vol 8, issue 5

African oil production - west to east

20 May 2013
By Sean Davies
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A worker at an oil plant in Yemen

Africa Oil’s long-term plan is to cultivate a workforce from local talent

Traditionally oil production in Africa has been centred on the west coast, but recently that exploration has moved to the eastern extremes.

Although Africa is made up of 54 countries and an estimated 805 million people, to date oil and gas production has been focused on just five nations ' Nigeria, Libya, Algeria, Egypt and Angola. But that is about to change, with the eastern states of Kenya, Somalia and Ethiopia joining the party.

According to the 2012 BP Statistical Energy Survey, Africa had proven oil reserves of 132,438 billion barrels at the end of 2011, equivalent to 41.2 years of current production and 8.01 per cent of the world's reserves. The continent produced an average 8.8 million barrels of crude oil per day in 2011, just over 10 per cent of the global output.

The big five account for 85 per cent of Africa's oil production. Other oil producing countries are Gabon, Congo, Cameroon, Tunisia, Equatorial Guinea, the Democratic Republic of the Congo, and Cote d'Ivoire.

Africa Oil Corporation, a Canadian-based exploration and production company, are attempting to move this oil production scenario eastwards. The company holds rights to blocks in East Africa ' some of which were surveyed last decade and abandoned by oil majors.

"It is virgin exploration," Keith Hill, CEO of Africa Oil explains. "We are in three countries, Kenya, Ethiopia and Somalia; none of these have any proven reserves or production."

The region has an unsavoury reputation for unrest and crime but Hill feels there are no particular challenges on that front. "I think in Somalia there is probably geo-political reasons why it has not been developed. The major oil companies did go to Kenya and Ethiopia in the 80s and early 90s and they found relatively small oil fields that they didn't think warranted development.

"Since then there have been major discoveries made in Sudan, Uganda and Yemen that have similar geology. We picked these up believing that geology extended into peace countries."

The current seismic and well database provides sufficient information to identify a large number of prospects and leads. Some of the prospects and leads have the potential to target multiple stacked plays.

"There were a lot of existing seismic surveys from the previous operators that we were able to use," Hill says. "We then added our own seismic and were able to identify a number of dig prospects. We spent a lot of time understanding what the previous dig people had done so we didn't repeat their mistakes.

"Once we got all the acreage together and the geological story together, we were able to draw up and attract partners, primarily Tullow, who came into six of our blocks. We also brought in a UK company called Afren, who is primarily involved in Nigeria."

Location, location, location

In Kenya, Block 9 and 10A are located in the Anza Graben. This is a Mesozoic basin related to similar Mesozoic basins of southern Sudan (Muglad Basin) where the petroleum system is proven and productive. The Muglad Basin is an analogue and provides calibration for the analysis of the prospectivity of these licenses.

Block 10BB is located south-east of 10A. The block is positioned within the eastern branch of the East African Rift, analogous to recent discoveries made by Tullow Oil and Heritage Oil in Uganda within the western branch of the East African Rift.

Block 10BA is in the north-western part of Kenya within the Kenya Rift, which is part of the East African Rift System. The Block includes onshore areas to the east and west of Lake Turkana and offshore portions of the northern two-thirds of Lake Turkana. Within the Block are several sub-basins and structural fault blocks that are considered part of the Kenya Rift.

The Cretaceous age Anza Graben may extend west of Block 10A to underlie the Tertiary age rift system and could add deep exploration targets. Sub-basins include Lake Turkana North, Lake Turkana Central, Lodwar North and Kerio North.

In Ethiopia, the Ogaden Basin Area is within a proven hydrocarbon setting. However, to date no commercial production has been established. Oil, gas and condensate discoveries indicate that there is a complex petroleum system. The limited available data in this under-explored area indicates that there is a wide range of potential petroleum type and volumes in this basin.

The company are now in the exploratory drilling phase. There are three rigs working at present and the plan is to bring another three rigs in over the course of the year. These wells are being drilled by experienced drilling contractors; a Polish company called OGEC, an American company called Weatherford and an Egyptian company called EDC. "There was a fairly high exploration budget this year of $468m so we have a very active year and it will continue next year," Hill adds.

Activity to date has seen encouraging results. From the three wells completed they have made three discoveries; two of them very significant in Ngamia and Twiga. "We have identified 130 prospective wells and we have an area the size of the North Sea," Hill says. "So its looks fairly interesting in that we are three for three and we have so many prospects still to drill.

"We will spend the next couple of years really getting to understand what we have got, drilling more exploration wells and appraisal wells and shooting 3D seismic until we are confident enough to develop."

Investing in infrastructure

A challenge facing the region is its lack of upstream and downstream infrastructure. The volume of oil would need to be fairly large to justify the construction of a pipeline to transport the crude to a coastal terminal. And clearly they are not there yet. Once a pipeline is in place lower capacity fields come more attractive; the problem is getting enough critical mass to justify that big first infrastructure investment.

The exploratory wells being drilled are not particularly deep; the deepest is 4,000m. "Our wells are all on shore," Hill explains. "We are focused on oil not gas; a lot of the East Africa offshore stuff is primarily gas. We look to smaller, more portable rigs that can be moved as quickly as possible. In the future we will be looking to get smaller rigs, our target depths are generally in the 1,000-2,000m range. We don't need the really big rigs to drill those types of targets."

Electrical logs are run to measure exactly what is down the well and drilling mud is used to control any hydrocarbon flow. The oil is first measured in place and then raised to the surface under controlled conditions for further inspection. "It's not like these movies where you get oil coming up to the surface and spraying up into the sky," Hill adds. "That's what we now call a disaster in the oil industry. So we make sure that we keep these wells under control.

"We can suspend these wells as future producers. It makes sense, after spending an average of $20m, to keep these wells. Currently we are drilling at $40m per well, but that will come down as we drill more and the infrastructure gets established."

As long as they keep finding oil the exploration will continue. The current programme is planned out for the next two year with the aim of reaching a position where they can commence commercial development.

It is always tough to put a figure on the quantity required to justify development but the best guess is between 300 and 500 million barrels of recoverable oil. A position that Hill hopes can be reached by the end of 2013. "If we have the same type of drilling success that we have had so far, we should be in position by the end of the year," Hill says. "I feel confident about a development project."

For the early stages of exploration experienced oil workers are being drafted in, but the long-term plan is to cultivate local talent. "There is a highly talented, well-motivated work force here and we are working to build the capacity and get local content put into our workforce," Hill says.

One of the engineering challenges the company faced is that the crude is very waxy. It needs to be kept warm to prevent it solidifying. The facilities and pipeline are heated to ensure that the oil stays above 40°C. "It's like having a 700km long candle," Hill says. "It's actually fairly light, its 30-40 degrees ATI, so a light crude. It's very common for these crudes to have high wax content. It doesn't detract on the price; it just has to be handled in a special way."

Production of crude oil

Once production can begin the plan is to build a pipeline to Lamu, the port being built by Kenya. "We will probably do this in conjunction with the Ugandans, although those negotiations are still under way," Hill says. "Most of the crude oil will go for export. There is talk of building a refinery in a country that will satisfy local demand but we will have to see."

The size of these discoveries will not rival the major oil deposits under production in Nigeria and Angola, but a third party report says that there could be 27 billion barrels of oil which would be defined as prospective resources. "The size of the prize is very large but, of course, we are very early in our exploration," Hill concludes. "Having drilled only three wells we don't really have a handle on how much of that resource can be converted into reserves.

"But these are probably the largest unexplored basins outside of Russia and these just don't come along very often and with this much potential. It has lain fallow for the last 20- 25 years since the majors left, so it's time to produce."

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Exploiting Angola's hidden riches 

Earlier this year BP Exploration Angola announced that production from the PSVM (Plutão, Saturno, Vénus and Marte) development area in Block 31, offshore Angola, has started.

Initial production comes from three production wells in the Plutão field and is expected to ramp up to around 70,000 barrels of oil per day. PSVM is expected to build towards plateau rates of 150,000 barrels of oil per day over the coming year with the additional production from Saturno and Venus fields in 2013 and Marte in 2014.

PSVM is one of the largest subsea developments in the world and was one of BP's key project start-ups for 2012 as we grow higher-margin production, Bob Dudley, BP group chief executive, says. Over the coming decade, we expect Angola, where we have extensive interests from exploration through to production, to be one of the main hubs delivering growth for BP.

The PSVM development consists of four oil fields – Plutão, Saturno, Vénus and Marte – discovered in 2002-04 in water depths of up to 2,000 metres and is the second BP-operated development in Angola.

PSVM produces through a converted hull, floating, production, storage and offloading vessel (FPSO) with 1.6 million barrels of storage capacity and the first FPSO in Angola ultra-deep water. A total of 40 production, gas and water injection wells will be connected to the FPSO through 15 subsea manifolds and associated subsea equipment.

Nineteen discoveries in Block 31 have been announced to date. Future development is expected to comprise multiple hubs similar to the first development (PSVM). The second development for the south-east area of Block 31 is in the planning phase.

BP's involvement with Angola goes back to the mid-1970s. BP has interests in nine blocks (15, 17, 18, 19, 20, 24, 25, 26 and 31) with operatorship of four (18, 19, 24 and 31) and participation in Angola LNG.

Following her launch in 1996 at the Españoles shipyard at Puerto Real in the Bay of Cadiz, the very large crude carrier Bourgogne had plied the world's oceans as a trading tanker for 12 years.

But after a three-and-a-half-year transformation programme she is now ready on location to play her key role on Block 31 offshore Angola as the FPSO PSVM. The focal point of the vessel is the massive rotating turret, weighing in at around 2,500 tonnes, that towers 54m above the bow section of the vessel – increasing the length of the former tanker by 18m to 355m.

This essential feature will hold the FPSO on location through 12 polyester and chain moorings attached to the seabed. These allow it to swing or 'weathervane' in response to wind and tidal conditions and, at the same time, serve as the link with the subsea equipment and wells.

While the former Bourgogne's bridge remains, the accommodation has been remodelled to provide quarters for 140 or more staff, as well as all administration and technical facilities to handle day-to-day operations, including maintenance, health and safety, security and environmental functions.

Meanwhile, the main deck above the storage tanks is now home to the complex network of 19 specialist modules and pipe racks as required for the various production processes and utility support.

The racks were constructed at the Sonamet yard at Lobito, and the topsides modules were fabricated at the Dyna-Mac engineering services yard. Their total weight is approximately 20,000 tonnes, the heaviest more than 1,400 tonnes.

Completing the topsides structures are the helideck and flare tower – the upper section of the tower being the last major structure to be installed, putting the flare tips 136m above the sea.

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