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Badilisha Lugha KISWAHILI

Huge finds make East Africa the next big gas source

17th May 2012

Western companies have announced finds of huge additional quantities of gas off the coast of Mozambique and Tanzania, cementing the future of East Africa as a major new supplier exporting liquefied natural gas (LNG) to energy-hungry Asia.

Italian oil group Eni said yesterday it had discovered a vast new field at its exploration block in Mozambique, while Britain’s BG Group and explorer Ophir Energy said they made a big find at their Mzia well in Tanzanian waters.

The size of these discoveries, coming on top of earlier finds, will more than justify the billions of dollars it will cost to build at least two LNG projects to cool the gas into liquid form for shipment on tankers.

Eni called its gas find “important” and Eni said it estimated that, with the latest discovery made in Mozambique, its block could potentially hold up to 52 trillion cubic feet (tcf) of gas.

Around 10 trillion cubic feet would be enough to meet an entire year’s gas consumption by France, Germany, Britain and Italy.

“The success at Mzia-1 is a major step towards a Tanzanian LNG hub development in Block 1,” said Chief Executive Nick Cooper of Ophir Energy, whose shares jumped 12 per cent.

Oil and gas companies have flocked to East Africa in recent years, spurred by advances in deep-water drilling and problems in securing access to reserves in areas historically seen as more promising, such as the Middle East.

The resources discoveries have boosted prospects for the region’s development, paving the way for energy-intensive industries to emerge there if some of the gas is made available for domestic use.

Analysts said oil majors without a presence in the region would rush to gain exposure to such huge new reserves, meaning that more merger and acquisition activity could be possible after Royal Dutch Shell’s move to try to buy British explorer Cove Energy.

“We believe that it can only be a matter of time before Ophir Energy comes to the attention of the oil majors in the same way that Cove Energy did with Shell,” Westhouse Securities analysts said.

Cove is partnered with US explorer Anadarko Petroleum Corp in Mozambique, and the two said on Tuesday they also discovered a major new gas field off the country’s coast, in an area neighbouring ENI’s block.

Eni, which has Portugal’s Galp Energia as its partner in Mozambique, has said that it will consider selling a stake in its Mozambican block but does not expect to make a decision on any deal before the end of the year.

Shares in Eni traded up 0.1 percent while BG’s shares added 0.2 per cent, broadly in line with the European oil and gas index which was 0.2 per cent higher.

Meanwhile, reports from Nairobi say Kenya is close to sealing a deepwater exploration contract with France’s Total and has offered three other oil majors new offshore blocks.

The country’s petroleum commissioner, Martin Heya, told Reuters on Tuesday that a production sharing contract with Total for block L22 offshore was with the Attorney General’s office, meaning it is close to being signed.

He said the Energy ministry had offered Brazil’s Petrobras, Norway’s Statoil and Italy’s Eni offshore blocks, but the companies had yet to sign agreements.

Oil and gas exploration in East Africa has surged in recent years, after hydrocarbon discoveries in Mozambique, Tanzania and Uganda. British explorer Tullow Oil has also found oil in Kenya, but its commercial viability is yet to be determined.

Kenya said in March it was listing eight new deepwater blocks for leasing. It said on Tuesday it had signed production sharing contracts with US-based CAMAC Energy Inc. for four blocks, two of which are new deepwater blocks.

In all, Kenya has 46 exploration blocks. With CAMAC’s signing, 34 are licensed.
Heya said last month Total had purchased data in the area that is now block L22.It approached the Energy ministry, requesting it to demarcate a block there. In July 2011, Total signed a heads agreement with the government to acquire it. Normally, Kenyan authorities choose where exploration blocks will be, delineate the boundaries and then license them.

However, the minister explained that because the country had been looking for a company to ramp up exploration efforts offshore - and Total has a long history of exploration in risky, deepwater areas - Kenyan officials responded warmly to Total’s proposal.

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