Sunday, October 6, 2013

Oil production from the established sub-Saharan future production from Chad and Ethiopia

Despite high above-ground risks, oil explorers keen to tap into Africa’s new fields - As oil production from the established sub-Saharan producers increases, areas less known for their hydrocarbons potential are receiving more attention, Business Monitor International (BMI) has reported in its October 2013 monthly market intelligence, trend analysis and forecasts for the oil and gas industry across the Middle East and Africa.

“Despite high political risk and difficult business environments, under explored regions of onshore middle Africa are seeing growing exploratory interest,” said the BMI report, which was made available to PANA here Friday.

The report highlights Chad and Ethiopia as countries where the business and political environments remain challenging, yet the below-ground potential for oil and gas exploration and production outweighs the above-ground risks.

Chad is sandwiched between Sudan on the east and Nigeria and Cameroon on the west, all of which are proven oil producers.

Ethiopia has no history of oil production and thus remains an area of particular interest as companies move in to test its potential.

Interest in sub-Saharan Africa is growing as the exploration success in nearby central African countries such as Uganda dissipates throughout the wider central African region.

Oil and gas independents are increasingly carrying out exploration and drilling work in under explored high risk, high reward onshore areas.

BMI’s short term political ratings for Chad saw it struggling against neighbouring central African nations, with a score of 47.3 out of 100; while its overall business environment rated among the worst in the region at just 19.6 out of 100.

“Despite the high above-ground risks present, exploration and production interest in Chad is increasing as small independents take on the higher-risk environment,” BMI noted.

“Oil output from the country has also fallen considerably, over 72,000 barrels per day (b/d) since 2005, and remains a critical source of revenue for the government.

“The majority of recent exploration has taken place in the southeast of the country along the border with Central African Republic and Cameroon, where much of the country's 104,000b/d (2012) of oil is produced,” said the report.

A few small Canadian exploration and production companies hope to survive Chad’s political difficulties.

Caracal Energy recently spud two wells in the Badila field where it hopes to soon bring online 14,000b/d, and also drilled the Krim prospect which is estimated to hold up to 64mn barrels (bbl) of unrisked oil.

The company's next move is to drill in the Bitanda prospect which is considered even more prospective with initial estimates of unrisked resources set between 277mn and 648mn bbl.

In June this year, Simba Energy was awarded production sharing contracts on three separate sites in Chad in the Erdis Basin in the north of the country and Chari Sud Block I and II in the south of the country.

While the political rating of 47.5 and the business environment rating of 32.9 in Ethiopia fared slightly better than that of Chad, there were higher risks due to the unproven nature of the country's oil prospects, the BMI report observed.

After discovering oil in Kenya for the first time in 2012, Tullow Oil has moved its operations cross-border to the South Omo Block in Ethiopia.

With partners Africa Oil and Marathon, the company drilled the Sabisa-1 well earlier in the year, encountering traces of hydrocarbons. Results are still being analysed, though Tullow has announced the area is oil prone.

This area is thought to be a continuation of the oil bearing structures found in Uganda and Kenya, which are also seeing increasing exploration and production activity.

In the Ethiopian region bordering Djibouti, General Energy and New Age (Africa Global Energy Limited) are working in the 27,000sq km Adigala Block.

According to the companies, 2D seismic data reprocessed in 2012 and augmented with a Full Tensor Gravity survey showed evidence of working petroleum systems.

The northern part of the country is thought to be analogous with the producing Jurassic Rift Basins in Yemen.

“The prospects for oil in Ethiopia remain strong and could go some way towards reducing the country's 100 percent reliance on imports. Consumption reached a record 54,100b/d in 2012,” said the BMI study.

The report went on: “While it remains too early to tell the full potential of the oil and gas industry in the country, first mover advantage in this unproven oil producing country will provide high rewards.

“In spite of the high potential in both Chad and Ethiopia, warnings should be heeded from the difficulties nearby Uganda has experienced in tapping its 3.5bn bbl oil reserves.

“The large political influence imposed by President Yoweri Museveni, who is entitled to a final decision before any oil deals are signed, has slowed the development of an export pipeline, a refinery and the start up of oil production.

“Along with allegations of bribery, the deteriorating political environment is now damaging interest in the country.

“Our short-term political rating for Uganda has dropped from 60.4 in 2010, to 51.7 in 2013. This fall in confidence, in one of the better performing countries in the region, further highlights the high risk faced by oil and gas companies.”

Pana 05/10/2013

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