Wood Mackenzie estimates that 100 trillion cubic feet (tcf) of gas has been discovered in Mozambique and Tanzania to date, ranking the Rovuma Basin as one of the most prolific conventional gas plays in the world.
However, there are significant technical and commercial challenges to be overcome in order to bring the gas to market by the end of this decade. These include: addressing issues around infrastructure, government capacity, financing and reaching a positive outcome to unitisation negotiations in Mozambique.
Recent discoveries and high profile M&A activity in Mozambique and Tanzania are attracting attention and Martin Kelly, Wood Mackenzie’s Head of Sub-Sahara Upstream Research, says the interest is justified: “100 tcf of gas has been discovered to date in East Africa and we estimate yet-to-find reserves could be as much as 80 tcf in Mozambique and 15 tcf in Tanzania. There is clearly plenty of gas to supply the likely commercialisation route of LNG – theoretically enough to support up to 16 LNG trains.
“The Rovuma basin is the most prolific in the region, and one of the hottest conventional gas plays in the world, with 85 tcf discovered so far. Globally in 2011, it yielded the third most hydrocarbons, and we expect it to top the list in 2012 if the first half of the year is anything to go by,” Kelly continues.
In neighbouring Tanzania, the targets are the northern extension of the Rovuma Basin and the Mafia Basin. Kelly says: “Tanzania has enjoyed considerable exploration success as well, but hasn’t discovered the same scale of reserves. The average discovery size is much smaller at around 2 tcf, compared to Mozambique which is over 7 tcf. Discoveries in Tanzania are also more spread out, so developing them will be more expensive than those in Mozambique because additional infrastructure will be required.”
One of the most immediate challenges for Mozambique, is the unitisation discussions which Wood Mackenzie understands have already begun. Kelly explains; “Of the 85 tcf of gas discovered to date in Mozambique, around half of it is thought to be one enormous field which is in communication across the block. Under Mozambican law, a unitisation agreement between the operating parties will be required.”
Although there is a risk that unitisation discussions could delay Final Investment Decision (FID) – the crucial last step before commercial development – and therefore LNG production, there are other discoveries which are wholly contained in Area 1 and Area 4 and therefore gas could come from these first.
Giles Farrer, Senior LNG research analyst for Wood Mackenzie comments: “Many challenges will need to be overcome prior to LNG project sanction. The region’s remoteness and lack of development present serious technical obstacles. There is virtually no existing skilled workforce and both Mozambique and Tanzania will have to build and establish deepwater ports capable of servicing the needs of the petroleum sector. On the commercial side, there is the question of government capacity – whether there is sufficient impetus and capability within the governments and national oil companies to advance the huge legislative, bureaucratic, customs and financial challenges that such a development would bring.
“The major outstanding milestone for Mozambique is the conclusion of a commercial framework agreement, which is in the process of being negotiated. It will determine how the LNG facility or facilities will be structured for the purpose of taxation and whether the Joint Ventures (JVs) will co-operate in the construction of a single, mega LNG facility, or pursue individual developments. One crucial advantage that the Tanzanian projects enjoy is that they have already negotiated commercial terms, prior to the announcement of their projects.”
Farrer continues: “Lastly there is the question of finance, we estimate that a two train greenfield development in the region is going to cost at least US$25 billion, and for some of the players involved financing their share of this sort of development cost will certainly prove challenging and could delay development.”
The joint analysis by Wood Mackenzie’s upstream and LNG research teams stresses that these challenges are not insurmountable. “They have been encountered and overcome in several countries before. The risk is that delays could lengthen development schedules and add to costs,” Farrer says in closing.
|This week the SubseaIQ team added 5 new projects and updated 33 projects. You can see all the updates made over any time period via the Project Update History search. The latest offshore field develoment news and activities are listed below for your convenience.|
- Anadarko: Another Major Discovery Offshore Mozambique (mb50.wordpress.com)
- UK: Cove Encourages Shareholders to Accept Shell’s Takeover Bid (mb50.wordpress.com)
- Anadarko Strikes More Mozambique Gas (mb50.wordpress.com)
- Ocean Rig Drillship to Drill for Chariot Offshore Namibia (mb50.wordpress.com)
- Recap: Worldwide Field Development News (Apr 27 – May 3, 2012) (mb50.wordpress.com)
- Anadarko expands massive Mozambique discovery (fuelfix.com)
DENVER, Feb. 21, 2012 /PRNewswire/ — Grid Petroleum Corp. (OTCBB: GRPR) The Board of Directors are pleased to announce that Grid Petroleum has entered into a Joint Venture Development Agreement with a private holding company, to develop a Mutual Area of Interest in the Northwest Premont Field in Jim Wells County Texas. The Field covers 4,500 acres and is part of the Gulf Coast Trend in South Texas.
Reserves are estimated to contain over 20 million barrels of oil (bbls) and 20 billion cubic feet (bcf) of natural gas from as many as 15 potentially productive zones per well. The initial phase of the Development Agreement outlines the drilling and completion of 20 new wells and the re-entry of 8 additional previously drilled and completed shut-in wells.
The company had previously announced negotiations to purchase the private holding company, however it has been determined a Joint Venture Development Agreement will serve the company and its shareholders more beneficially in the near term.
Grid Petroleum will begin participation with the second well to be drilled under the Joint Venture Development Agreement at a level of 10% for an investment of $152,000.
Grid has the opportunity to make the Companies first investment into the Joint Venture after the results of the first well-drilled and completed are available for analysis, greatly reducing the risk of the investment by Grid Petroleum into the entire field.
The purpose of the development of the Northwest Premont Field is to create value and income by re-entering certain wells, which have been tested and have proven oil and gas producing zones, and the drilling of strategically located wells containing multiple zone production in a manner that produces high rates of stable production; proving the reserves of the underlying pay zones for further development of the field through production.
To date the fields operator has re-entered two wells, the Guerra #2 and the Garcia #2. The Guerra #2 was drilled to 4,000 feet and tested positively for oil and gas in 12 potentially productive sand zones encountering 118 net feet of pay.
AP Yang, Petroleum Engineers of Houston Texas ran 45 days of open flow tests to draw down the pressure of each of the productive zones in the well. The absolute open flow rate calculations indicated the lobe flow of the Laughlin oil sand deposit tested at 15,541,000 cubic feet gas per day. The upper lobe flow tested at 5,063,000 cubic feet peer day. The combined total of 20,604,000 cubic feet per day from 16 feet of net pay zone for this one well with multiple pay zones.
Preliminary Reserves Estimates for the Guerra #2 are 100,000 to 150,000 Barrels of oil and 1.5 Billion Cubic Feet to 2.5 Billion Cubic Feet of natural gas.
The second re entry well the Garcia #2 is co-mingling two gas zones with production averaging 1.0 million cubic feet of gas per day. An Oil zone is also producing an average of 39 barrels of oil per day. Reserve estimates for the Garcia #2 will have similar potential production levels as the Guerra #2.
The current price of gas ranges between $2.75 and $3.00 per mcf.
20 million cubic feet per day of gas production represents a potential gross of $60,000.00 per day.
Grid Petroleum Corp is a development stage company focused on the acquisition and development of low cost high reward oil and gas prospects with infield drilling for proven potential reserves in the United States and Canada.
The company anticipates the initiation of a development plan with its joint venture partners for the purpose of establishing suitable drill sites for the Kreyenhagen Trend leases.
Upon completion the company will have established a time line for the development of its significant Oil and Gas assets.
Odfjell SE has made an agreement to enter into a joint venture via its subsidiary Odfjell Terminals Asia Pte Ltd (Singapore), with Tianjin Economic-Technology Development Area (TEDA) via its subsidiary Nangang Port Company to develop a terminal and marine facilities for bulk liquid chemicals, petroleum products and gases in the Nangang Industrial Zone (Tianjin) in China.
The initial phase of the joint venture will consist of three deep sea berths and have a total storage capacity of about 150,000 cubic meters.
The joint venture company will be named Odfjell Terminals Nangang (Tianjin), whereby Odfjell will hold 49% ownership and hold the operational management. The initial total investment is estimated to be about USD 160 million. The first phase will start operations during the second quarter of 2014. The Nangang Industrial Zone is located about 120 km from Beijing and will become the major petrochemical complex in the Western Bohai Bay area
- South Korea: Naming Ceremony for Odfjell Drilling’s New UDW Drillship (mb50.wordpress.com)
- UK: Largest Contract in Odfjell Drilling’s History (mb50.wordpress.com)
- Deepsea Metro II Drillship Arrives in South Africa (mb50.wordpress.com)
- South Korean Hyundai Heavy Delivers Deepsea Metro II Drillship (mb50.wordpress.com)
Total announced that its subsidiary, Total E&P USA, has signed and completed on December 30, 2011 an agreement to enter into a Joint Venture with Chesapeake Exploration, a subsidiary of Chesapeake Energy Corporation, and affiliates of its partner EnerVest Ltd.
Yves-Louis Darricarrère, President, Total Exploration & Production, stated “Total is delighted to be building on our technical successes with Chesapeake in the Barnett Shale Joint Venture and to expand into the liquids-rich Utica Shale play in Ohio. This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to oil price. This joint venture will provide us with a material position in a valuable long-term resource base under attractive terms and with a top-class operator. Total is conscious of the environmental aspects linked to developing shale acreage and is confident in Chesapeake’s capacity to manage the Utica shale operations in a responsible manner, respecting the highest industry standards. ”
The transaction is effective as of November 1, 2011. Total has paid Chesapeake and EnerVest about USD 700 million in cash for acquiring these assets. Total will also be committed to pay additional amounts up to USD 1.63 billion over a maximum period of 7 years in the form of a 60% carry of Chesapeake and EnerVest’s future capital expenditures on drilling and completion of wells within the Joint Venture.
The Joint Venture covers approximately 619,000 net acres, of which 542,000 net acres are brought by Chesapeake and 77,000 net acres are brought by EnerVest. Total will acquire its 25% share from each of Chesapeake and EnerVest on identical terms, giving a total of 155,000 net acres. Chesapeake will operate the Joint Venture acreage.
As a result of the transaction, Total will also acquire a 25% share in any new acreage which will be acquired by Chesapeake in the liquids-rich area of the Utica shale play.
To date 13 wells have been drilled across the acreage with very promising results seen from each well in terms of productivity and liquid content. The Joint Venture plans to ramp up the drilling activities in the coming 3 years with 25 rigs planned to be mobilized by 2014 to fully appraise and develop the acreage. SEC production in Total’s share is expected to reach 100,000 barrels of oil equivalent per day by the end of the decade.
Additionally, Total, Chesapeake and EnerVest have agreed to jointly develop the construction of the necessary midstream facilities to export the production from this acreage.
- Who Is Chesapeake’s ‘Undisclosed’ Partner for Utica Shale JV? (forbes.com)
- Total enters shale-energy venture with Chesapeake (marketwatch.com)
- Stocks to Watch: Chesapeake, BP, Halliburton (thestreet.com)
- New Frontiers: the attention turns to some up-and-coming plays (mb50.wordpress.com)
- Total Said to Consider Chesapeake’s $2.14 Billion Ohio Shale (businessweek.com)