 2011. The ownership structure of these two blocks is given below.

Figure 4: Ownership Structure for Block 18/06 and Block 26. Source Derrick Petroleum

Block 16
Maersk Oil operates the block with a 65% interest. Sonangol (20%) and Odebrecht (15%) are partners. Block 16 lies 100 km offshore Angola in water depths ranging from 200 m to 1500 m. Wildcat wells targeting the Omba and Caiundo prospects are scheduled to be drilled in 2011.

Blocks 9 & 21
Block 9 (4000 sq km) is located offshore Benguela Basin and in water depths that range between 50 to 1,000 meters. The block has oil potential of 400 MMBO (25-28 degree API). Prospects are scheduled to be drilled in late 2012. Block 21 (4,900 sq km) is located in the deep-water offshore south-central Kwanza Basin, some 200 Km southwest of Luanda. The water depth of the block is 300 to 1,600 m. Two prospects, Bicuar and Cameia, are scheduled to be drilled in 2011.

Block 0
Chevron operates this block with a 39.2% interest. Other partners are Sonangol (41%), Total (10%) and Agip (9.8%). The block is divided into Areas A and B. Together they contain 21 fields whose total production in 2010 was 365,000 barrels of liquids per day. According to Chevron two exploration wells are planned to be drilled on the block in 2011.

Block 8
Maersk Oil is the operator of the block with a 50% interest. The other partners are Svenska Petroleum (30%) and Sonangol (20%). Block 8 is situated along the early Cretaceous pre-salt lacustrine rift trend. It starts at the beach of the Kwanza and extends westwards, with water depth ranging from the very coastline to 600 metres. A well is scheduled to be drilled in 2011.

Block 23
Maersk Oil is the operator of the block with a 50% interest. The other partners are Svenska Petroleum (30%) and Sonangol (20%). Located in the deepwater Aptian salt basin trend, both pre- and post-salt petroleum systems have been identified. A well is planned to be drilled in 2011.

Block 17/06
Deep offshore Block 17, is operated by Total with a 40% interest and is Total’s principal asset in Angola. It is composed of four major zones: Girassol-Rosa and Dalia, which are currently producing. The other partners are Sonangol (30%), Sonangol Sinopec International (SSI) Seventeen Limited (27.5%), ACREP Bloco 17 S.A. (5%), Falcon Oil Holding Angola S.A. (5%) and PARTEX Oil and Gas (Holdings) Corporation (2.5%). The consortium drilled the Canna-1 well in 2011 which discovered hydrocarbons in a reservoir of Miocene age and produced more than 5,000 barrels per day of high quality oil (33° API) during a production test.

FUTURE
The industry is getting increasingly excited about the prospects in the pre-salt region. So far, all indications are that the pre-salt in Angola is analogous in hydrocarbon bearing potential to the pre-salt regions of Brazil which host substantial reserves. The government of Angola is still mooting production sharing agreements for the pre-salt regions, and once this is done, new pre-salt blocks will be up for grabs. All indications are that exploration activity is bound to increase in Angola. Angola looks set to maintain its high production into the future and, if exploratory success comes from ongoing and future exploration, the country just might topple Nigeria in terms of production and reserves.

For a list of West African oil discoveries in 2010 - 2011 click here

WILL ALBANIA BE THE NEW EXPLORATION HOTSPOT?

The Republic of Albania lies in south eastern Europe. It was under communist rule, but the communist party collapsed in 1990 and the Republic of Albania was formed in 1990. In the last decade Albania has evolved into a stable parliamentary democracy in a modern free market economy with a regulatory environment structured to attract foreign investment.

Figure 1: Location Map of Albania (Shown in thick blue). Source, modified from Google Earth.

EXPLORATION IN ALBANIA
The petroleum industry is one of the oldest industries in Albania, dating back 2000 years when the Romans mined bitumen. In modern times, exploration kicked off during the First World War when oil was discovered in Drashovica. Later in the 1920’s, the Patos Marinza (largest onshore oil field in Europe) and the Kucova fields were discovered with help from Italian investments. World War II led to a decline in output. The 1948 production was 1374 kboe, during which time the erstwhile Soviet Union began to play an important role in the industry (up until 1961 when Albania broke ties with the Soviet Union, and China starting playing an important role). Maximum production was achieved in 1974 with 17380 kboe annually, and Albania broke ties with China 4 years later. In 1989, total annual production was 7900 kboe and in March 1994 it was 3749 kboe. This decline was in part due to poor economic policies, lack of materials and natural decline. In 2001, it had declined to 2379 kboe. According to the CIA world factbook, total annual production in 2010 was 1971 kboe.

BIRTH OF MODERN EXPLORATION

The ultra- Stalinistic rule of the Enver Hoxha regime up until his death in 1985 plagued the Albanian economy, but after the collapse of the Soviet Union through the late 1980’s and the death of Hoxha in 1985, the Albanian economy opened up and culminated in the country adopting democracy in 1990.

The country’s first offshore licencing round was held in 1990, with contracts taken up by international companies, including Deminex, Chevron, Occidental, Hamikon and AGIP. This was followed by the first onshore round in 1992 which offered access to seven onshore blocks, won by a French company called Coparex, a Croatian company called INA Naftaplin and Shell.  In November 1994, a foreign investment law was enacted to attract and protect foreign investment, guard against nationalization or expropriation of assets and allow funds to be freely transferred in and out of the country. The second onshore licensing round in November 1995 was attended by 30 oil companies. The offerings were two onshore blocks not awarded in the first licensing round, eight new onshore blocks and one block in the Adriatic Sea.

OIL DISCOVERIES IN ALBANIA

There have been many discoveries in Albania and there are also a few fields producing. These are listed in the following table

Table 1: List of Oil/ Gas fields along with their discovery year, reservoir depth, API gravity and sulphur content. Source, Technological Institute for Oil and Gas, Albania.

Figure 2: Licenced exploration areas in Albania. Source, Manas Petroleum

SHELL AND COPAREX DO THE DIRTY WORK
Shell and Coparex spent a great deal of resources in acquiring and interpreting over 4000 km of seismic data over their onshore licences. The result of their seismic imaging and analysis was the recognition of a deep underthrust structure (~ 4 km deep) which according to them had the potential to host  820 mmboe. This same giant underthrust structure which hosts all of Albanias hydrocarbon reserves was also present below their licences in the form of a giant anticline. However, after all this good work, Shell and Coparex decided to abandon their licences due to conflicts in the neighbouring Kosovo and due to extreme unrest within Albania. This, as it turns out, was a boon for Manas Petroleum which later acquired these properties with giant, well defined, drill ready prospects.

THE ECONOMIC X-FACTORS
Although not recommended as a destination to spend an annual vacation, Albania has all the key elements to ensure a good return on investments through oil and gas companies active in the area. The key factors are:

1.        Location: - Excellent access to European markets 

2.       Stable political environment 

a.       Constitutional Democracy since 1991

b.       Member of WTO, regional and European trade organizations

c.        NATO member

d.       Currently undertaking key steps to become EU member (applied in June 2009)

3.       Hydrocarbon rich

a. Albania is home to the largest onshore oil field in Europe (Patos Marinza; 7.5 billion barrels OOIP)

b. Multiple active oil fields

4.       Favourable economics (for the number crunching analysts)

a.        Attractive terms

b.       10 - 15% royalty

c.        50% profit tax

d.       100% cost recovery

e.       Hydrocarbon law allows 100% export of crude oil

f.        100% cost recovery & working interest

g.       25 year term + 5 year extensions

Figure 3:  Comparison of petroleum exploration and production  contracts between different countries. As can be seen, Albania ranks quite high in terms of financial and profitability.

THE ACTIVE PLAYERS
Fortunately, for number crunching analysts, there are a few players within Albania actively pursuing exploration and production. These companies along with their assets are listed below:

1.        Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration and production company focused on developing large oil and gas reserves in Albania. The Company operates and has 100% interest and rights to develop the Patos-Marinza heavy oil field (7.5 billion barrels OOIP; 140 million barrels produced to date; 6º to 24º API Oil), and has a 100% interest in the Kucova oil field (297 million barrels OOIP; 24 million barrels produced to date; 14° to 22°API Oil). It also has interests in the Block F Exploration Acreage consisting of 185,000 acres with gas and oil potential.

2.       Stream Oil and Gas has a 100% working interest in  3 producing heavy oil fields (Ballsh, Cakran, Gorisht) and the Producing Delvina gas field with 3 sister structures in phase II exploration 

3.       Petromanas Energy Inc. has 3 production sharing contracts (“PSCs”) comprising  6 onshore blocks, a 100%  working interest in Blocks A,B,D,E,2 & 3 comprising 1.7  million net acres, and have 9 existing oil fields on blocks 2 & 3 which include the largest onshore oil field in Europe, Patos Marinza which is operated by Bankers Petroleum Ltd.

4.       Cairn Energy through its subsidiary holds a 100% interest in the Joni-5 PSC  which is valid for seven years from 9 September 2007. 

5.       San Leon Energy and Beach Petroleum have a 75% and 25% interest respectively in the Durresi Block which lies in the Adriatic Sea, offshore Albania and covers an area of approx. 4200 sq km. It contains the A4-1X gas condensate field, discovered in 1993, 30 km off the southern coast of Albania.

Figure 4: Figure showing possible export routes for oil produced in Albania. There are about 15 refineries in the Mediterranean that can process Patos-Marinza crude apart from the other oils that are produced in Albania. Source, Bankers Petroleum. The favourable location of Albania would make it very easy to transport the crude for refining and then for supply into thirsty European markets.

OK… SO WHO’S DRILLING AND WHEN??
The Derrick Petroleum- Planned Exploration Wells Database keeps track of the number of wells being drilled globally and sorted by operator, country, oil or gas, year of drilling and many other parameters. From this database, the number of wells planned to be drilled in Albania in 2011 are 4. These four wells to be drilled will be significant as 3 of these wells are to be drilled by Petromanas on the almost drill ready, giant prospects, that were mapped by Coparex and Shell before they abandoned their plans. The upside is huge, and the results of these wells have the potential to change the face of exploration in this small Mediterranean country. The latest discovery in onshore Albania was made by Occidental Petroleum on the Shpiragu discovery after the Shpiragu-1 well in the Sqepuri  subthrust structure located in Block 2 proved oil from the Eocene – Cretaceous fractured reservoirs. The result of the Shpiragu-1 well have seriously de-risked this area. Gustavson and associates commenting on the probability of success on the Petromanas Blocks state "The probability of success for a wildcat well in a structurally complex area such as this is relatively high due to the fact that it is in a structurally favorable area, there exists a proven hydrocarbon source and analogous production exists only 20 to 30 kilometres away”. These few players have the potential to strike it big in Albania. With favourable economics and easy access to refineries and markets, the country presents a good deal to companies wanting to invest.

Table 2: List of companies with plans to drill in Albania in 2011 and beyond. The number of columns have been minimized to fit the table on the page. The actual database has many more parameters listed and recorded. Source, Derrick Petroleum- Planned Exploration Wells Database.