A new Qatar?

Andrew Scutter, The EIC

November 1, 2017

With the entry of ExxonMobil, East Africa has entered the gas business for the long term. Can South Africa catch up? EIC’s Andrew Scutter sets the scene.

Over the last decade, recent oil and gas discoveries across East Africa have made the region a key frontier for hydrocarbon exploration. Prospective projects could spell billions of dollars in government revenue which, if managed responsibly, could finance a much-needed overhaul of infrastructure and social services, ultimately transforming the region.

Offshore there have been world-class discoveries of gas made in Tanzania and Mozambique. While it has not yet made the same scale of discoveries as other countries in the region, South Africa is one of the most anticipated hotspots for oil and gas exploration in the continent.

In 2010, BG Group made significant gas finds offshore Tanzania, which took the country’s estimated natural gas reserves up to 57 Tcf. The hype which followed these discoveries has tapered off somewhat. The plan, for now, is to construct an LNG plant with a 10 MTPA of gas processing capacity. The plant is scheduled to be up and running by 2025. However, fiscal and regulatory uncertainties, low gas prices and higher exploration and production costs compared to neighboring Mozambique, has led to delays and a loss of momentum in Tanzania.

On the other hand, Mozambique’s developments are moving at a much faster pace. Like Tanzania, much of Mozambique’s reserves were discovered in the past decade and amount to more than 150 Tcf of natural gas reserves. Anadarko and Eni are the two key players in the country, both having made significant offshore gas discoveries and subsequently proposed major LNG facilities. The Coral FLNG project was the first of these to take final investment decision (FID). In June, Eni announced that a joint venture of TechnipFMC, JGC and Samsung Heavy Industries will be the engineering, procurement and construction (EPC) contractor for the project. Tendering for detailed engineering is also underway for Eni’s sizable 10 MTPA onshore LNG facility, which, like Coral, will be fed by gas from the Area 4 gas discoveries.

The recent farm-in of ExxonMobil into Eni’s Area 4 has made the market much more attractive to potential investors. The supermajor, renowned for planning decades into the future, views Mozambique as the new Qatar.

South Africa

After demonstrating Mozambique and Tanzania’s hydrocarbon potential, the industry is now hoping to uncover the potential of South Africa. Many companies, including majors ExxonMobil and Total, have acquired rights to explore offshore South Africa. Recent improvements in exploration technology, coupled with the need for South Africa to diversify its energy mix has seen increased interest in exploration activity, with 20 exploration licenses issued.

The requisites for a successful offshore oil land gas industry differ between East Africa and South Africa. While Mozambique and Tanzania have proven significant reserves, their biggest hindrance is the lack of infrastructure and skilled work force. South Africa, on the other hand, has the basic infrastructure and skills required, but is yet to make major finds.

Map image courtesy of EIC.

About the author

Andrew Scutter is the Upstream Sector Analyst at the EIC, and covers this remit globally. He has a degree in Geology from the University of Leeds and a master’s degree in Petroleum Geoscience from the University of Aberdeen. Andrew has also gained experience working with an international operator, CNR. 

Panel: South African moves

Written by OE Staff.

Early September, Statoil completed a deal with ExxonMobil E&P South Africa to acquire a 35% interest in exploration right 12/3/252 Transkei-Algoa.
Operator ExxonMobil retains 40% interest, while Impact Africa holds 25%. The license covers approximately 45,000sq km in water depths up to 3000m.

Statoil also completed a transaction with OK Energy, acquiring 90% interest and operatorship in the exploration right 12/3/257 East Algoa. The remaining 10% interest is held by OK Energy. The license covers approximately 9300sq km.

Statoil entered its first license in South Africa in 2015, acquiring a 35% interest in the ExxonMobil-operated Tugela South exploration right.
Meanwhile, Total E&P South Africa agreed to a contract with Odfjell to drill one well plus one optional well using the 6th generation semisubmersible Deepsea Stavanger offshore South Africa, starting between June 2018 and April 2019.

Total operates offshore Block 11B/12B, with 50% interest, 175km offshore in 200-1800m water depth. The block covers about 19,000sq km. Total also holds a technical cooperation permit (100%, operator) covering 76,000sq km in the Outeniqua Block, in 400-4000m water depth.

Total tried to drill the Brulpadda-1 exploration well in Blocks 11B/12B in late-2014 (a well that was aimed at testing a new deepwater play), but didn’t reach total depth due to mechanical issues on the rig. Total had also been lining up drilling on the Paddavissie structure in 11B/12B in 2017. CNR International had previously, when operator of the block, given 3 billion bbl initially in place for Paddavissie. •