Oil Review Africa 3 2014 by Alain Charles Publishing

ORA 3 2014 - COVER_cover.qxd 6/9/2014 12:08 PM Page 1

■ Geology - p34 ■ Gas - p39 ■ E&P - p42 ■ Technology - p54

Volume 9 Issue Three 2014

www.oilreviewafrica.com

Africa

Covering Oil, Gas and Hydrocarbon Processing

Europe m10, Ghana CD18000, Kenya Ksh200, Nigeria N330, South Africa R25, UK £7, USA $12

Oil Review Africa - Issue Three 2014

Glimpse of light in Nigerian oil sector Tanzania ready to catapult into a major world gas exporter Examining the prospectivity of the Zambezi Delta area Ghana Summit review HR - African nationalisation Putting safety first A growing piping infrastructure Well data: towards a truly global resource

Scandinavian companies expanding into Africa

www.oilreviewafrica.com

Alex Mould, acting chief executive of Ghana National Petroleum Corporation See page 48

REGULAR FEATURES: ■ News ■ Contracts ■ Events Calendar ■ IT update ■ Company profiles ■ Products & Innovations

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African Inspiration Taking it further...

Well Services

Marine Platforms Ltd

Subsea Solutions

Vessel Chartering

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■ Geology - p34 ■ Gas - p39 ■ E&P - p42 ■ Technology - p54

Contents

Volume 9 Issue Three 2014

www.oilreviewafrica.com

Africa

Covering Oil, Gas and Hydrocarbon Processing

Europe m10, Ghana CD18000, Kenya Ksh200, Nigeria N330, South Africa R25, UK £7, USA $12

Glimpse of light in Nigerian oil sector Tanzania ready to catapult into a major world gas exporter Examining the prospectivity of the Zambezi Delta area

Columns

Ghana Summit review HR - African nationalisation

Industry news and executives’ calendar

Putting safety first A growing piping infrastructure Well data: towards a truly global resource

Analysis

Scandinavian companies expanding into Africa

Oil market optimistic again

Country Focus

Alex Mould, acting chief executive of Ghana National Petroleum Corporation See page 48

REGULAR FEATURES: ■ News ■ Contracts ■ Events Calendar ■ IT update ■ Company profiles ■ Products & Innovations

Nigeria

Skandi Aker deepwater intervention vessel has been working for Total E&P Angola. Image: Aker Solutions

Glimpse of light in gloomy Nigerian oil sector. Nigeria’s indigenisation trend.

Tanzania

Tanzania is ready to catapult into a major world gas exporter

Scandinavians in Africa

Scandinavian O&G companies as well as oil field service companies are expanding into Africa.

Mozambique

Examining the prospectivity of the Zambezi Delta area.

Human Resources African nationalisation

Why the secctor must draw on global expertise in order to thrive.

Gas FLNG: ready to launch

The floating liquefied natural gas market is poised for increased investment and activity.

Exploration & Production News and developments

The latest exploration and production news from around the region.

Editor’s note THERE IS A mood of cautious optimism in the international oil market. With global economic growth in 2014 projected to increase to 3.5 per cent from 2.9 per cent in 2013, world oil demand is forecast to rise by one million barrels per day over the same period. In this issue we look at the Nigerian market which is once again a cause for concern in the oil markets and, together with Libya, remains a strong reason why oil prices remain at their current high levels. However amidst all the uncertainty a small boom is underway as global majors and midsize players divest, producing, but declining, onshore assets to, often domestic, juniors. These smaller companies are raising production by fine tuning existing assets and redeveloping declining reservoirs with the help of enhanced oil recovery techniques. On the other side of the continent, Tanzania now has the potential to make a quantum leap as a big energy exporter, after the discovery of huge amounts of gas offshore....and more is expected to be found. Safety is inextricably linked with every aspect of the oil and gas industry and offshore this is likely to get increasingly difficult as operators push the boundaries in their search for new oil and gas....It’s a major challenge and comes at a cost, but one that is always worth paying.

Conference review Ghana Summit

Emmanuel Yartey reports from the 5th Ghana Summit on Oil and Gas, held recently in Accra.

Safety and Security Putting safety first

The ongoing quest for safety in Africa’s growing offshore industry.

Technology A growing piping infrastructure

Addressing Africa’s offshore and onshore piping challenges.

Well data: towards a truly global ressource

ITF and Tullow Oil’s plans to establish a comprehensive, global wells and completions reliability database.

FLNG - The world’s longest ship Prelude measures nearly half a kilometer in length and weighs over 200,000 tonnes.

Managing Editor: Zsa Tebbit - Zsa.Tebbit@alaincharles.com Editorial and Design team: Bob Adams, Hiriyti Bairu, Lizzie Carroll, Andrew Croft, Prashanth AP, Ranganath GS, Nicky Valsamakis and Ben Watts Publisher: Nick Fordham Advertising Sales Director: Pallavi Pandey Magazine Sales Manager: Serenella Ferraro Tel:+44 2078347676, E-mail: serenella.ferraro@alaincharles.com Country China India Nigeria South Africa UAE USA

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Africa

Covering Oil, Gas and Hydrocarbon Processing

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Production: Nathanielle Kumar, Donatella Moranelli, Nick Salt and Sophia White - E-mail: production@alaincharles.com Subscriptions: E-mail: circulation@alaincharles.com Chairman: Derek Fordham Printed by: Stephens & George Print Group ISSN: 0-9552126-1-8 © Oil Review Africa

Serving the world of business

Oil Review Africa Issue Three 2014 3

Business news and events

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Executives Calendar 2014 JUNE 24-25 24-26

The Oil Council Africa Assembly 3rd U & D Oil & Gas Summit

PARIS ABUJA

www.oilcouncil.com www.oilandgasexpos.com

Oil & Gas Africa Tanzania Local Content Summit

CAPE TOWN DAR ES SALAAM

www.exhibitionsafrica.com www.tanzanialocalcontent.com

NAICE-Soc of Petroleum Engineers Nigeria Annual Intl Conference & Exhibition West Africa Oil and Gas Security Summit Oil & Gas Summit Africa Gas Africa Conference ONS

LAGOS

spenigeria.spe.org/naice

LAGOS MAPUTO SANDTON STAVANGER

www.waoilgassecurity.com africa.oilgassummit.com www.mcnaughtonevents.co.za www.ons.no

Cairo Energy Oil & Gas Exhibition South Africa Local Content Summit

CAIRO CAPE TOWN

www.cairoenergy.com southafrica-local-content.com

IADC Drilling Africa Conference & Exhibition CIEMEOGIS 2014-Côte d’Ivoire International Mining, Energy/Oil & Gas and Infrastructure Summit EAOGS-3rd East African Oil and Gas Summit Mozambique Continuous Education & Career Development Forum Gulf of Guinea Gas

PARIS ABIDJAN

www.iadc.org www.cotedivoiresummit.com

NAIROBI MAPUTO ABUJA

www.eaogs.com www.elliteic.net www.cwcgog.com

JULY 2-4 23-25

AUGUST 5-7 18-19 18-20 26-27 25-28

SEPTEMBER 6-9 16-17

OCTOBER 1-2 7-9 15-17 24-26 28-30

Readers should verify dates and location with sponsoring organisations, as this information is sometimes subject to change.

OTC sets attendance record in 2014 EXPERTS FROM THE offshore energy industry around the world came together 5–8 May for the 2014 Offshore Technology Conference at Reliant Park in Houston. Attendance at the annual conference reached a 46-year high of 108,300 - the highest in show history and up 3.3 per cent from last year. The sold-out exhibition was the largest in show history with 2,568 companies representing 43 countries, including 163 new exhibitors in 2014. International companies made up 44 per cent of exhibitors. “OTC’s great success this year is yet another validation of the great vision inspired by the founders who created the conference in 1969,” said Ed Stokes, chairman of OTC. “Clearly the deep and broad coverage of the technical programme, flanked and supported by excellent panels, executive keynote presentations, distinguished and spotlight award winners, as well as thousands of displays of the latest in new technology at the exhibition, continues to demonstrate the power of collaboration from our member engineering and geoscience societies and trade organisations moving the offshore oil and gas industry forward safely, sustainably and with due consideration of environmental protection.” This year’s event featured nine panel sessions, 29 executive keynote presentations at luncheons and breakfasts, and 308 technical papers. Speakers from major, independent, and national operators; federal and regional government officials; academia; and more presented their views on a wide variety of topics while discussing views on the current challenges and future directions of the industry. OTC’s Spotlight on New Technology recognised 12 technologies for their innovation in allowing the industry to produce offshore resources. Safety and environmental protection, always key areas of focus at OTC, was at the forefront of many discussions.

4 Oil Review Africa Issue Three 2014

Oil and gas investment model THE WORLD BANK has appointed auditing firm PricewaterhouseCoopers (PwC) to undertake a consultancy in developing a new petroleum master plan in Kenya’s nascent oil and gas business. The plan will define how the country commercialises its oil and gas reserves to maximise the value of projects by preventing duplication of investments. The plan will also provide a road map for investment in processing, pipelines, storage and distribution. PwP will prepare the master plan covering up to 2040 and will also evaluate domestic, regional and global export markets for oil and gas. Among the stakeholders that will be involved will be officials from the ministries of Finance, Energy and Petroleum, Devolution and Planning, Transport and Infrastructure, relevant parastatals and department as well as the private sector. Mwangi Mumero

The new shale gas countries: The prospects for shale gas outside North America THIS REPORT BY Oil Review Africa journalist Nicholas Newman and published by PennEnergy Research highlights both the challenges and major factors that face the industry, investors and governments, outside the United States in repeating the American shale gas revolution. New Shale Gas Countries report takes a special interest in the top 13 countries including South Africa, which hold the largest technically recoverable shale gas assets outside North America. It examines the key issues concerned with shale gas development, this pioneer industry is expected to face, including petrochemical geological conditions, but also political, policy, regulatory, market, fiscal and scarcity of specialised skilled equipment and infrastructure required to exploit shale gas resources. It takes a look at the proposals made by governments and industry to facilitate the scale of investment required scale of investment required to expand global shale production outside the United States. Furthermore, it provides a series of recommendations to tackle some of the challenges in the race for shale gas faced by the industry, government and potential investors.

www.oilreviewafrica.com

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Industry News & Events

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Report predicts surge in world subsea spending GLOBAL SUBSEA HARDWARE capex could total US$117bn between 2014 and 2018, according to Douglas-Westwood’s (DW’s) latest market forecast. This represents growth of more than 80 per cent compared with the preceding five-year period, DW says, although the global financial crisis in 2009 and the Gulf of Mexico oil spill in 2010-2011 both limited growth in subsea hardware spend during 2009-2013. Also, subsea tree installations last year were lower than expected mainly due to delays in big projects offshore Brazil and West Africa. The strong growth to come is down to a combination of a favourable outlook in the established deepwater provinces and the start of field development in new frontier areas such as the Eastern Mediterranean and East Africa. Subsea hardware spend is expected to be highest in Africa, Latin America and North America, with these regions providing almost half of the total expenditure. Over the next five years, DW also foresees around 44 per cent of total spend committed to projects in water depths greater than 1,000 m. Subsea production equipment will account for almost half of all expenditure by component. The SURF (subsea umbilicals, risers, and flowlines) market makes up over a third of expenditure, driven by the development of remote fields, new project phases, and the tieback of satellite fields into subsea hubs. Pipelines incur the remaining spend, driven by a few large offshore pipeline projects and smaller tieback pipelines.

Big year for West Africa’s new oil province THE RESULTS OF wells due to be drilled this year could be make-orbreak for the four-country Transform Margin Five years ago, a new interpretation of West Africa's petroleum geology suggested the deep waters lying off Sierra Leone, Liberia, Côte d’Ivoire and Ghana could emerge as a world-class oil province. Extending nearly 1,500 km from west to east, the lightly-drilled West African Transform Margin - an area between two tectonic plates - had been shown to hold oil at both extremes, but in complicated structures. Exploration since then has yielded discoveries - although none on the scale of Ghana's Jubilee field, now a 100,000 bpd producer, which sparked the interest in what had been viewed as an unpromising area. There have also been a number of disappointments, and none of the discoveries west of the Jubilee area has been large enough for a development to be launched.

US firms are working to drive the continued "Angolanisation" of the petroleum workforce THE OBAMA ADMINISTRATION is working with General Electric, Chevron, ConocoPhilips and Exxon to help bring more Angolans into positions of power in the petroleum sector. On a tour of GE oil services facilities at the Sonils compound in the Port of Luanda, US secretary of state John Kerry said US firms are working to drive the continued "Angolanisation" of the petroleum workforce as part of overall training and corporate responsibility. "More and more Angolans are being trained to take on more and more different kinds of important jobs," Kerry said. "And I know the government is very focused on how to provide for an increased standard of living for the people of the country. That comes from fair and reasonable trade agreements where everybody benefits, where there’s an ability to create jobs." Kerry was joined at Luanda's port by GE Africa CEO Jay Ireland, Exxon country manager Johnny Sandlin, ConocoPhilips country manager Knut Schjerverud, and US-Angola Chamber of Commerce head Pedro Godinho. Angolans took the lead in delivering the first of 16 subsea production trees from the GE joint venture GE-GLS Oil & Gas Angola Ltd to help develop one of the first tranches of deepwater Angolan acreage. Designed and manufactured through a combination of resources from GE Oil & Gas facilities in Norway, the US, the UK and Angola, the valves, spools and fittings to monitor and control flow and injections were assembled at the Sonils compound with another 15 subsea

6 Oil Review Africa Issue Three 2014

production trees, 12 water injection trees, two water injection manifolds, four production manifolds, topside upgrades and associated equipment on the way. "We announced our intentions to further support the development of Angola's growing oil and gas industry and, after only a year, are proving our commitment to the country's ‘Made in Angola' pledge," says joint venture vice president Eugenio Neto, who is the CEO of GLS Holding, SA. "Setting up in-country has significantly improved our speed-to-market, allowing us to execute on critical project deliverables in a timely fashion." The joint venture was founded in 2013 with an initial investment of US$175mn for a manufacturing facility in Soyo to supply subsea equipment to Angola's oil and gas industry. It has brought new manufacturing and industrial technologies to the country while creating hundreds of direct and indirect jobs and developing local expertise with Angolans training at GE's UK-based Centres of Excellence for subsea systems, controls and systems engineering. "Localisation is about physically being where the customer is to ensure quality delivery on complex, remote projects," says GE Oil & Gas for Sub-Saharan Africa CEO Marco Caccavale. "GE's global footprint enhances delivery of services, technologies and expertise, while empowering decision-making at a local level, ultimately bringing growth opportunities to all of the stakeholders involved." New GE turbines in Soyo "will help provide the power that then generates the ability for hospitals,

for schools, for homes, for cities, for stores to be able to grow and prosper," Kerry said on his visit to the Sonils compound. "So we believe there are great opportunities on which we can build where, most importantly, Angolans will benefit." "There is enormous opportunity for the people of Africa, the people of Angola, to be able to gain in healthcare, in education, in jobs, in the quality of life," Kerry said, commending a US$600mn US loan guarantee to help Angola purchase a Boeing 777. "When a Boeing airliner is bought from Boeing, it creates jobs in America, but it will also create jobs and opportunity here in Angola," Kerry said. "This will grow the opportunity of, obviously, more ability to have business and more ability to have trade, and also for people to simply come to be able to engage in some of the exciting things that are happening in Angola." During the visit, he praised Chevron's work with Texas Children's Hospital to improve health care for Angolan children in co-operation with First Lady Ana Paula dos Santos. "This is not just about business," Kerry said. "This is about building a relationship between two people, two countries, and building a future. And when I look out at the economic energy out here in the port in all these containers and these ships and the work that you’re doing, I am confident that Angola, working together as you are now, will be able to help contribute to an extraordinary journey in Africa as a whole, and we will provide greater opportunity to everybody."

Scott Stearns www.oilreviewafrica.com

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Industry News & Events

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Workforce survey in Nigeria and Tanzania OILCAREERS.COM AND AIR Energi’s 2014 H1 Workforce Survey delved into the oil and gas market in Africa to uncover current market trends, with the results showing a polarised industry across the continent. The West offers large numbers of existing operational assets including deepwater projects while East Africa is still regarded as a prospective market and a region with vast opportunity. The opposing positions result in different workforce drivers in terms of operation assets and availability of candidates. Key findings indicate that despite on-going unrest in Nigeria, international companies continue

Baker Hughes and Aker Solutions new alliance BAKER HUGHES AND Aker Solutions offered details about a newly formed Subsea Production Alliance at the Offshore Technology Conference. The alliance is designed to combine Baker Hughes’ completions and artificial lift technology with Aker Solutions’ subsea boosting, controls, and intervention products. The alliance says the aim of the combination is to boost output, increase recovery rates, and reduce costs in subsea fields. Subsea production systems have traditionally been designed and installed separately from in-well production and completion systems, even though they share a common interface at the subsea tree and ultimately function as one joint system. The result is significant installation costs and less than optimal production rates. And when production falls off, workover and intervention operations for subsea fields are often too cost prohibitive. Baker Hughes chief executive Martin Craighead said that the tie-up would aim to “identify and integrate the most effective combinations of in-well and subsea technologies, enabling greater production rates - efficiently and economically - from subsea fields". "Deepwater subsea fields have so far been characterised by low recovery rates, and new discoveries in deeper and more hostile environments are making these fields even more costly to develop," he commented. Svenn Ivar Fure, Aker Solutions leader in the alliance, said, “Well access and subsea boosting can be combined into one power control, and monitoring system. We can reduce ESP intervention costs. Baker Hughes is improving ESP pump life and a throughtubing ESP installation can use a riserless intervention vessel rather than a drilling rig. “Baker Hughes completion technology with Aker’s boosting pumps – single-phase or multi-phase – will give greater recoveries at lower costs.”

8 Oil Review Africa Issue Three 2014

to invest and thrive in the area. Although the skill set of local professionals is high, retention of local workforce has proved difficult as experienced professionals continue to emigrate in pursuit of more lucrative projects and better pay. This is reflected in the results with nearly three quarters of the respondents, all managers who recruit staff as part of their role, expecting industry salaries to rise in 2014. Tanzania is proving particularly attractive to foreign investors due to the number of untapped fields ready for development. There is high demand for local candidates and expats with strong experience due to large LNG projects currently

underway. The survey showed that in Tanzania the issue of training requirements is pressing as the workforce currently lack the levels of experience and skills necessary for the oil and gas sector. Key statistics for OilCareers.com: Over 1.5m visits from 193 countries per month 930,000+ searchable CVs 9.5m+ page impressions per month 24,000+ new candidate registrations per month

6 6 6 6

For more information: Lyndsay Aitken/Cameron McHattie, Fifth Ring for OilCareers.com

PTTEP seeks upstream investment opportunities in Africa THAILAND’S UPSTREAM PETROLEUM company PTT Exploration and Production Plc (PTTEP) is exploring opportunities to invest in Africa beyond Algeria, Kenya and Mozambique, where it already has investments, a senior official was quoted as saying in the local daily Bangkok Post. The Thai company is looking into the feasibility of investing in various African countries, with the study touching on areas such as business potential, politics, foreign investment policies and technology requirements, PTTEP CEO and president Tevin Vongvanich said. PTTEP, which has a 35 per cent interest in Algeria's 433a & 416b concessions, indicated first oil from the Bir Seba block in December. Production from the block, projected to reach 20,000 bpd, will be its first in Algeria. Meanwhile, the Thai firm reported that Mozambique's Rovumma project is now in the exploration phase, with appraisal wells expected to be drilled and liquefied natural gas (LNG) production targeted for commencement in 2020.

Broad collaboration to set industry standard THE DOCUMENTATION NEEDED within the international subsea industry to ensure regulatory and operational compliance has grown considerably. Preparing and maintaining the relevant documentation is time consuming, complex and costly to deliver. Further, requirements differ significantly between the major operators. To address this issue, DNV GL has launched a Joint Industry Project (JIP) to standardise subsea documentation. This long-awaited initiative has been welcomed by the industry, with broad participation from operators, EPC(I) contractors and suppliers representing all parts of the supply chain. A typical subsea project can involve more than 10,000 documents (with up to 80,000 in a complex project) over a lifecycle of 30 years. To develop, maintain and verify the quality, security, accuracy and availability of documentation, operators, contractors and suppliers will often spend millions of dollars on document management, technical review and information management systems. Consequently, the lack of standardisation can lead to misunderstandings, a reduction in quality and difficulty in handling approvals, distribution and availability. This further leads to increasing project lead-times and costs for both customers and suppliers. There are multiple subsea projects that would benefit from an industry standard for subsea documentation. As well as improving documentation quality and assisting with on-time delivery, a standard should save suppliers, contractors and operators valuable engineering hours by reducing the need to define and review technical documents. “The aim of this broad industry collaboration initiated by DNV GL and the Norwegian Oil and Gas Association is to develop a standardised set of subsea-system documents for designing, approving, manufacturing, verifying, operating and maintaining equipment,” explained the JIP project manager Jarl S Magnusson, project manager, DNV GL Oil & Gas. The outcome of this JIP will be a DNV GL Recommended Practice (RP) aimed at establishing industry guidelines and recommendations required to document typical subsea products and systems, with an associated minimum set of documentation. Initially, the RP will provide a method for industry variations and options for add-on documentation.

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S03 ORA 3 2014 Analysis_Layout 1 06/06/2014 13:15 Page 9

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S03 ORA 3 2014 Analysis_Layout 1 06/06/2014 13:15 Page 10

Analysis

All of Africa gains from orderly development of the oil market even though some individual producers continue to struggle with supply, and attention switches to gas. OPEC sees the continent as a key to building on success.

Oil market

optimistic again G

ENERAL ECONOMIC RECOVERY was warmly welcomed at the International Energy Forum’s 4th Annual Symposium on Energy Outlooks in Riyadh on 22 January. And again at the RIIA’s MENA Energy Conference at Chatham House a week later. Good news for Africa, mainly because of the improving prospects implied for the commodity markets generally. And for local oil and gas exporters because of the “tilt” in the markets towards cash-rich Asia in general. “Things are looking decidedly better” says the latest ‘OPEC Bulletin’. “There is every reason to be optimistic.” This is on the grounds of recorded global growth rising from less than three per cent last year to an expected 3.5 per cent for 2014. Even though it has been existing and future sub-Saharan producers of gas that have been most in the news recently (from coastal EA and Mozambique especially) it is on exports of crude that the continent as a whole continues to rely most heavily for foreign exchange. International prices held up fairly steadily in the US$100-110 range (“acceptable” according to OPEC in reference to its “basket” of grades) through 2013, and this has continued well into the current second quarter. The upturn in demand in most of the heavily industrialised (OECD) countries is particularly welcome as the crude-producing world had come to rely on rising consumption of oil products in developing Asia recently; no doubt the turnaround in the US supply situation has been a key factor behind this. Over the long term the Organisation expects global demand to rise from 89.9 mn bpd last year to 91.0mn bpd in 2014, and then – barring major upsets – on fairly steadily upwards to exceed 108mn bpd in far-off 2035. Recently North and sub-Saharan Africa combined have been supplying roughly one-fifth of the world’s internationallytraded crude, so there’s plenty of room for earnings growth here. There is no reason to suppose this will slow significantly in the foreseeable future.

There is every reason to be optimistic. next formal session in Moscow as this issue goes to press - is essential to the ensuring of this. Speaking at the second (MENA) “New uncertainties and new opportunities” gathering which included a special mid-way session on North African issues, specifically on “Managing transition” – OPEC’s Secretary General Abdalla Salem El-Badri stressed that stability and fair prices in the markets are now being threatened by the current crop of “political uncertainties and unfolding geopolitical changes” throughout the region, presumably including Libya in these, a key member country of the producers’ group. A senior adviser to Algeria’s Ministry of Energy & Minerals Mr Ali Hached played a key part in this session, which focused on developments in troubled Egypt too.

Significant challenges to be faced But to meet such a steadily rising level of demand in a timely and orderly fashion without 2008-style panics, gyrations of prices and shortfalls OPEC points out that significant challenges have now got to be successfully faced – by both members and non-members alike, and by consumer groups too. Continuation of stakeholder co-operation through information/opinion-sharing organisations like the International Energy Forum - which is holding its

10 Oil Review Africa Issue Three 2014

Competition from unconventionals Of course competition from unconventional sources complicates the situation further, as do rising costs generally, the ever-present importance of protecting an environment which has never been harmed by Africa in the first place, and the continuing “financialisation” (ie, consequences of excessive speculation, elsewhere referred to neatly by OPEC as “paper oil trading”).

And the key issue remains, namely how to actually manage the inevitable long-term price fluctuations that all major commodities are subject to in a responsible and fair way.

Transparency in the trade A major source of assistance, El-Badri said, is the activities of the Joint Organisations Data Initiative, which was profiled in the January ‘OPEC Bulletin’. JODI’s Services Dept is headed up by Dr Adedapo Odulaja, a well known advocate of transparency in the trade. These activities cover international business in both oil and gas. Another obvious asset is the provision of improved conditions of investment security generally, the industry’s time-horizon being very much a longterm one. And a third could be the argued-for more generous tax treatment of consumer groups in the main, especially OECD, importing nations. As many of these looked-for improvements as possible are required to create “a future that works for us all”, without the shortfalls and extreme price movements of the all-too-recent past. And the implications for Africa of all this optimism? For importing nations they are of a welcome return to predictability in the market for what must be the world’s most sensitive traded commodity. And for producers, both the old hands and the new, a future in which vital foreign direct investment can be more confidently relied on. ■

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Nigeria

Nigeria continues to be in the oil market headlines for all the wrong reasons, as oil theft, violence, political deadlock, corruption and unclear rules result in investor insecurity and outages. Yet there are other stories which contrast, like the ongoing boom as domestic juniors take over and renovate mature onshore assets from retreating majors.

Glimpse of light in gloomy

Nigerian oil sector N

IGERIA IS ONCE again a substantial cause for concern in the oil markets after an attack against a subsea pipeline feeding the Forcados terminal led Shell to issue a force majeure on liftings of Forcados crude. Forcados is one of Nigeria’s mainstay export crudes, as the Forcados terminal maintains a 400,000 bpd export capacity, which is more than 20 per cent of the country’s production rate of around 2,2mn bpd. The outage at the Forcados oil terminal comes at a time when markets devote more headline commentary on the tensions between Russia and Ukraine, as well as the hitherto failed attempt to get Libyan oil production back on track. Yet Nigeria, together with Libya, probably remain by far the weightier reason for why oil prices remain at the current levels despite ongoing strong US supply growth and relatively lacklustre demand growth, given the size of the two countries’ shut-ins. The attack on the Forcados pipeline was – according to their own claim – carried out by separatists in the Niger Delta. After a lull in the past years caused by a now stalled peace process and a fighter amnesty initiative, the Movement for the Emancipation of the Niger Delta (MEND) has again started targeting oil installations in the heartland of the Nigerian oil industry. The escalation is problematic as it raises the threat against oil installations from larger organised attacks considerably. However it does not mean that before MEND returned to the war path the situation was stable. Nigeria for instance continues to suffer large-scale oil theft, which it did more or less without any peaceful interregnums in the last few decades. The oil ministry itself in 2012 calculated Nigeria’s losses somewhere around an astonishing 300,000 bpd of crude. Large-scale oil theft, particularly on the industrial scale it is carried out in Nigeria, points to another debilitating problem, which is widespread corruption. Indeed the presence of an illicit cottage crude blending and refining industry of this size itself guarantees that a large manpower pool of everything from professional thieves to dishonest brokers is maintained in the country. This parallel economy spreads into the country’s financial and political establishment and from time to time causes either scandals or power contests. So far there have only been relatively halfhearted attempts to start weeding out corruption, while some large and important aspects of the Nigerian oil industry continue to be handled by the

12 Oil Review Africa Issue Three 2014

Nigeria continues to be in the oil market headlines.

government and parliament in what many consider a relatively opaque manner. This is especially so regarding the marketing of Nigeria’s oil production, where trading companies win one-year marketing deals for Nigeria’s crude (with a one-year extension option), creating an additional middle-man layer between the national oil company NNPC and the world market, when the state’s share of the oil production is being sold.

Legislative and social pressure over the past decades has gradually introduced progress towards more openness and accountability. Violence is not confined to the oil producing region, but has in the past few years escalated in the northern, mainly Muslim part of the country. Militant Islamist movement Boko Haram appears to have gained in strength and while being met with a ramped up anti-terror offensive currently, is able to mount strikes which cause widespread global reporting and further tarnish the country’s perceived political risk and stability situation. At the time of

writing around 200 schoolgirls remain in captivity after having been abducted from a school in the north. Only a few months ago the group also hit at a regional fuel depot in the north east of the country, disrupting logistics. Boko Haram remains geographically removed from the upstream oil industry and Nigeria’s export terminals, as well as the infrastructure tying those together. Still, their activity not only undermines investor confidence, it also, quite rightly, draws government concentration away from other matters. The two issues of violence and corruption are increasingly coming together. Naturally, with regards to violence and oil theft in the delta region they were always combined, but the problems seem to escalate with time. Violence, albeit in different guises and with radically different agendas, has spread and is no longer confined to one particular part of the country. Corruption in the oil sphere, as a visible political issue, seems to have spread too and both these issues are now draining government and parliament of time, resolve and space to manoeuvre. In particular oil industry corruption has become a headline-issue internationally, drawing the attention of a growing number of NGOs and of high-profile journalism. The oil minister herself, Diezani AlisonMadueke, last month came under pressure to resign from opposition parties, following allegations that

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she personally, together with her family, had benefitted from chartered jets at the expense of the NNPC for a value of up to US$63mn, a charge she denies. This at a time when the NNPC has come under allegations of having failed to remit around US$20 bn of its US$67bn oil sales income between January 2012 and July 2013. The latter allegations were levelled against the company in February by Nigeria’s Central Bank governor, Sanusi Lamido Sanusi and caused President Goodluck Jonathan to launch a full forensic audit into the NNPC at the end of March. Criticism has, as mentioned, also been levelled at the oil marketing contracts and their award to ever smaller and domestic trading companies, some of whom even have little previous market experience.

Yet not all is doom and gloom in the Nigerian oil industry. Progress towards accountability Previously contracts were awarded to multinational oil companies with large trading arms and the large global traders. These companies might be famed for their sometimes non-transparent business practices; however legislative and social pressure over the past decades has gradually introduced progress towards more openness and accountability. In Nigeria, the influence of global trading outfits has diminished radically over the past few years, fuelling fears that their stronger corporate anticorruption safeguards are seen by the NNPC and the Nigerian financial establishment as an obstacle. This was particularly evident in media reactions to the last round of crude marketing contract awards earlier this month, according to a leaked report seen by Reuters. Firstly the number of companies gaining access to buying and marketing Nigerian crude from the NNPC has shrunk by almost half since 2012, with only 28 companies receiving a contract this year. Out of the lucky trading outfits, the only global trading house, Mercuria, won a contract, while the rest of the list was made up of domestic companies. Some of those are experienced and with a good market reputation, but

The Forcados terminal, currently under force majeure, is used by SPDC, Chevron and other IOCs to export crude oil from the Western Niger Delta.

the share of the awards going to so-called “briefcase traders” who are only expected to resell their volumes straight to a bidder was very large. The combined crude value of the contracts awarded this April is estimated to be US$40bn and it was immediately alleged that several of the companies securing sale contracts were held by business interests with close ties to the government. Given the relative opaqueness of the marketing model, shaking such rumours off is not an easy task. NNPC is no stranger to corruption allegations, but the sheer scale this time, as well as the source of the open accusations, seems to bring the problem to a new level. In the meantime government and parliament have now for about a decade failed to push through a new oil and gas investment law framework, leaving the industry in considerable ambiguity about what rules and tax rates might apply in the future. Industry criticism against the most recent drafts of the Petroleum Investment Bill (PIB) has been harsh, which is one large reason while the bill has not had enough backing to be passed into legislation. As the deadlock has drawn out in time, however, more and more attempts to include other reforms of the oil sector in the bill have surfaced, creating further confusion about what package of laws exactly is being suggested to parliament.

Deep investor confidence crisis Nigeria hence suffers a deep investor confidence crisis on two sides. Concerns about the state’s ability to handle a seemingly escalating security challenge, as well as growing ambiguity about what

rulebook will apply to the oil industry over the medium-to-long term. Needless to say, investment decisions on larger projects, with longer lead times have suffered the worst. Exploration and development projects in Nigeria’s output growth frontier, its deepwater acreage, have dwindled as IOC’s – in this space naturally dominated by the majors – have finished what they started and held off on any expansions or greenfield work. Consequentially, the output capacity of Nigeria has largely stalled. Even the country’s output capacity calculation remains mired in some uncertainty, as between mature decline and decreasing exploration, the country’s ebb and flow of large violence-caused shut-ins, means the now theoretical production capacity has not been tested for a long time. Without any certainty on long term contract terms further capacity additions from the still promising deepwater remain elusive apart from a few projects still moving forward. Yet not all is doom and gloom in the Nigerian oil industry. Amidst all uncertainty a small boom is underway as global majors and midsize players divest producing, but declining, onshore assets to, often domestic, juniors. In its essence, the boom is not too dissimilar to what was seen in the North Sea in the past decade, as large corporations withdrew, leaving smaller companies to raise production by fine tuning existing assets and redeveloping declining reservoirs with the help of enhanced oil recovery (EOR) techniques and a healthy dose of enthusiasm. This development is essentially what has kept the uncertainty in Nigeria’s output capacity calculations, as had it not been for the recent onshore successes of these minnows and juniors, straight capacity downgrades would have been required. With the success of so many local oil companies, one can only hope that in time a significant sense of ownership and stewardship will also spread into the country’s political sphere, leading to a more responsible focus on creating and upholding clear, transparent and stable rules by the parliament and government. Perhaps then, would there also be a chance for a more constructive dialogue between the country’s elites and to make sure oil revenue benefits the population at large. Perhaps that would also help with, although on its own it is probably not enough to solve, Nigeria’s violence problem. ■

NNPC says domestic gas supply will increase by 250mn scf THE GROUP MANAGING director of NNPC, Andrew Yakubu, has promised that domestic gas supply will increase by 250mn scf before year end. Yakubu told journalists on the sidelines of the OTC, in Houston, that domestic gas supply is an essential ingredient in the Federal Government’s gas-to-power project. He said: “Today, NNPC is the largest producer of gas for domestic use. We produce over 400mn scf, and as we speak plans are underway to jack it up to 250mn scf by the end of the year. “There is a lot that is going on in terms of gas investment, particularly gas-to-power investment, which is a key component of the Federal Government’s agenda.” He also said that gas production in the last three years has been on the

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increase despite the challenges faced in the sector. Yakubu said: “Within the current physical regime, we have been able to move from 300mn scf to 500mn scf. This, by any global standard, is impressive. We also intend to continue to build on that.” He also explained that one of the major challenges of domestic gas supply was the commercial framework. He said: “Gas investment is capital intensive. The commercial framework has been put in place and the gas price is one major factor in the process today, because gas investment is demand driven.“ We have a better framework now but we are not there yet. We are working with the relevant agencies to ensure that the right environment is there.”

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As West Africa’s economic giant struggles to diversify its economy, simultaneously it is stimulating the indigenisation of its all-important oil and gas sector. From Nigeria’s oil industry capital, Port Harcourt, Oil Review Africa’s contributing editor Stephen Williams reports.

Nigeria’s

indigenisation trend W

HILE NIGERIA AWAITS the long delayed parliamentary approval of the country’s Petroleum Industry Bill, authored by the minister of petroleum resources, Diezani Allison-Madueke, that will provide a legislative backbone and complement the oil and gas industry’s local content legislation – as laid out in the Nigerian Oil and Gas Industry Content Act 2010 – it is evident that Nigerian entrepreneurs are already investing significantly in the sector’s value chains. A prime example of this trend is in the offshore vessel servicing business, where Slok Shipping is an indigenous pioneer. Slok Shipping is a division of Slok Holdings, a large conglomerate led by its chairman and founder, the Nigerian elder statesman HE Dr Orji Uzor Kalu, headquartered in Nigeria with interests in a wide range of sectors – from finance to media, trading to construction and manufacturing – and a corporate presence in DRCongo, Gambia, Guinea, Liberia, Mozambique, Sierra Leone and South Africa. On a visit to Port Harcourt, Oil Review Africa met with Slok Shipping’s CEO, Firas Abboud, who runs the operations of a nine-strong fleet of off-shore service vessels, part of the 20-strong Slok Shipping fleet of craft that serve West African waters. Abboud told ORA that he began his career as as a mechanical engineer in an LNG plant in Qatar, then worked in an HVAC/utilities company in the EMEA area before leveraging his brief naval experience to land a job in Slok’s technical department.

MV Neya III platform supply vessel (PSV).

Safety and security are at the core of our operations, Abboud insisted. He rose up through the company to become its CEO, with the company now employing around 300 people directly, and around 200 indirectly through part time contract status. Nigeria produces between two and two-and-a half million barrels of oil a day and oil and gas revenues account for 70 per cent of the country’s budget, so it is obviously a critical component of Nigeria’s economy. But much of the oil and gas (O&G) windfall goes to the big five international oil company (IOCs) majors operating in the country: Chevron, Eni, ExxonMobil, Shell and Total, and the oil and gas industry does not offer that much in terms of employment opportunities to Nigerians.

Employment opportunities will come

Slok Shipping’s CEO, Firas Abboud.

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But this is expected to change as the country grapples with how best to indigenise the oil and gas sector, turning it from being a ‘resource curse’ to an engine for sustainable economic development. Currently, around 10 per cent of Nigeria’s oil production is lifted by local firms, but that figure is set to double within five years,

especially as the IOC’s divest from on-shore fields. But clearly, the nascent indigenous industry will need to partner with the IOCs that operate in Nigeria to some extent to make this vision a reality. Abboud said proudly that Slok Shipping has served, and still does, many of the biggest names in Nigeria’s off-shore sector, such as Chevron, ExxonMobil, Agip, Total, Transocean, and Afren. It transports such vital equipment to these companies’ offshore platforms as drilling fluids, fuel, fresh water, nuclear material used for welltesting, casings, food supplies, and medical supplies; as well as personnel, including security service personnel in some instances. With a turnover of a relatively modest US$50mn a year, but profits running at some 35 per cent, it is clearly a force to be reckoned with. It is the largest indigenous OSV operator in Nigeria, and has an ambitious acquisition programme which will, with the investment of US$500m, double the number of ships it operates within six years. Since 2009, Slok Shipping has been providing potent competition for the big multi-national operators such as Bourbon, Tidewater and Chouest. But Abboud expressed his huge solidarity for Slok Shipping’s fellow indigenous operators, with whom the company shares information and goes out of its way to offer advice. It is surprising yet refreshing to learn of the company’s progressive attitude towards its would-be peers and potential

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competitors, yet clearly augers well for the indigenous industry as a whole. When asked to identify what Slok Shipping’s competitive advantages might be, Abboud cited the company’s proven track record; pride in a Nigerian identity; and a quality policy that seeks to always offer excellent service delivery.

Investment in new OSVs These are exciting times for the company as it embarks on a large investment in new OSVs. Abboud described this as an aggressive vessel acquisition strategy, targeted at acquiring deep sea going vessels. He anticipates taking delivery of the first batch of vessels in Q4 2014. The vessels will be multi-purpose supply vessels, but security-patrol vessels will follow in Q2 2015. That issue surrounding security, and the vessels that Slok Shipping will take delivery of next year, is

Slok Shipping’s stance towards security gives confidence to the company’s clients. hugely important. Safety and security are at the core of our operations, Abboud insisted, adding that the Gulf of Guinea has the highest numbers of pirates and offshore robbers in the world. Slok Shipping has made it a policy to take an uncompromisingly stringent approach towards reducing the security risk. The company complies with, and in fact goes beyond, the International Safety Management code for both office and vessels – as well as charterers convoy regulations, watchkeeping and International Ships and Ports Security

InterMoor meets local content challenge INTERMOOR IS FINALISING a joint venture agreement with Century Energy Services Ltd (Century) in Nigeria. This will be a locally registered company and fully compliant with the Nigerian Oil and Gas Industry Content Development Bill, 2010. For InterMoor, securing a joint venture with an experienced and established partner like Century will ensure an effective local engagement with the Nigerian oil and gas market. InterMoor has been working in West Africa for 10 years with bases in Luanda and Malongo in Angola. The company also has extensive experience with rig moves and mooring campaigns in Angola and Equatorial Guinea. Philipp Stratmann, InterMoor’s global development manager, said, “Nigeria is the largest oil producer in Africa. Expanding in Nigeria is a strategic move for us while we continue to focus on international growth and new ways to address our clients’ needs. The joint venture will ensure compliance with Nigerian local content laws and enable us to participate in the increasing number of offshore projects being conducted in the region.” Derrick Douglas, InterMoor’s new business development manager in Nigeria, and Osas Uwaifo, Century’s managing director for the joint venture, will manage the InterMoor offices in Lagos. Douglas brings 10 years of experience with Shell Nigeria to the job and holds an MBA from Cranfield School of Management in the UK. Uwaifo is a petroleum engineer with more than 13 years’ experience in business development and contract management in the oil and gas industry. She is currently in charge of business development and commercial activities for Century Group and has a BEng degree in petroleum engineering. InterMoor currently has three permanent staff based in Lagos, including a local operations and a local commercial manager. It also offers shore-based support through its partner at Kidney Island and through the planned yard at the Lagos Deep Offshore Logistics Base (LADOL).

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code with which all its vessels are compliant with. Nevertheless, it is estimated that Nigeria is losing in the region of 400,000 barrels per day (bpd) of oil production due to pipeline sabotage, illegal bunkering and large-scale theft. So Slok Shipping’s stance towards security gives confidence to the company’s clients as they contract Slok Shipping in areas as diverse as crew transportation; security patrols; standby support; fire fighting and oil spill response; search and rescue; environmental data collection; as well as general cargo supply. As Abboud commented, there are a lot of hard working Nigerian people and professional indigenous companies working within the country’s oil and gas sector. But unfortunately, they rarely have the opportunity to make themselves known to the outside world, unlike the negative publicity that usually stains Nigeria’s image. ■

Tolmann commissions Africa’s first deepwater simulation theatre ON 14 APRIL 2014, AS an indigenous oil servicing company, Tolmann Allied Services opened a Deepwater Simulation Theatre (DST) at its new office complex in Port Harcourt, Rivers State. The DST – the first in Africa and third in the world - was conceived by Tolmann in response to the increasing number of companies carrying out exploration activities in the deep offshore and the need to prepare from classroom to installation to overcome harsh environmental conditions that may arise in such industry operations. Tolmann’s vision is to be recognised as an instiution that cares about the safety of lives, and aims to achieve this by developinng a skilled and trained workforce that will enhance public safety, security and economic growth, using modern technology. In 2004 it became the first indigenous company to acquire and deploy for training a TT dunker with a well-equipped training facility. However, the move by major IOCs for the exploration of hydrocarbon deposits deep offshore raised personnel safety concerns in emergency situations. This led Tolmann into new thinking which resulted in the establishment of the DST. With the reality of harsh environmental effects and high fidelity training, Tolmann has clearly demonstrated that the Government’s Local Content policy is on track. The managing director of Tolmann, Mr Emmanuel Onyekwena recounted the challenges the company faced while setting up the DST. He listed the company’s goals for investing in the DST to include: addressing challenges in deepwater exploration, building in-country capacity with global reach, creating employment for graduates and community support, identifying with the ideals and reforms in the sector and demonstrating the capability as the local leading offshore safety training provider in-country. The MD, who extolled Total Exploration and Production Company for the patronage and support it provided the company from start-up till date, also highlighted the financial support provided by a local financial institution, Sterling Bank. The facility was set up with the assistance of Survival Systems Ltd, Canada. It can simulate naturally occuring events/effects of the environment; for example it can create wave, currents, sounds and weather. The DST facility will not only retain millions of naira that would have been spent by the Nigerian oil and gas industry to sponsor staff to overseas training programmes, but also attract trainees from the Gulf of Guinea and other oil producing countries around the world.

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Damen cutter suction dredger for Nigeria

Shell eyes extra FPSO vessel for Bonga

A DAMEN CSD500 HAS been delivered to Nigeria. The stationary dredger has been assembled on the beach and pushed and tugged into the sea over a ramp. The cutter suction dredger will perform maintenance duties in and around the harbours of Port Harcourt. As all Damen cutter suction dredgers are dismountable, their transport is straightforward. The various elements such as the pontoons and control cabin were hoisted from the transport ship onto trucks. These trucks were unloaded on a Nigerian beach for dredger assembly on the spot. The crew together with a Damen field service engineer assembled the cutter suction dredger using hoisting gear available locally. With the main pontoon placed on a wooden ramp, once assembled the dredger was pushed into the sea by two bulldozers assisted by a tug pulling the other end. The dredge design allows for this type of launching to make sure it can be deployed anywhere. The CSD500 will perform maintenance duties at a dredging depth of -16 m in the wider Port Harcourt area. The dredge pump has a mixture capacity of 4,000 cu m/h and with its respectable swing width of 40m its performance is impressive. The dredge project was started immediately as the Damen delivery included floating pipe line, land based pipe line, a complete spares package and two weeks of crew training by Damen field service engineers.

SHELL IS STUDYING for a second newbuild FPSO vessel to further develop its deepwater reserves off Nigeria, following the success of its original worldclass Bonga project. The Anglo-Dutch major was already known to be well underway with plans to develop its estimated US$12bn Bonga South West-Aparo discovery via one newbuild FPSO vessel, with significant Nigerian content levels. Concept selection for this project, spanning OMLs 118,132 and 140, was performed in Nigeria. The tender process for the singlepoint moored facility - which would be the world's largest FPSO unit 0- is still out to tender, with bidders including Samsung and Hyundai. According to Jerry Jackson, Shell's general manager for deepwater Nigeria, a final investment decision is expected before year-end 2014 on Bonga SW-Aparo. However, Jackson went on to reveal that the company is also considering a "possible concept" for a second FPSO vessel for its Bonga North development also in OML 118. This facility would sit in 1,100 m of water, with the aim of producing the field via up to about 29 subsea wells. “It’s got to be close enough together iwth Bonga SW-Aparo so we can look at standardisation” he said, meaning a possible replicant FPSO project could be on the cards. However the facility itself is likely to end up being smaller scale than that planned for Bonga-SW-Aparo. “If you are not standardising, you have to have a very good justification as to why not,” Jackson added.

Ceona nets Camac West Africa deal

Nigerian minnows get aggressive

CEONA, SURF CONTRACTOR with heavy subsea construction capabilities, has been awarded a contract for work in the Oyo oilfield offshore Nigeria from CAMAC Energy Inc. The Oyo Phase One Expansion Project consists of the installation and recovery of The Nomand Pacific. umbilical and flexible pipe as well as light subsea construction in up to 500m water depth. Project management will be performed by Ceona, while local offshore support and engineering work will be delivered in partnership with their local partner, Marine Platforms Limited (MPL) in Lagos. Offshore works are planned to commence in July 2014 using the Normand Pacific. Ceona chartered the vessel from Solstad Offshore in April 2014 for one year, with an option of extension. Ceona mobilised the Normand Pacific with a new high-specification 75t VLS, a reel drive system of 400t reels and two work-class ROVOP ROVs in Galveston (Gulf of Mexico). The vessel’s first contract as part of the Ceona fleet was working on the Clipper Contingency Umbilical Installation Project for Bennu Oil and Gas in the Gulf of Mexico. Mark Preece, Executive VP Commercial and Business Development at Ceona commented: “We are delighted to have secured this installation project from CAMAC Energy. Working in partnership with MPL, Ceona continues to build its reputation for excellent project management and offshore performance. West Africa is a key market for Ceona and we are well positioned to compete for the many upcoming SURF projects in the region”.

OIL MAJORS IN Nigeria are having grave challenges with their work programmes, especially in acreages where they are in joint ventures with the state hydrocarbon company NNPC. Whereas Total and Chevron were absent from shallow water and land rig activities in April 2014, companies like Conoil, Sahara and Newcross (the last two having only arrived at the drillsite for the first time), have maintained rigs on both land and swamp locations in the last four months. In that space of time, all of them have either made discoveries or confirmed extensions of known pools of hydrocarbon by appraisal drilling. Conoil, Sahara and Newcross collectively hold working interests in over 7,200 sq km of acreages on eight oil prospecting leases and two oil mining leases. And whereas these three are holders of both producing and exploratory acreages, they are joined on the patch by several marginal field companies, already producing between 1,000-5,000bopd from small fields, and keen on maintaining, or adding to the output, for as long as possible. Frontier Oil has a contract with a rig company to complete two gas wells, drill a water injection well and drill two new wells, one of which is an appraisal hole. In effect, it’s a five well contract, to be implemented from June 2014. Niger Delta Petroleum completed one well on its Ogbele field as a dual completion gas well, completed and hooked up another as an oil well, which almost doubled its output. Pillar drilled and completed two wells on its Umusati field in the last four months, releasing the rig at the end of March. Platform has just completed work over of some wells, which increased its production by 50 per cent of what it was producing before February 2014. Energia released a rig at the end of March after completing yet another well. This very aggressive player has 8,000 bopd in capacity. Prime Energy is ready to tackle a second well. They’ve been producing from one for upwards of a year. Century Energy finally moved a rig to location on the Atala fields in the swamps of Bayelsa State, where it will spend 60 days reentering and conducting an extended test on the only well on the field, drilled by Shell.

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Corporate Head Office 5B, Rahman Adeboyejo Street, Lekki Phase1, Lagos, Nigeria Tel: +234 1 7742304, +234 709 872 7105 Email: info@emval.net

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Tanzania

Tanzania ready to catapult into a major world gas exporter.

Tanzania targets

gas future T

HESE ARE EXCITING times for Tanzania. Although the country already produces a small amount of natural gas for local consumption, it has the potential now to make a quantum leap as a big energy exporter. This opportunity follows the discovery of huge amounts of gas offshore by a clutch of international drillers, notably British duo, BG Group, in partnership with Ophir Energy, and Norway’s Statoil, with US super major ExxonMobil. Together, these companies have unearthed discoveries totaling 25 to 30 trillion cubic feet (tcf) of recoverable gas in the country’s lightly explored deeper waters. Some estimates put the reserves at closer to 50 tcf. The intention is to develop this resource into liquefied natural gas (LNG) for sale around the world, particularly in the high demand Asia market.

LNG project to drive economy Details of the LNG project are still taking shape, though the Tanzanian government is believed to favour an onshore development rather than a floating one. Some early reports have suggested the plant could be built in the southern Lindi region, as part of a new industrial complex housing LNG production and other linked energy and petrochemicals projects, although this has still to be decided. A final investment decision is expected around 2016 although all sides seem keen to get moving on it. Foreign investors are working together to fasttrack the idea although they will be keen first to evaluate precisely how much gas is in the ground before discussing the finer details. The government hopes to see the LNG production site ready by 2020, though industry analysts think it could be later. While the search is still very much on for oil in Tanzania, the scale of these gas resources is sufficient to make a material impact on this developing east African economy. The story mirrors that of Mozambique, further south, which has similarly identified mighty gas pools in its deep water in recent years, and is again looking to exploit them via LNG. With a head start already, it is expected to just pip Tanzania in the race to launch the first LNG deliveries.

The onshore pipeline construction site in Mkuranga. Photo:www.news.cn.

The government hopes to see the LNG production site ready by 2020. Much of this is concentrated on two giant discoveries, Mzia and Jodari, located in around 1,700 metres of water. Operator BG holds a 60 per cent interest in the three blocks, with Ophir Energy holding 40 per cent. Statoil and ExxonMobil estimate their in-place gas reserves from block 2 in a similar range. More gas is also expected to be found with seven additional deep water blocks being offered to investors only recently, based on a new model production sharing agreement (PSA). This bid round also included one block for Lake Tanganyika. Tanzania clearly hopes to emulate other near neighbours, Uganda and Tanzania, in finding gas and hopefully crude oil - onshore. Other international energy companies search for oil and gas in Tanzania include Royal Dutch Shell and Petrobras of Brazil.

More gas expected to be found BG recently confirmed total gross recoverable resources across its blocks (1, 3 and 4) at around 15 tcf, with further exploration upside.

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BG making good progress According to BG’s former chief executive Chris Finlayson, there is already sufficient gas for a two-

train LNG project. “The aim of our appraisal programme now is to optimise the future development plan and place the most economic gas into the proposed project first to extract the most value across the chain," he said shortly before his departure from the company in April. The company’s exploration and appraisal campaign of recent years has certainly been prolific, with BG claiming a 100 per cent success rate in the 14 offshore Tanzanian wells it has drilled since 2010. Finlayson also cited “good progress” with partners Ophir, Statoil and ExxonMobil in the planning of the proposed onshore LNG terminal. "We look forward to the Tanzanian government’s announcement of a decision on the location of an onshore site for an export facility."

Key challenges ahead It may not all be plain sailing, however. Aside from the sheer scale and complexity of the LNG project including unlocking deep water gas reserves - there is also the enormous cost. Another uncertainty facing investors is the terms on offer, with the government mooting windfall taxes and royalties, in addition to corporate and other income taxes. The state may also take an unspecified share in

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gas production projects, according to a draft natural gas policy published at the end of 2013 (the country’s first such gas policy). At the very least, this leaves a degree of uncertainty that is not typically welcome when billion dollar projects are being put together by blue chip foreign investors. Still, the momentum and will is there, with Ophir Energy commenting recently that the LNG export terminal could be expanded with more gas being discovered. Tanzania’s gas underpins the development of a minimum of two five million tonne per annum LNG trains “and provides encouragement for a potential third” the company said in its 2013 results statement in March. And, after Ophir’s disappointing drilling results in block 7, not all wells drilled offshore are meant to be successful.

Some gas for local demand Still, a great deal of progress has already been made in tapping into Tanzania’s known gas potential. Lawyers Norton Rose Fulbright commented in a briefing note this year that the country’s new gas policies marked a significant step towards the regulatory means for the realisation of this potential. This includes the ‘Tanzania first’ concept, with local content integral to the future growth of the energy industry, and a sovereign wealth fund planned. The domestic gas market is also being given

The Songas electricity project, which feeds Songo Songo gas to a power plant near Dar es Salaam, has been operational for a decade, after receiving support from international donors.

Local content is integral to the future growth of the energy industry, and a sovereign wealth fund is planned. priority over the export market. Some of this offshore gas is therefore certain to find its way onshore for domestic use, with demand for energy on the rise. Presently, locally available gas comes from the shallow water Songo Songo fields, which is used for industry and power generation. Indeed, Tanzania is something of a pioneer in sub-Saharan Africa in the development of gas-topower projects. The Songas electricity project, which feeds Songo Songo gas to a power plant near Dar es Salaam, has been operational for a decade,

after receiving support from international donors. The country still relies heavily on erratic hydro power for most of its electricity. One flagship project is the supply of natural gas from the Mnazi Bay area in the Rovuma Basin operated by Oslo-listed Wentworth Resources - for the Mtwara to Dar es Salaam pipeline. This pipeline is now under construction and expected to be completed and commissioned during the first quarter of 2015. Tanzania also produces small volumes of coal, which is consumed locally. And, as with most countries in the sub-Saharan region, there is huge room for growth, with just 15 per cent of the population having access to electricity, according to World Bank figures. The government is already keen to expand its gas pipeline infrastructure onshore and, if it can do this, then it follows that further investment will follow in new power lines and other infrastructure. ■

East Africa licensing update WHEN BIDDING IN Tanzania’s 4th Offshore Licensing Round was officially closed on 15 May, the Tanzania Petroleum Development Corporation (TPDC) announced bids by CNOOC, RAK Gas, ExxonMobil/Statoil, Mubadala and Gazprom and with other licensing rounds in the region scheduled; there remain opportunities for exploration companies with an eye on the market to secure fresh acreage. There are 10 key points for IOCs to look out for: 6 Unsuitable petroleum legislation and policies are being updated across the region creating a moving regulatory target for investors. 6 Each of Tanzania, Mozambique, Kenya and Uganda grant oil and gas exploration and production rights through a form of production sharing contract/agreement. Each jurisdiction has its own model form which provides a basis for negotiations. 6 Licensing rounds are generally characterised by a public launch and a period for due diligence before bids are submitted and valuated. Mandatory data packages are made available (often costing millions of dollars a time) and bids will be evaluated against criteria including strength of the proposed work programme; technical capability; financial capability; fiscal package; and health, safety and environmental protection policy. In Tanzania, TPDC indicated that IOCs bidding in consortium or as part of a joint venture with domestic companies would be preferred. 6 In Tanzania, the new 2013 Model Production Sharing Agreement (MPSA) introduced bonuses of US$2.5mn and US$5mn on signature and production respectively (no bonuses previously); makes the contractor subject to general corporate tax (30 per cent of income) as well as additional profits tax (25- 30 per cent for both onshore/shelf and offshore – previously only for onshore/shelf); and applies a royalty of 12.5 per cent for onshore/shelf and 7.5 per cent for deepwater (offshore up from previous five per cent). Global trends have seen bonuses increase and this is likely to be reflected

24 Oil Review Africa Issue Three 2014

in forthcoming East African licensing rounds.

6 The trend is towards a higher state-take and Tanzania’s 2013 MPSA

6 6

reduced the contractor’s share of profits from deepwater gas finds from 20-50 per cent to 15-40 per cent. There was also a significant reduction in the deepwater cost recovery limit from 70 per cent of production net of royalty to 50 per cent. TPDC has an option to acquire a minimum 25 per cent interest and greater state participation can be expected in future across the region. In Mozambique, ENH has an interest in existing blocks ranging from 10-30 per cent. States can also be expected to take a more forward role in the development of their own blocks and two blocks were held back from Tanzania’s licensing round for development by TPDC in conjunction with a “strategic partner”. Specific local content policy is likely to strengthen the force of local content provisions included in production sharing agreements. Under Tanzania’s 2013 MPSA, contractors are required to comply with the government’s local content policy. Tanzania’s 2013 MPSA provides that TPDC and contractors must “satisfy the domestic market in Tanzania from their proportional share of production”. Capital gains tax regimes are being tightened across the region to capture disposals of assets via the sale in shares of offshore companies. Recent trends are against the inclusion of economic stabilisation clauses in East African production sharing agreements and Tanzania’s 2013 MPSA does not contain any stabilisation provisions. Various Bilateral Investment Treaties are in place with East Africa states and each of Tanzania, Mozambique, Kenya and Uganda is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Ben James and Paul Jones, Bracewell & Giuliani www.oilreviewafrica.com

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Scandinavians in Africa

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Scandinavian oil and gas as well as oil field service companies have embarked on internationalising their portfolios and activities around the world and are to be found in three African clusters of oil and gas production fields, exploration blocks and field developments located in North, West and East Africa says Nicholas Newman.

Scandinavian O&G companies expanding

in Africa T

HE AFRICAN CONTINENT is currently estimated to hold oil and gas reserves, which are respectively eight and seven per cent of the world’s reserves. Africa’s traditional oil and gas countries, most notably Nigeria, Libya, Algeria, Angola and Côte d’Ivoire, have long attracted foreign investment in exploration, field development and production. Ever since the huge gas discoveries in Tanzania and Mozambique and the promise of oil in Uganda and Kenya these “frontier” countries have been the focus of new investment in exploration and field development by companies eager to expand their reserves and production over coming decades. Development of recent African discoveries will require construction of some 21 LNG trains over the next decade and propel Nigeria and Mozambique respectively into the second and fourth largest oil and gas exporters in the world, according to a PWC Report dated June 2013 on current developments in the oil and gas industry in Africa. Scandinavian oil and gas as well as oil field service companies (OFS), faced with declining North Sea oil and gas production, have embarked on internationalising their portfolios and activities around the world and are to be found in three African clusters of oil and gas production fields, exploration blocks and field developments located in north, west and East Africa. Scandinavian companies are present in all phases of the exploration and production cycle from 3-D seismic surveying, processing and interpretation to de-commissioning services in Africa. Foremost amongst these are Norway’s National Oil Company, Statoil, and Denmark’s independent, Maersk Oil, both ranked in the top ten of their class. Focused on exploration is PA Resources AB, a Swedish oil and gas exploration company, which recently found oil in Equatorial Guinea. Alongside oil and gas upstream opportunities lies the need for field development services, which have attracted Denmark’s Maersk Group which, through its various subsidiaries, dominates the activities of Scandinavian oil field service companies working in Africa. Most prominent of all the Scandinavian companies is Statoil, one of the world’s leading energy companies, which entered Africa in the early 1990s as part of its internationalisation strategy.

26 Oil Review Africa Issue Three 2014

Statoil - Angola holds key position According to Statoil’s Annual Report 2013, daily equity oil production from Angola, Nigeria, Algeria and Libya averaged 317.9mn boed or 44 per cent of Statoil’s total international daily equity oil production of 723mn boed. Angola has proved the jewel in the crown averaging some 203.5mn boepd or 64 per cent of Statoil’s oil production in Africa during 2013. In Angola, Statoil has exploration and production licences as well as equity partnerships and operatorships. Statoil’s PSVM started production in December 2012 and increased its output in 2013. The key position of Angola is emphasised by Steiner Pollen, Statoil’s country manager in Angola, who notes, “The Angolan continental shelf is the largest contributor to our oil production outside Norway and a key building block in our international strategy. Angola yielded approximately 200,000 barrels of oil equivalent per day in equity production in 2013, which is around 28 per cent of our total international oil and gas output.” Statoil’s exploration activity centres on acreage awarded in 2011 in the offshore pre-salt play of the Kwanza basin, a ”frontier” play believed to be analogous to Brazil’s pre-salt reservoir. In January 2013, Statoil, together with Total and BP, completed a huge 3-D seismic survey covering 26,300 sq km equivalent to most of the Norwegian sector of the North Sea. In-house processing of the seismic data is ongoing and the company plans to drill up to six wells in the area this year. Present in Nigeria since 1992, Statoil holds a 20.21 per cent share in the large Agbami deep water oil field which was completed in 2008 and is operated by Chevron. Lying approximately 110 km off the coast of Nigeria its oil production of 250,000 boed is extracted through subsea wells which are connected to a Floating Production and Storage Vessel. In addition, Statoil’s exploration and operator licenses in the deep waters offshore have the potential to add to total production in coming years. Statoil operates at both In Amenas and In Salah in ventures with BP Plc and Algeria’s state-owned Sonatrach energy group. Statoil has a 45.9 per cent in the onshore In Amenas development, the fourth largest gas development in Algeria. The In Amenas plant’s production has, since April 2013 been limited to just two out of its three trains owing to the

Statoil’s PSVM FPSO now working offshore Angola.

terrorist attack of 16 January in which 40 people lost their lives including five Statoil employees. The third unit is awaiting new equipment to replace parts damaged in last year’s attack. Statoil also has a working interest of 31.9 per cent in Algeria’s third largest gas development, the In Salah field. Statoil is also engaged in exploration and has acquired an operator exploration licence with Sonatrach, the state oil company, in the promising Hassi Mouina gas play. In neighbouring Libya, Statoil is a partner in two licences in the Murzuq and Mabruk oil fields of the Sirte Basin. However, since the revolution the security situation has severely disrupted production and exploration activities in the country.

Scandinavian companies are present in all phases of the exploration and production cycle in north, west and East Africa. At the centre of East African activity In 2006, Statoil joined the gas exploration frenzy in the Rovuma basin in offshore Mozambique which has yielded some of the largest gas finds of the past decade. Statoil has a 40 per cent interest in the operatorship of two blocks in partnership with INPEX Mozambique Ltd (25 per cent), Tullow Mozambique Ltd (25 per cent) and Mosambik Empresa Nacional de Hidrocarbonetos E.P (10 per cent). The blocks some 8,041 sq km in size are located in water depths varying between 300 and 2,400 metres, www.oilreviewafrica.com

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Scandinavia in Africa

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Esvagt AS provides a whole range of safety and support services at sea.

depths in which Statoil is expert. In 2013, according to Statoil’s 2013 Annual Report, Tanzania emerged as a new potential cluster for development following three discoveries during the year.

Success for Maersk Oil in Algeria and Angola Present in Algeria since 1990, Maersk Oil, a Danish transport, exploration and production conglomerate has, in partnership with Sonatrach the state national oil company, participated in over 30 exploration wells, which have resulted in 16 field discoveries. It is producing collectively over 500,000 bpd of oil from fields some 700 km south of the Algerian eastern city of Constantine. Since 2006, when Maersk Oil began exploration in Angola, it has made three notable discoveries. The first, Chissonga, discovered in 2009 in Block 16, an area covering some 4,900 sq km and up to 1,500 metres in depth was declared commercial in 2011. The second, Azul discovered in late 2011 in Block 23 generated worldwide interest as it was the first positive deep-water pre-salt well in the Angolan analogue to the prolific offshore regions of Brazil. The third, made in mid-2012 in Block 16, was made with the Caporolo-1 well. Maersk Oil has completed two successful Cubal wells and is working on a major development plan for its Chissonga and Cubal discoveries.

Svenska focus on west Africa Swedish Svenska Petroleum Exploration AB is an exploration and production company focusing on the hydrocarbon-rich basins of Angola, Nigeria and Guinea Bissau whilst its main production derives from the Côte d’Ivoire, where its offshore Baobab field averaged more than 17,000 bpd in 2012. It has plans for further exploration in Senegal and Angola where it has a 30 per cent interest in Production Sharing Agreements for two Blocks in the Kwanza basin.

28 Oil Review Africa Issue Three 2014

Scandinavian oil field service companies Today the global OFS market is worth US$750bn a year of which Africa accounts for some 20 per cent according to Clearwater Industrials’ Team Report, “Oilfield Equipment & Services Report 2013”. Whilst Scandinavian OFS companies have naturally dominated their home market their deep-water technical and operational expertise is highly valued in Africa.

PGS are are the holders of the largest non-exclusive database of seismic data in West Africa.

and delivery of drilling rigs. Likewise, Maersk Tankers deliver African oil and gas to customers worldwide. Aker Solutions is a Norwegian partiallyprivatised OFS company providing oilfield products, systems and services for customers in the oil and gas industry worldwide. Its engineering, design and technology help bring discoveries on-stream and maximise recovery from each petroleum field. It is currently providing Exxon in Nigeria with umbilicals as well as a subsea guide and hinge over (GHO) connection system to Total’s Angolan Dalia offshore project. Today, the global deep-water market is worth some US$6bn to Aker solutions of which the Europe and African region outside Norway contributed 13 per cent of its revenues in 2013.

Safety and support services PGS - Multi-Client data available in sub-Saharan Africa PGS provides a broad range of geo-services including seismic and electromagnetic services, data acquisition, processing, reservoir analysis/interpretation and multi-client library data for clients in Africa including in the past year, the Petroleum Agency of South Africa and Côte d’Ivoire’s state-owned oil company Petroci. They are the holders of the largest nonexclusive database of seismic data in West Africa. In South Africa, a new PGS MultiClient survey of a 13,000 line km in the frontier area offshore the east coast of South Africa is making progress and the seismic data should be ready in Q4, 2014. Maersk, the Danish conglomerate provides a host of upstream technological hardware as well as transport services. For instance, Maersk Drilling is engaged in supplying and operating jack-up drilling rigs for clients in Africa including the Egyptian General Petroleum Corporation. Whilst Maersk Supply Service offers a variety of transport solutions including, subsea support vessels, platform support vessels

Esvagt AS is a Danish-based international offshore support vessel operator, which provides a whole range of safety and support services at sea. These include standby and emergency duties, oil spill contingency, tanker assist, rig moves, supply and transfer duties. It has vessels all over the world including Africa. Since December 2013, one of its vessels, the Esvagt Connector, has been on oil and gas exploration duties in the Cape Juby licences 1 to 3 off the Moroccan coast near Agadir for Cairn Energy reports the Esvagt website. Whilst lagging behind their US and UK peers, Scandinavian companies’ presence in Africa‘s oil and gas production and exploration are not insignificant. Likewise, Africa’s contribution in oil and gas production is not insignificant for Scandinavian companies. Indeed, Africa’s contribution to Scandinavian company’s reserves and production is set to increase in importance as successful exploration in the deep waters offshore allows Africa to reach its potential, notwithstanding, the current high risk environments of Angola, Tanzania, Algeria and Libya. ■ www.oilreviewafrica.com

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Human Resources

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Drew Leitch is managing director of MDT International, a global training provider for the industry in more than 70 countries. He explains why the sector must draw on global expertise to thrive as this constantly evolving business expands into East Africa.

African

nationalisation T

HE OIL AND gas industry is a global operation and new frontiers of energy exploration have become increasingly more important in the quest to fuel the world’s demand for hydrocarbons. The World Bank has pinpointed East Africa as one of the strongest economies of the future with robust potential for future growth. Undoubtedly, its burgeoning oil and gas sector is a key factor in this forecast. Huge oil discoveries in Nigeria, Egypt, Libya and Algeria, smarter technology and increased political stability have fuelled enthusiasm in other African countries for drilling reserves. A 2013 Deloitte report indicates more hydrocarbon reserves have been discovered in East Africa than in any other part of the world in the last two years. Major players around the globe are intently watching each and every potential basin across the East side of the continent. Mozambique and Tanzania show the most promise in driving growth in the East African oil and gas sector. Tanzania is currently being explored both onshore and offshore. The country has no commercial oil discoveries at present, but a number of promising gas discoveries have been made in the deep offshore blocks and two small producing gas fields, Songo Songo and Mnazi Bay. Since 2010 exploration success has raised Tanzania’s potential to supply LNG to Asian markets. Exploration in neighbouring Mozambique dates back to 1948 but before the early 1970s, despite 54 wells being drilled, no commercial discoveries were made. Activity stopped during the independence struggle and the subsequent civil war, but picked up again with gas discoveries in the late 1960s. Now Mozambique is home to one of the largest natural gas discoveries for a decade. Valued at approximately US$800bn in 2012, it is worth 36 times the entire nation’s economy and is predicted to open trade doors to India and China.

Tanker offloading production from FPSO Kwame Nkrumah on the Jubilee field, offshore Ghana. Image: Tullow Oil

Brazil, Tanzania or Malaysia - don’t belong to the international oil and gas companies, the government or the ministry. They belong to the people of the country who should be able to benefit from and capitalise on these resources. It is vital that local populations in mineral rich countries are able to benefit through employment in energy.

It is vital that local populations in mineral rich countries are able to benefit through employment in energy.

Empowering overseas communities

A wealth of knowledge

East Africa is one of the least developed and poorest regions in the world. Many who live there survive on less than a dollar a day. Diseases such as AIDS and Malaria remain prevalent and infrastructure is poor. The arrival of the oil and gas industry will boost local economies significantly and demand that the infrastructure is extensively upgraded and maintained. It should also bring hope of a better life to millions of people who live there. Mineral wealth, in any country, is vested with its people. Hydrocarbons - whether discovered in

Governments must carefully consider local content policies to manage and harness the power of oil and gas resources for the benefit of the current population and for future generations. In Uganda, an example of legislation aiming to do this is the Petroleum Exploration Production and Development Act which became effective in April 2013. It encourages oil companies to employ Ugandans, provided they have the right qualifications to meet the job specification. It also makes it mandatory for firms to plan for technology and skills transfer. As

30 Oil Review Africa Issue Three 2014

well as fulfilling legal requirements and contractual obligations, it is also heartening to encounter an international oil company which truly understands and is dedicated to its role in national development. To give overseas communities the best chance of gaining employment and benefiting from their countries’ new found wealth they must have information and knowledge. Without knowledge it becomes difficult to exploit the benefits and so knowledge becomes as valuable as dollars. At MDT International knowledge share is what we do and we are very passionate about it. My career was unlocked when I became willing to share and realised that watching people grow and progress gives me great satisfaction. MDT International provides training in what I call ‘the business of oil and gas’ in more than 70 countries. All of our trainers have the human factor. They are seasoned travellers and understand, no matter where they visit around the world, people are more alike than different. We connect with our audience so they engage with us and stay true to ourselves to provide a genuine and worthwhile experience. Our courses use industry knowledge and realistic industry examples and can equip nationals with the intellectual know how and skills to build a strong, local workforce.

On the pulse Our work is incredibly rewarding, particularly in an environment where people are hungry to learn. A

www.oilreviewafrica.com

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Human Resources

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recent trade mission to Africa saw me visiting my 16th country in the continent. There is a buzz and a beat there and in a training room environment a desire to learn that is palpable. There is never a stony silence when you ask if the participants have any questions. This is where an audience gets the best from our trainers. Questions lead to more questions and debate. In Africa, it’s commonplace for this kind of highly-charged learning atmosphere to be created and that is not only valuable but fun.

There is a buzz and a beat there and in a training room environment a desire to learn that is palpable. Better together The long-term and technically complex nature of oil and gas projects in East Africa, without a doubt, requires the involvement of qualified national professionals. However activities and disciplines will continue to require involvement of international experts too. The monetary implications of expatriates in foreign oil and gas provinces is not one to be taken lightly and there is a compelling financial argument to reduce dependency on this. But it is about striking a balance. In an industry like oil and gas you need to be able to adapt to numerous different cultures to build your knowledge and experience. My view is

that the industry will always have expats but they will not necessarily be British expats working for British companies or American expats working for American companies. It will become about people from all nationalities being tested and delivering in a variety of cultures and oil and gas provinces.

One world At the beginning of a nation’s journey to becoming an energy powerhouse the country does not hold the knowledge or the dollars to go it alone and is forced to open the door to foreign investment. This is no bad thing but it must also be understood this is just a matter of timing. Both the host countries and international oil companies must have systems in place for the locals to become skilled and to decrease the dependency on foreign investment. The happy medium will lie with key positions being filled by fiercely capable nationals but with international companies still having a key role to

The industry will always have ex-pats but from all over the world.

play. At MDT International we see that we can genuinely play a part in helping the frontier areas in oil and gas shift the power balance in their favour. We must think of the world’s reserves as one collective resource, working together in new provinces to prolong its legacy of success. I am confident we can play a key role in harnessing the enthusiasm for the industry globally and facilitating its future in Africa and beyond. ■

Wages reach record high WAGES FOR OIL and gas professionals reached a record high in March, according to a Rigzone analysis of data from the Bureau of Labour Statistics. Looking at the combined categories of oil and gas extraction and support activities for oil and gas, energy workers were paid US$33.22, higher than any other time. “Record production activity in the US, coupled with an increased need for experienced oil and gas professionals is having a positive impact on wages,” said Paul Caplan, president of Rigzone. “Companies are having to pay up to attract skilled talent and energy professionals can reap the rewards of a solid job market.”

Call for action to tackle drilling skills crisis THE CEO OF global leading energy services company LR Senergy, James McCallum has issued a stark warning that oil and gas productivity will drop if the drilling sector doesn’t unite and take urgent action to tackle the drilling skills shortage and focus on excellence in well delivery processes. Speaking at the Industry Technology Facilitator’s (ITF) Bi-annual Members’ Forum meeting on 23 April in Abu Dhabi, Mr McCallum hosted a debate on drilling challenges and initiatives. He highlighted that highly skilled engineers are needed now more than ever to execute drilling on complex, high risk projects such as Shah and Bab sour gas developments in the Middle East, but with 50 per cent of petroleum engineers due to reach retirement age in the coming years, concerns are rising about the potential impact of a lost generation of talent. Mr McCallum said: “Concerns are rising that the exit of senior drilling talent will be accompanied by a drop in productivity as new entrants are likelier to make costly errors, operate at a slower pace and extract lower yields from more challenging deposits due to a lack of experience, resulting in incremental non-production time (NPT) and inefficient operation. “The set of skills required for drilling engineers

32 Oil Review Africa Issue Three 2014

in the region is changing, in particular on the type of high-risk projects, where specific skills are required to identify any potential hazards. Risk judgement is very important at a time when the drilling risks become significantly higher as geographically difficult and more complex mature oil and gas fields are being exploited. Enhanced oil recovery rightly gets a great deal of attention, however, incremental oil recovery from efficient and effective drilling operations should be the immediate priority. “It is a serious issue which has been ongoing and while the drilling sector continuously talks of collaborating, what we need to see is a commitment to this with urgent action.” ITF’s meeting was attended by the organisation’s membership of international operating and service companies as well as technology specialists who were given a platform to showcase latest developments. The drilling challenges debate heard the views of senior industry experts from NOCs, IOCs and major service companies. Initiatives to attract new talent to the industry, accelerating training programmes and launching drilling centres of excellence are among the actions being pursued by the industry to stem the challenge. Dr Patrick O’Brien, CEO of ITF said: “Our forum

also looked closely at the technical drilling challenges faced by the industry, and our members gave us some good insight and direction on what technology development we now need to facilitate on behalf our members and the wider industry. We had a number of entrepreneurial drilling technology developers in the room that in time we believe can bring game changing techniques to the industry. Casing while drilling is one such technology that would radically reduce drilling downtime and improve drilling cost efficiencies that we all agreed was acutely needed at this time. My team at ITF intend to pursue this agenda vigorously in the near term.” The two day bi-annual Members’ Forum was hosted by ADMA-OPCO and attended by more than 60 senior international oil and gas company representatives. ITF established a base in Abu Dhabi in 2012 and launched the Gulf Co-operation Council (GCC) cluster to help establish a vision for collaborative oil and gas technology research and development. The agenda included updates from technology developers from ITF’s emerging project portfolio as well as interactive facilitated discussions on key themes including enhanced and increased oil recovery.

www.itfenergy.com www.oilreviewafrica.com

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Geology

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Aminex completes 2D seismic over Ntorya-1 INDEPENDENT EXPLORER AMINEX has completed the acquisition of 2D seismic data over the up-dip portion of the Ntorya1 discovery, located in the Ruvuma contract area, onshore Tanzania, according to partner Solo Oil. Processing of the data has begun and fullyinterpreted results are expected during the third quarter of 2014. Solo said that the new seismic data, which totals approximately 177 km, will assist in delineating the Ntorya discovery and allow the optimisation of future production wells. Solo executive director Neil Ritson commented in a company statement: "Acquisition of the infill seismic data over the Ntorya gas condensate discovery is an important next step in the monetisation process for the discovery. This is especially timely as the commissioning of the new gas pipeline, currently under construction, to the market in Dar es Salaam will make Ntorya especially valuable. We look forward to seeing the results of the processing and interpretation as they are concluded."

Chevron needs two and a half years to decide on Morocco CHEVRON NEEDS AT least two and a half years to gather seismic data before deciding whether to stay in Morocco, according to the the head of its Moroccan affiliate. In January, Chevron Morocco Exploration Ltd signed an agreement with Morocco's Office National Des Hydrocarbures Et Des Mines (ONHYM) for three deepwater blocks in one of the less explored areas in the region. Vice president and country manager at Chevron Morocco Exploration, Carl Atallah, said the company was still in the early stages of exploration. "We plan two and a half years of seismic data to make a decision whether to stay in Morocco or not. Based on that we will launch 3D surveys and I am confident we will," Atallah said. Chevron will acquire seismic data and conduct studies in deepwater areas known as Cap Rhir Deep, Cap Cantin Deep and Cap Walidia Deep, 100 to 200 km west and northwest of Agadir in southern Morocco. The areas total approximately 29,200 sq km with average water depths ranging from 100 m to 4,500 m, according to official data. Chevron has a 75 per cent working interest in the three areas, with Morocco's ONHYM holding the remaining 25 per cent. "We have the opportunity to be in an explored large area. It is with high risk, but with a high potential," Atallah said. "We are making significant exploration investments here in Morocco, similar to what are we doing in Liberia and Sierra Leone," he added. Morocco has awarded dozens of permits to oil companies in the past few years, helped by its relative stability compared with other North African countries and by increasing indications of potential offshore and onshore reserves. The country is planning to drill around 30 oil and gas wells in 2014, up from only three in 2013.

Simba’s FTG Survey in Kenya's Block 2A

Expert panel looks at emerging technology

SIMBA ENERGY’S AIRBORNE FTG survey (Full Tensor Gradiometry) commenced daily flights late. The programme has been expanded somewhat to cover a new and significant target area identified by preliminary FTG results received to date. The aircraft initially covered the secondary smaller survey area (850 sq km) at the southwest boundary of Block 2A in order to investigate the area within the Anza basin. Results to date for the FTG survey in this area have been encouraging. Considered with the known geology and modeling of the Anza basin in this area, the preliminary data from these FTG results indicate the existence of two basinal structures within the basin’s margin: 6 A new large basinal structure identified with an area of +/- 100 sq km in the southwestern most extents of Simba’s concession 6 A second basinal structure of +/- 40 sq km lying about 15 km to the southeast appears coincident with the northern extents of the Badada prospect in Block 2B (just south of Block 2A) controlled by Taipan Resources, with Premier Oil farming in for 55 per cent. The FTG survey coverage will be expanded by +/- 100 sq km to the northeast of the new target area in order to provide full gradiometry coverage through to the known extents of the Anza basin’s margins controlled by Simba. Resulting data from this FTG survey will serve to provide better targeting and more cost-effective 2-D seismic acquisition planned for later in the year, preparatory to final drilling decisions.

THE STATUS OF emerging offshore geoscience technologies was the topic of a panel at the recent 2014 Offshore Technology Conference. New streamer technology, permanent reservoir monitoring, seabed geophysics equipment, micro-seismic monitoring, and Petrobras’ experience in Jubarte with permanent monitoring were discussed. David Monk, director of geophysics for Apache, reviewed the place of new streamer technology among the advances. He predicted continuing advancements in bandwidth, an increase to one million channels within a decade, and continuing development of novel acquisition geometries. Rocco Detomo, an independent consultant, talked about the rise in life-offield seismic systems and the inclusion of geodesic measurements with the typical seismic data. Looking forward, Detomo expects improved instrumentation, much denser receiver spacing, more channels, and ruggedisation of fibre optics, along with the establishment of standards for their use. Shuki Ronen of Seabed Solutions, expects more combined use of streamers and seabed nodes going forward, particularly where area obstructions preclude the use of streamers. As for the use of seabed monitors, Ronen expects to see ROV handling of the equipment for placement and recovery to go along with more sensors and longer-life batteries for power. Better broadband sources, with more repeatability and faster shooting to improve the economics of seabed receivers, will lead to a new chapter in geophysics, he said. On the use of microseismic technology offshore, Peter Duncan of MicroSeismic Inc talked about the use of passive measurement technology as being applicable to both frac and production monitoring, in addition to being a part of the smart oil field. He also pointed out that such passive monitoring could benefit the public transparency of technological applications. Petrobras’ Paulo Johann showed how the company is applying permanent reservoir monitoring (4D/4C) at record water depths of as much as 1,350 m of water at Jubarte in the Campos basin. One benefit in particular is in the ability of seabed monitors to work in the presence of complex infrastructure. He pointed out that Petrobras had taken as many as 3.8mn sensor traces per sq km with four-component sensors at every 50 m along the cables.

Soco to start DR Congo seismic shoot UK-LISTED EXPLORER Soco International began a controversial seismic survey over Lake Edward in Congo-Kinshasa’s Virunga National Park. Roger Cagle, one of Soco's managers for DR Congo, said the company would use an environmentally-sensitive technique of placing seismic recorders on the lakebed as had been done by Tullow Oil on the Ugandan side of the lake. The project has drawn repeated fire from conservation group WWF over the past couple of years as the wildlife organisation believes the oil exploration places the local water supply and fishing activity at risk.

34 Oil Review Africa Issue Three 2014

www.oilreviewafrica.com

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Mozambique

A recent study by Schlumberger petrotechnical experts* examined the prospectivity of the Zambezi Delta area.

Expanding the understanding of the

Zambezi Delta area A

RECENT STUDY assessed the hydrocarbon potential of the Zambezi Delta area of Mozambique. A team of Schlumberger petrotechnical experts relied on seismic measurements, gravity calculations and local exploration well data to construct a 3D model of interpreted horizons. They also evaluated the prospectivity of this frontier area by identifying and characterising the presence of five essential components of a petroleum system: source rock, reservoir, trap, seal and migration. The study concluded that all necessary components for a working petroleum system exist in the Zambezi Delta area. Additional data acquisition and evaluation will enhance the model and provide additional insight. Accurate models and hydrocarbon prospectivity information are critical for operators, particularly as new Mozambique licensing opportunities arise.

The offshore area is relatively underexplored with a paucity of wells. Regional history and geology In 1948, hydrocarbon exploration activities intensified in the southeastern African nation of Mozambique. The efforts led to the Gulf Oil discovery of the Pande gas field in 1961 and subsequent onshore gas discoveries at the Buzi and Temane fields in 1962 and 1967 respectively. Following years of political instability and national unrest, Mozambique became increasingly receptive to oil and gas exploration. By 2011, the number of drilled wells reached 141. Ruvuma and Mozambique are two major basins in the Republic of Mozambique. The geology of these passive continental margin basins varies from north to south. Deepwater gas discoveries occurred in the Rovuma Basin between 2010 and 2012, confirming its role as a prolific gas province. Anadarko and ENI operate the Barquentine and Mamba offshore gas fields (Figure 1). Given recent Rovuma Basin gas discoveries and hydrocarbon occurrences within its own boundaries, the focus is now on the offshore section of the Mozambique Basin. The Zambezi River Delta area is of particular interest. The delta has a sedimentary thickness of approximately four kilometres, an area of 200,000 sq km and a tidal- and wave-dominated mix similar to those of the Nile and Orinoco Deltas.

36 Oil Review Africa Issue Three 2014

Sedimentary sequence model The experts sought to improve understanding of the area, particularly as related to the development of the Zambezi Delta Depression (ZDD). The depth of the thick ZDD sedimentary sequences exceeds the record length of existing seismic data for the area. The offshore area is relatively underexplored with a paucity of wells; nevertheless, the understanding of the basin has recently been boosted with the acquisition of 35,000 km of multiclient data with ObliQ* sliding-notch broadband acquisition and imaging technique in 2013, including approximately 10,000 km over the Zambezi-Save area. This is in addition to the 12,000 km of legacy and reprocessed seismic data from this area. The Schlumberger petrotechnical experts built a 3D model of the ZDD using 22,000 km of timemigrated legacy and newly acquired seismic measurements along with free air gravity and Bouguer-corrected gravity information. They also incorporated check shots, logs and well reports from the Nemo-1, Zambezi-1, Zambezi-3 and ZD-E-1 shallow shelf exploration wells (Figure 1). They recognised the possibility for significant variations in the sedimentary sequences given the complex tectonic history of the area (Figure 2). The scope of this work included mapping and characterisation of seven ZDD horizons, including shelf and fault locations. The model interpreted horizons for the following sedimentary sequences: Karoo-Belo, Upper Jurassic, Lower Cretaceous, Upper Cretaceous, Paleocene, Eocene-Oligocene-Lower Miocene and Upper Tertiary-Quaternary (Figure 3). The Karoo section of the Mid Jurassic Karoo-Belo sequence displays fault growth caused by deposition as well as high angle dip events resulting from rotation and movement. Thick Middle Jurassic sedimentary sequences are seen in the rotated fault blocks in the outer Beira High and in the ZDD. Terrigenous and carbonate formations may compose this sequence, with the Beira High acting as a barrier which allowed a lake or lagoon to form in what is now the ZDD. Seismic data indicates amplitude contrasts in the layering of the Upper Jurassic section. The thickest part is related to the rotated fault blocks in the Outer Beira High, while erosion or lack of deposition may have caused the thin and absent sections over the Beira High. The thick section within the ZDD indicates basin infill after the Gondwanaland split. The Maputo Formation and Lower Domo Formation represent the Lower Cretaceous sequence. Seismic data reveals amplitude contrast variation between layers. The marine sandstone lithology

Figure 1. Oil occurrences and offshore gas discoveries indicate hydrocarbon potential in the Zambezi Delta area. (Image courtesy of Schlumberger).

suggests the existence of transitional continental marine facies. Deposition from the northern portion of the Zambezi River is associated with the thickening of the central part of the ZDD. The Domo Formation dominates the Upper Cretaceous sequence, with the Grudja Formation also having a possible presence. Evidence suggests both carbonate precipitation in the sub-tropical section of the Mozambique Channel and siliciclastic deposition from inland streams. The upper section of the ZDD exhibits signs of deepwater deposition. The seismic character of the Paleocene sequence varies by location, but as with the Upper Cretaceous section, both carbonate precipitation and siliciclastic deposition coexist. Events exhibit a chaotic expression. It is possible that deep water and sudden sediment influx from south of the current Zambezi River position resulted in deposition of the basin floor fans in the central area of the ZDD. The Upper Grudja Formation is associated with this sequence. In the Eocene-Oligocene-Lower Miocene sequence, large quantities of sediment influx appear to have caused several thick sections. Indications of sedimentation from the Zambezi River and a paleoshelf break also exist. This sequence exhibits prograding clinoforms and channels. The Upper Tertiary-Quaternary sequence displays possible progradation of the Zambezi Delta and shelf edge throughout the ZDD, turbiditic and chaotic beds, canyons as wide as 10 km and slides and slumps indicative of gravity driven processes. Seismic data also reveals well-developed clinoforms.

Petroleum system evaluation The Schlumberger petrotechnical experts assessed the elements of a petroleum system to determine the prospectivity of the offshore Zambezi Delta area. They evaluated the five critical components of a www.oilreviewafrica.com

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Mozambque

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Figure 2. Stratigraphy of the Zambezi Delta offshore area reveals various sedimentary sequences. (Image courtesy of Schlumberger).

working petroleum system: source rock, reservoir, trap, seal and migration. Model interpretations and previous research indicate that active source rock may include the Late Karoo, Domo, Lower Grudja and Cheringoma Formations. As previously noted, the Karoo sequence contained a narrow lagoon or lake where conditions may have supported the development of oil-bearing source rock. Seismic data also reveals that areas in the rotated fault block sections display low amplitude contrast, another possible indication of source rock. Model analysis suggests the Domo Formation in the Lower and Upper Cretaceous sequences is another possibility. Previous research also points to the offshore portion of Lower Grudja as oil-prone source rock. Lastly, while indications suggest the onshore portion of the Cheringoma Formation is source rock, additional research is required to make a similar determination for the offshore portion. The experts identified several potential reservoirs, a second petroleum system requirement. The likely terrigenous and carbonate formations may represent reservoirs in the Upper Jurassic Karoo while the Maputo Formation and Lower Domo Formation are possibilities in the Lower Cretaceous sequence. High contrast amplitude responses suggest reservoir potential in the section of the Domo Formation located in the Upper Cretaceous. Research indicates that deepwater basin floor fans, channels and carbonate sections of the Grudja Formation may represent reservoirs in the Paleocene sequence. The Cheringoma Formation within the Eocene-Oligocene-Lower Miocene may also represent a reservoir, although further evaluation is necessary. Additionally, the well-defined Zambezi

38 Oil Review Africa Issue Three 2014

Figure 3. 3D models for seven interpreted horizons in the Zambezi Delta offshore area. In the Karoo-Belo sequence, the approximate fault place position on the model is shown with yellow dashed lines. The possible shelf position of the Paleo-Zambezi Delta in the Eocene-Oligocene-Lower Miocene is indicated with the yellow dashed line.

Delta complex may represent reservoirs in the Upper Tertiary sequence. The experts searched for evidence of traps, the third component of a petroleum system. Analysis of seismic data reveals structural, stratigraphic and combined trapping styles. Channel fills, truncations against unconformities and onlapping pinch-outs provide stratigraphic traps. Structural traps may include four-way dip closures formed by rotated fault blocks. Pinch-outs truncated by faults create combined traps. The study also identified necessary seals. The Upper Domo and Lower Domo Formations, unconformities such as the Jurassic-Cretaceous boundary and deposition of shales and mud within the Tertiary may all act as seals. Porous materials, faults and fractures within the ZDD may provide required migration routes, the final petroleum system requirement. The experts concluded that all five components are present, indicating a high hydrocarbon potential. Amplitude

anomalies and contrast variations within 2D seismic reports support this determination. The Schlumberger study expanded the understanding of the Zambezi Delta area by successfully creating a 3D model of the ZDD. The related petroleum system analysis indicated high hydrocarbon prospectivity for the Zambezi Delta area. As with all frontier environments, additional seismic studies, new gravity data, advanced processing techniques and more exploration well data will help refine models and confirm conclusions. â&#x2013;

References Marjosbet Uzcategui Salazar, Malcolm Francis, D. Baker, Duplo Kornpihl, and Tekena West . Frontier exploration offshore the Zambezi Delta, Mozambique. First Break, Volume 31, 135-144, June 2013. *Marjosbet Uzcategui Salazar, Malcolm Francis, Duplo Kornpihl, Tekena West, Eva Hollebeek, Sebabrata Sarkar, and Olivia Osicki, Schlumberger www.oilreviewafrica.com

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The floating liquefied natural gas (FLNG) market is poised for increased investment and activity. That’s the message highlighted by Douglas-Westwood in a recent report. But in the here and now FLNG is not yet able to boast a fully operational baseload unit. Vaughan O’Grady discusses the prospects for this fascinating but still nascent market with analyst and report editor, Murray Dormer. Gas

FLNG:

ready for launch? T

HE PRODUCTION OF floating liquefied natural gas (FLNG) is no longer merely a dream. Work has long since begun on pioneer FLNG vessels, such as Shell’s Prelude FLNG and Petronas’ PFLNG 1. More are likely to follow as Douglas-Westwood, an independent company that carries out business research for the international energy industries, suggests in its recently published report World FLNG Market Forecast 2014-2020, where it notes that investment and activity are about to grow. In fact the report forecasts total expenditure of US$64.4bn in the period under review. Two-thirds of this spend is attributed to liquefaction infrastructure, while the remainder is from import and regasification facilities. The report cites a number of market drivers for FLNG — among them monetisation of stranded gas reserves, security of supply, onshore terminal costs, environmental solutions and demand. But is FLNG still relatively expensive compared to onshore production and pipelines? Or will the market drivers that have encouraged investment soon make that investment worthwhile? Douglas Westwood analyst — and the report’s editor — Murray Dormer is fairly upbeat about this. FLNG, he believes, has progressed in recent years from a commercially and technologically unviable development option to a theoretically cost-effective solution for stranded gas fields. However, costs are not proven until the unit is built, commissioned and up and running, and as he pointed out, the market will not see an operational baseload unit until 2016, when Petronas brings its Kumang Cluster FLNG facility onstream in Malaysia. “In summary,” he said, “no-one really knows yet.” He continued, however, “It is important to note that FLNG has been a potential enabler to some projects from an economic standpoint. An onshore development for Australia’s Browse LNG Development — operated by Woodside and located near James Price Point — was initially selected. Further technical and commercial evaluation suggested that this project fell short of Woodside’s commercial requirements for a positive final investment decision (the onshore development would have cost more than US$80bn). In late 2013, FLNG technology was chosen, among other alternatives, to develop the Browse Basin.” FLNG could also mean the creation of more jobs, although not everyone is convinced. Some opposition to offshore FLNG will cite job creation in the push for onshore production and pipelines. Dormer disagrees. “While there may be some truth www.oilreviewafrica.com

The world's longest ship Prelude measures nearly half a kilometre in length and weighs over 200,000 tonnes.

in this during the construction phase — where the FLNG vessels are built in other countries such as South Korea — the operation of the FLNG could mean creation of skilled jobs locally in the longer term,” he pointed out. The potential working life of an FLNG vessel is another plus. Shell’s first such vessel, the Prelude FLNG, can remain on station for more than 25 years, after which its working life can be extended through refurbishment. The hull has a design life of 50 years. Could these vessels even last long enough to be refurbished and re-used in other parts of the world? “There is an argument for mobilising units from different stranded gas fields,” said Dormer. “However, Prelude is unlikely to offer this solution due to the size and design limitations of the project.“

Economically attractive in Africa? Africa is already a major player in offshore gas. However, do the economics of using FLNG stack up for this region? Again Dormer pointed out that until a vessel is built we cannot be certain, and in any case, “Offshore megaprojects don’t have a great track record in terms of being delivered on budget.” That said, he added, “The issue in parts of Africa is that there is just no local infrastructure whatsoever so the FLNG option becomes increasingly attractive.”

So how about (for example) offshore Mozambique in the Rovuma basin? Will Africa just have to wait until volume and demand are high enough to justify FLNG? ENI, it seems, may still be considering FLNG as a development solution for the Mozambique field. Dormer explained: “There are also currently many operational onshore plants located in Nigeria and Algeria. The case for FLNG in Africa is strong given that the region holds a large number of stranded gas deposits; however, East Africa is still largely under-developed.” We’ve written about floating production systems (FPS) on a number of occasions in these pages. Can FLNG benefit in any way from the experience of FPS, which already have a role in oil production? Dormer allows that there are some similarities with the FPS market but, he added, “The technical challenges of gas processing offshore and handling large volumes of methane, propane and so on are completely different to oil and lead to totally different design requirements with respect to process safety, cargo containment, offloading, etc.” Nevertheless there is one area that might see a seamless transfer from FPS to FLNG. Most of the FPS newbuilds are constructed in South Korea while the conversions are constructed in Singapore and China shipyards. Shell has signed contracts with Samsung Heavy Industries (a South Korean yard) for

Oil Review Africa Issue Three 2014 39

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Gas

Economics a key concern

Shell’s Prelude FLNG hull floated out of dry dock. It took to the water for the first time in December.

The technical solutions exist and have done for some time. The challengeis commercial. a series of FLNG vessels, while Petronas has also contracted South Korean shipyards Daewoo (PFLNG 1) and Samsung Heavy Industries (PFLNG 2) for its FLNG shipbuilding. Dormer explained, “It is important to note that South Korean shipyards have taken the lead with FLNG building in part due to Korea’s success in its FPS newbuilding work. It is likely that Singapore and China will take on some parts of the work, similar to Drydocks World’s involvement in the Prelude FLNG. At least in the near future, we could expect South Korea to take on most of the construction lead for FLNG as very few yards have the combination of scale and expertise with LNG containment systems.” It’s very early right now, but could a successful FLNG market allow off-the-shelf vessels or

components and thus lower the price? Its certainly true that a ‘modular’ or ‘standardised’ approach is being looked at by several E&P companies, technology providers and equipment companies, and could potentially lead to greater certainty in cost, and shorter lead times for development. Also, said Dormer, “In terms of seeking lower costs, smaller developments could have a future, and there is no reason that FLNG cannot be economically successful on a smaller scale in terms of the technology. The technical solutions exist and have done for some time. The challenge,” he added, “is commercial.” This means that, unlike, say, Prelude or a similar-sized project, these small-scale developments require a number of comparatively small companies to come together to agree terms and off-take contracts, secure financing, and so forth. This is a major challenge. The financing in particular could be tough. After all this it could still be a multi-billion dollar undertaking. An integrated oil and gas major with a large project does not have this complexity, and will fund the project through free cash flow.

But, however big the player, will FLNG prices make it a viable undertaking? Economics, as ever, remains a key concern. For example, Dormer suggested that oversupply of shale gas is invariably a threat to FLNG. However, this threat hinges on many factors and it varies from location to location. We already know that North America’s shale gas discovery is expected to transform the region from a net importer to a net LNG exporter. “However, apart from producers such as Australia and North America, we have not yet witnessed any other game-changers in terms of unconventional production,” he said. As he pointed out, in Europe, Poland and Ukraine were hailed as potential shale producers, holding 146 tcf and 42 tcf of technically recoverable reserves respectively. Disappointing results from ExxonMobil in Poland, and political unrest in Ukraine, mean that neither are likely to threaten FLNG in the short-term. “Furthermore,” Dormer added, “fracking disruptions or bans in the UK, France and Bulgaria seem to have quelled any significant development in the short term.” Another important point relates to transport. Currently, US gas prices are far lower than LNG spot prices in other regions — Asia, for example. However, shipping costs could substantially close up the arbitrage and create a convergence in prices from differing regions. Then again, Kumang Cluster is two years off and Prelude perhaps three. Both look impressive on paper and they won’t be alone long. However, it’s hard to predict the market into which they will launch except, perhaps, to agree that demand for gas is not likely to slow down. But will that be enough to keep FLNG afloat? ■

The World FLNG Market Forecast 2014-2020 from energy business analysis company DouglasWestwood includes comprehensive examination, analysis and a 14-year view of FLNG expenditure, with historic data covering the period 2007-2013 and forecast data for 2014-2020. For more information and pricing go to: http://www.douglas-westwood.com/shop/shopinfopage.php?longref=1253

New subsea gas compression technology THE RECENTLY LAUNCHED Åsgard subsea compression project in the Norwegian Sea is the world’s first-ever subsea gas compression facility and a pioneering development for the industry. An issue for many subsea oil and gas fields is that decreasing natural pressure is reducing recovery and shortening the lifetime of fields. Owners of the Åsgard oilfield, situated some 200 km off the coast of Norway, have developed a process that could bring benefits to the oil and gas industry for years to come. Set for completion in 2015, the groundbreaking project will use subsea gas compression technology to maintain production and boost recovery from the Midgard and Mikkel reservoirs by the equivalent of about 278mn barrels of oil. Åsgard field operator Statoil states on its website: “With Åsgard subsea gas compression, we are one step closer to realising our vision of a subsea factory. Subsea processing, and gas compression in particular, is an important technology advance to develop fields in

40 Oil Review Africa Issue Three 2014

deep waters and harsh environments.” While this project represents a quantum leap in seabed technology, the challenging applications will increase the demands on the equipment used. Apart from being water-resistant, the equipment must withstand the temperatures and hydrostatic pressures found in deep-sea beds. At these depths, fluids become warmer, resulting in a significant temperature difference compared with the surrounding seawater. This can cause piping wax build-up and eventually clogging, potentially leading to costly production downtime and repairs. Sophisticated thermal insulation is crucial to ensure a steady fluid flow. With this in mind, Aker Solutions, contractor of the Åsgard subsea compression system, will apply Trelleborg’s high-performance Vikotherm R2 subsea insulation to 600 m of piping. A well-proven solution, the material can easily be adapted to the varying geometries, surfaces and applications of the installation.

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Algeria sees strong interest in energy round offers - one to Spain’s Cepsa and the other to its own state energy firm Sonatrach. It was a disappointing result for a North African country that gets most of its energy output from mature fields and needs foreign investment to develop new reserves. The government has since pushed through a new hydrocarbons law in 2013 it hopes will make the difference, offering tax and contractual incentives, and benefits for unconventional energy investments. For the 2014 round, 31 fields are on offer, with some of the gas perimeters from Algeria’s shale reserves, which are among the world’s largest and mainly unexplored. Algeria has also said it had made some “promising” discoveries among the more than 30 finds last year. Asked about Algeria’s output, Betata said for 2013 total production would be 192mn tonnes of oil equivalent (toe), including 121mn toe of natural gas, 54.5mn toe of crude oil, and 9.5mn toe of condensate. “In terms of production forecast for 2014 and 2015, and considering the start of new deposits, we will record an increase in overall production that may go beyond 200mn toe,”

Gas

MORE THAN 50 FIRMS joined in the early stages of Algeria’s new energy round when it hopes new oil law incentives and the potential of fields on offer will draw strong bids, a top energy official said. The country is looking for foreign oil explorers to sign up to help offset stagnating crude and gas output after a disappointing round in 2011. Increasing output is vital for a government that relies heavily on energy exports for state income and to pay for social programmes, and food and fuel subsidies that have helped keep it stable amid turbulent times for its neighbours. Ali Betata, president of Algeria’s national hydrocarbons agency ALNAFT, told Reuters that interest in the potential fields was clear during the data room meetings for initial due diligence process that was due to close late in May. “Since we opened the data room sessions, the number of companies seeking different perimeters has not stopped increasing,” he said. “From that rhythm of participation of the companies, we can conclude there is certainly interest.” Algeria’s last energy auction round in 2011 awarded only two contracts out of the 10

The jointly-run BP gas complex at In Amenas. Image:AFP/Getty Images.

he said. “This upward trend will continue beyond 2015.” Still, companies will also be looking at costs and other factors, such as security, when studying the potential of Algeria’s new offers for the auction round later in the year. Half of the new fields on offer are in southern Algeria, with five in the north. BP and Norway’s Statoil - partners in the In Amenas plant - have still to fully return their contractors to the gas field, though Algerian officials say they have met all their demands for increased security on the ground. Algeria also has no experience of developing shale gas, which involves new technologies such as hydraulic fracturing and horizontal drilling.

Afgen JV agreement with Ghana National Gas

Azura to pay $3mn/1000cfg

AIM-LISTED GASOL, the gas to power company for future generations, has announced that African Power Generation (AfGen) has signed a Joint Venture Agreement with Ghana National Gas Company aimed at providing additional gas to Ghana. Gasol has an option to purchase the entire issued share capital of AfGen from African Gas Development Corporation Limited until 24 August 2014. Under the JVA, AfGen and Ghana Gas have agreed to establish a new joint venture company (JV), to be incorporated in Ghana. The JV parties will explore a fast track LNG import project located in Ghana, with regasification facilities to supply regasified LNG to power plants and other gas users as a dedicated solution for Ghana, independent of the West African Gas Pipeline. The JV, when adequately established and capitalised, will ultimately be responsible for the sale and marketing in

SEPLAT HAS SIGNED a five-year Gas Sales Agreement(GSA) with Azura Edo Independent Power Project, to supply 116mn scfd at US$3mn scf from 2017, the company says in its interim report. The Nigerian E&P firm insisted that its expansion of the Oben gas processing facilities remains on track, to enable the company to expand production, in order to meet the fast growing domestic demand for gas. Seplat is working to increase its gas production capacity to 390mn scfd by 2017, from around 150mn scfd currently. The Azura-Edo IPP comprises a 450MW open cycle gas turbine power station; a short transmission line connecting the power plant to a local substation and a short underground gas pipeline connecting the power plant to gas from the Oben facility. It represents the first phase of a 1,500MW power plant facility. This first phase of the plant is expected to come onstream in 2017. The company said its gas strategy “achieved a major step forward” with the GSA for the Azura Edo independent power project. This contract with Azura “underpins Seplat’s major investment programme to upgrade the Oben gas plant and expand our domestic gas business”, said Austin Avuru, Seplat’s chief executive officer.

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Ghana of regasified LNG from Gasol’s LNG Import Project in Benin via the West African Gas Pipeline. Initial gas volumes to be sold into Ghana are expected to be a minimum of 100mmscfd for a minimum period of five years. Gas from the JV will complement Ghanaian field gas as well as contribute towards achieving security of the gas supply needed to address Ghana’s current gas deficit and diversify gas supply risk. Alan Buxton, chief operating officer at Gasol,

said: ‘We are very pleased that, following on from the MoU signed between Ghana Gas and AfGen last year, AfGen has now moved on with a formal agreement which envisages the incorporation of a joint venture company. The arrangements signal progress on two fronts, both in delivering a dedicated solution for Ghana and prior to the implementation of that solution, the sale and marketing of regasified LNG in Ghana from our planned Benin LNG Import project.’

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E&P

Total’s brownfields strategy off Angola TOTAL E&P ANGOLA is pursuing a comprehensive strategy to maximise recovery from its block 17 fields offshore Angola, which include its Girassol, Dalia, and Pazflor projects. The strategy was outlined by Pascal Carrier, vice president–projects, Total E&P Angola, at the OTC in Houston. It calls for the enhancement of existing field production through the implementation of enhanced oil recovery techniques, and the development of nearby reserves using existing installations. To that effect, a co-ordinated initiative named Projects Brown Field (PBF) has been launched in Luanda to start the brownfield era of this basin, Carrier said. The objective is to ensure maximum focus on reserves by optimising the use of existing facilities and techniques, and creating synergies between all nearby deepwater projects. Key components of this initiative, Carrier noted, include using one single structure to manage all projects, maximising modifications, and minimising shutdowns. Another key part of the strategy is to

employ existing equipment where possible, and he cited the example of a multi-phase boosting pump that could enhance recovery in several fields. He noted that Total will also share personnel between projects in the block, and work with other greenfield projects in the area, such as Pazflor and CLOV, in order to enhance efficiencies and lower costs. Officials with the new PBF organisation will interface between these various projects, and Carrier said that 60 per cent of the personnel on its block 17 projects work on at least two of these projects. He also noted that managing the various phases of these projects would be a key challenge. Other challenges will include development of local content, local fabrication of equipment, and development of local engineering expertise. But efforts to develop and promote these aspects were under way, Carrier commented. He also noted that some of its block 17 projects are employing 100 per cent local content. Another key challenge, he said, will be to integrate new technologies within existing

Cobalt makes biggest oil find in Kwanza US FIRM COBALT International Energy has discovered significant quantities of oil offshore Angola, state oil firm Sonangol said, calling the find the biggest so far in the promising pre-salt layer in the Kwanza Basin. Oil drillers hope discoveries under a deep submerged salt crust off Angola known as pre-salt may match the prolific finds beneath similar deposits off Brazil on the other side of the Atlantic in recent years. Analysts say Angola, Africa's No. 2 oil producer, could double its oil reserves, which are currently estimated at just under 13bn barrels, if pre-salt drilling proves successful. Drilling at Cobalt's Orca-1 well in Block 20/11 reached a depth of 3,872 m and has successfully produced over 3,700 barrels of oil and 16.3 mmcmd of gas , Sonangol said. "The results ... confirm the importance of the find, which is considered the biggest to date in the Kwanza basin," it added. Cobalt estimates the well may hold between 400mn and 700mn barrels of oil. Operator Cobalt, which counts Goldman Sachs Group and private equity firms Riverstone and First Reserve as investors, holds a 40 per cent stake in block 20/11. Sonangol and BP own 30 per cent each. Cobalt said in a separate statement that the find was its fifth off Angola and followed one in the Lontra well in November, which it said at the time was "a discovery on a global scale". The company also said it had started drilling the Cameia-3 well in the Cameia field in Angola's pre-salt offshore Block 21. Analysts say 2014 will be a crucial year of exploration and testing in Angola's pre-salt play, with up to 15 wells set to be drilled.

42 Oil Review Africa Issue Three 2014

facilities and implementing modifications within existing topsides areas. Carrier was joined onstage by Jean-Luc Le Rodallec, PBF field operations manager of Total E&P Angola. He said that one such brownfield project in block 17, the Girri Rosa MPP (multi-phase pump) project, will make use of the Girrasol and Dalia FPSOs. Le Rodallec added that two multi-phase pumps will be employed on this project, with the addition of gas lift to enhance recovery. Other brownfield projects being developed by Total in block 17 include the Dalia debottleneck project, which will involve produced water treatment, the addition of a heat exchanger, and “a lot of work on the FPSO,” Le Rodallec said. Other such projects include the Dalia 1A project, which will make use of water injection and an upgrade of the integrated control and safety system; and the Zinia Phase 2 project, which will make use of the Pazflor FPSO, and involve topsides integration and subsea network modifications.

TEN project on track to deliver 1st oil mid-2016 TULLOW OIL HAS said that the development of its second major oilfield in Ghana, being the Tweneboa, Enyera and Ntomme (TEN) field, is on track to deliver first oil by mid-2016. Terry Hughes, director of the TEN project, told a global gathering of industry people in Accra that work is progressing steadily on the fabrication of the FPSO vessel with a capacity to process 80,000 barrels of oil per day. Production at the field, he said, is expected to peak at between 75,000 and 76,000 bopd, and the project is expected to recover approximately 216mn barrels of oil. The government of Ghana approved the plan of development for the project on May 29, 2013, paving the way for Tullow and its partners to proceed with development of the field, estimated to cost US$4.5bn. According to Tullow, development of the TEN Project requires the drilling and completion of up to 24 development wells, which will be connected through sub-sea infrastructure to the FPSO. The TweneboaEnyenra-Ntomme (TEN) fields are located in the Deepwater Tano licence, which covers an area of more than 800 sq km and lies around 20km west of the Jubilee Field. The first discovery was made by the Eirik Raude drill rig in March 2009. Tullow is operator of the Deepwater Tano Contract Area with an equity interest of 47.175 per cent. Other partner interests are Kosmos Energy (17 per cent), Anadarko Petroleum (17 per cent), Sabre Oil & Gas Holdings Ltd — a wholly owned subsidiary of Petro SA (3.825 per cent), and the Ghana National Petroleum Corporation (15 per cent).

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Eni successfully appraises Agulha discovery

TANZANIA, A HOTSPOT for natural gas exploration, has received five bids for just half of the eight oil and gas blocks it offered in its latest bidding round, its upstream regulator said. Tanzania, which has made big discoveries of natural gas off its southern coast, had offered seven deep-sea offshore blocks and one block in Lake Tanganyika. China's top offshore oil producer, CNOOC Ltd, and Russia's state-run Gazprom were among companies that submitted bids for the blocks on offer in the fourth round. Statoil and ExxonMobil, which have made big gas discoveries off Tanzania, have submitted a joint bid for one of the offshore blocks. "The evaluation process will start immediately

E&P

ENI HAS EXECUTED the appraisal campaign for the Agulha discovery in Area 4 offshore Mozambique. The delineation was through the Agulha 2 well drilled in a water depth of 2,603 m to a TD of 5,645 m. The well is located in the southern part of the Area 4 block, 12 km south of the Agulha 1 discovery well and 80 km off the Cabo Delgado coast. Agulha 2, the 12th well successfully drilled in Area 4, proved about 25 m of gas column in good-quality Paleocene reservoir sandstones and confirmed the southern extension of the field. Eni is considering further exploration drilling in the southern part of Area 4. Total resources in the area are estimated at 85 tcf of gas in place. Eni is the operator of Area 4 with a 50 per cent indirect interest owned through Eni East Africa, which holds 70 per cent of Area 4. The other partners are GalpEnergia (10 per cent), KOGAS (10 per cent), and ENH (10 per cent, carried through the exploration phase). CNPC owns a 20 per cent indirect participation in Area 4 through Eni East Africa..

Tanzania receives five bids for oil, gas blocks

and we will announce winners of the bids as soon as possible within the timeframe of the fourth licensing round," Yona Killagane, managing director of the state-run Tanzania Petroleum Development Corporation (TPDC), told Reuters. Killagane did not say when the winners will be announced. The licensing round closed on May 15.

Sasol looks to 2,000bopd in Mozambique SASOL IS HOPING to produce 2,000 barrels of oil per day from a small oil find onshore Mozambique, expected to go onstream late in 2014 or early 2015. The South African synfuels giant has produced gas from the onshore Temane field, in the country’s Inhambane province since 2004, but Mozambican officials have always hoped there was also crude oil production. The proposed oil output will come from a separate field from Temane. The National Petroleum Institute (INP), the country’s upstream regulator indeed, hopes that future licensing and exploration will deliver additional oil finds. International operators have discovered

over 100tcf of gas, by their own estimation, in offshore areas 1 and 4 in the deep-water Rovuma basin, since 2010. Offshore Areas 2, 3 and 6 are also licenced. Sasol’s 524mn scfd of gas production has come from onshore Temane in the Mozambique basin. The forthcoming round will offer three new blocks around the existing Rovuma concessions and additional acreage off and onshore. The licensing round has been postponed since 2012. Now it is dependent on outstanding minerals legislation being finalised, and with presidential and parliamentary elections looming in October 2014, a delay until 2015 is quite possible.

Kenyan Government grants extension for Block L10B PANCONTENTAL OIL & GAS NL has disclosed that the Government of Kenya has granted a 12-month extension to the current Initial Exploration Period of the L10B offshore license in Kenya. Following the current period (as extended), the joint venture can then elect to move into the First Additional Exploration Period of the license. Pancontinental considers this to be extremely favourable because it gives the joint venture partners more time to assess the impact of the Sunbird-1 discovery in the adjacent L10A area (PCL 18.75 per cent) and its implications for possible future drilling in L10B.

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Pancontinental also intends to use the extended period to secure a farm-in agreement for any future L10B drilling. L10B has a number of large prospects and leads identified using 3D seismic and these are being examined as potential exploration drilling targets. Pancontinental also advises that it has notified BG Group, which operates the license, and the other joint venture participants, that it will increase its stake in L10B from 15 per cent to 20 per cent. Pancontinental has increased its stake in L10B by taking up its pro-rata share of the interest held by Premier Oil, which has elected to withdraw. The

changes in interests are subject to the approval of the Ministry of Energy and Petroleum of Kenya and such approval is not expected to be withheld. Pancontinental will increase its stake prior to June 15, subject to ministry approval. Pancontinental believes that the significant prospectivity of L10B and the opportunity to increase its interest with other partners in L10B at no cost, as well as the prospectivity of adjacent area L10A, means it is well-placed to farm-out a portion of its interest in both licenses on attractive terms and in a suitable time-frame under the 12month extension.

Oil Review Africa Issue Three 2014 43

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Woodside flags rethink on Africa

Tullow hits more Twiga oil

WOODSIDE PETROLEUM IS returning its exploration focus to Africa, a region it once saw as a key plank of its future only to then change tack and embark on a wholesale exit. Phil Loader, who joined Woodside as executive vice president, global exploration, 10 months ago, has flagged a Flaring at the Chinguetti oil discovery off Mauritania. focus on the southern half of Africa, incorporating the east coast region where some of the world's biggest gas discoveries have been made over the past three years. Addressing the Woodside investor day in Sydney, Mr Loader also highlighted offshore regions off northern South America and off Canada's east coast as art of his efforts to build "a balanced global footprint". The return to Africa would continue the transformation of Woodside's exploration strategy since Peter Coleman took over as chief executive three years ago. Since then Woodside acquired acreage off Myanmar, Ireland and New Zealand while expanding its footprint in a promising gas play in Peru. Mr Coleman has previously talked about the big size but also high cost of buying into some of the gas discoveries off East Africa. His predecessors at Woodside built and then dismantled an African business headlined by the Chinguetti oil field off Mauritania but also including a big acreage position in Libya.

TULLOW OIL’S TWIGA South-1 exploration well in Block 13T, onshore Kenya, has encountered 30 metres of net oil pay with further potential to be assessed on test and has also encountered a tight fractured rock section with hydrocarbon shows over a gross interval of 796 metres. Twiga South-1 has been drilled to a total depth of 3,250 metres and has been successfully logged and sampled. Three sandstone reservoir zones, analogous to Ngamia-1, were encountered and moveable oil, with an API greater than 30°, has been recovered to surface. Further potential exists up dip of the well and will be subsequently appraised. In addition to the net pay, the well also penetrated a thick section of tight fractured rock below 2,272 metres which had extensive hydrocarbon shows over a gross interval of 796 metres. Moveable oil with an API greater than 30° was also successfully sampled from this section. This tight fractured rock section is a new play-type for the region that will require further evaluation to understand its extent and any productive potential. The Twiga South structure is the second prospect to be tested in the Lokichar Basin as part of a multi-well drilling campaign in Kenya and Ethiopia and is the first oil discovery in Block 13T. It is located 22 km to the north of the Ngamia-1A discovery and further de-risks a number of other similar features on the western margin of the basin. A series of flow tests will now be conducted on the well and following completion of the testing programme, the rig will move back to flow test the Ngamia-1 well. Elsewhere in Tullow’s East African Rift basin acreage, a result from the Paipai-1 well in Block 10A in Kenya is expected by the end of the year and the Sabisa-1 well in the South Omo Block in Ethiopia is expected to commence drilling by the end of December.

Swala offered Zambia’s Block 44 SWALA ENERGY’S 81.08 per cent-owned subsidiary, Swala Energy (Zambia) Limited has been offered hydrocarbon exploration rights over Block 44, in the Republic of Zambia. The process now involves Swala accepting the offer, after which the licence will be formally awarded by the Ministry of Energy. Block 44 lies in the southern part of the country and covers an area of 6,000sq km on the margins of the Karoo-aged Kariba basin. Gravity and seismic data suggest that the basin has a thick sequence of Karoo-aged

Location of Block 44 over free-air gravity map. Blue areas indicate sedimentary basins.

sediments. The basin was explored by Mobil in the late 1980’s and a large volume of 2D seismic data was acquired at the time but no wells were drilled. It is evident from these data that the Kariba Basin has a significant sedimentary fill with large structural traps. During the first contract year Swala intends to reprocess and reinterpret the legacy seismic data as part of its work programme. Under the provisions of the award, Swala may withdraw after each of the first two year s of the contract should the work conducted not confirm the basin’s prospectivity.

Ophir Energy strikes gas offshore Tanzania A DRILL STEM TEST (DST) is expected to be performed on the Taachui discovery with results expected before the end of June 2014. Ophir Energy has announced the discovery of gas in two offshore wells in Tanzania’s Block 1 Ophir Energy holds 20 per cent of Blocks 1, 3 and 4 and BG Group is the operator with 60 per cent stake. According to the company, the Taachui-1 well was drilled by the Deepsea Metro I drillship close to the western boundary of Block 1. The well was sidetracked for operational reasons to complete as the Taachui-1 ST1 well and was drilled to a total depth of 4,215 metres. The well encountered gas in a single gross column of 289 metres within the targeted Cretaceous reservoir interval and the net pay totalled 155 metres. Ophir Energy said that the observed reservoir properties are in-line with those encountered at Mzia, the other Cretaceous-aged discovery on

44 Oil Review Africa Issue Three 2014

Block 1 and the estimates for the mean recoverable resource from the discovery are 28.3bn cu m. The size of the gas column is such that the discovery could extend into a second compartment to the west, which has the potential to be of a similar size. An appraisal well will be required to confirm this upside and is currently under consideration by the joint venture partners, the company added. Nick Cooper, CEO of Ophir Energy, said, “The Taachui-1 discovery continues the 100 per cent drilling success rate on Blocks 1, 3 and 4 and adds further resource to support the LNG development in Tanzania. The result is important to Ophir for two reasons — firstly it extends the proven hydrocarbon system to the eastern limit of, and partly de-risks, Ophir Energy’s East Pande permit on which the Tende-1 well will be drilled later in 2014; secondly the aggregate recoverable volumes of 472bn cu m are now approaching the threshold needed to underpin a potential third LNG train from Blocks 1, 3 and 4.” www.oilreviewafrica.com

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The Baker Hughes Rig Count tracks industry-wide rigs engaged in drilling and related operations, which include drilling, logging, cementing, coring, well testing, waiting on weather, running casing and blowout preventer (BOP) testing.

MAY 2014 - LAND & OFFSHORE MAY 14 Country Land & Offshore ALGERIA 47 ANGOLA 17 CAMEROON 2 CHAD 13 CONGO 4 EQUATORIAL GUINEA 2 GABON 7 GHANA 2 COTE D'IVOIRE 0 KENYA 13 LIBERIA 0 LIBYA 12 MOZAMBIQUE 2 NIGERIA 12 TANZANIA 1 TUNISIA 0 UGANDA 1 D R CONGO 2 NAMIBIA 1 SOUTH AFRICA 0 MAURITANIA 0 ETHIOPIA 1

APRIL 14

VARIANCE

MAY 13

Land & Offshore 49 16 2 11 5 1 7 1 1 13 0 8 2 14 1 0 1 2 0 1 1 0

From Last Month -2 1 0 2 -1 1 0 1 -1 0 0 4 0 -2 0 0 0 0 1 -1 -1 1

Land & Offshore 46 11 2 2 5 1 5 1 0 2 0 15 2 22 1 4 2 1 0 1 1 0

APRIL 13 Land & Offshore 49 7 3 2 6 1 5 1 1 2 0 14 2 22 1 3 2 1 0 1 1 0

VARIANCE From Last Month -3 4 -1 0 -1 0 0 0 -3 0 0 1 0 0 0 1 0 0 0 0 0 0

Source: Baker Hughes

Circle drills in Morocco

Apache makes 2 discoveries in Egypt's Western Desert

JUNIOR EXPLORER CIRCLE Oil has kicked off its latest drilling campaign in Morocco which will see it spud several wells across two permits. It started the campaign with the spudding of the SAH-W1 well in the Sebou permit where it plans to drill three wells which will be followed by its first drilling campaign in the Lalla Mimouna permit. The SAH-W1 well is targeting a dipping three way fault bounded sand lens and will be drilled to a total depth of 1225 metres, with primary targets in the Guebbas formation. Circle has estimated the targets in the well could hold 2.8bn cfg initially in place. In all, the company plans to drill 12 separate targets in its current campaign across the two permits which it estimates could hold a combined 25 bcfg initially in place. Circle holds a 75 per cent interest in the Sebou and Lalla Mimouna permits, with Moroccoâ&#x20AC;&#x2122;s Office Nationale de Hydrocarbures et des Mines holding the remaining 25 per cent interest.

APACHE CORPORATIN HAS said that two recent hydrocarbon discoveries illustrate the continuing reserve upside to be found across the company's 6.8mn gross acres in Egypt's Western Desert. * The Herunefer-1X discovery, located in the Matruh Basin in the eastern portion of Khalda Offset Concession, encountered pay in the Alamein, Alam El Buieb-6 (AEB), Masajid, Upper Safa and Lower Safa formations. Tests from the Lower Safa and Upper Safa intervals flowed at a combined rate of 49m mmcf of gas and 7,700 bpd of condensate. The estimated cost to drill and complete the well was US$6mn. â&#x20AC;˘ The BAT-1X discovery, located in the northern Shushan Basin in the Khepri-Sethos Development Lease, tested at a rate of 31 mmcf of gas and 390 bpd of condensate from a thick Paleozoic Shiffah sandstone interval. The well, which was drilled to a total depth of 15,555 feet, also encountered pay in the Cretaceous Upper Bahariya, Lower Bahariya, Alamein, AEB-3C and AEB-3D formations. The estimated cost to drill and complete the well was US$5.25 mn. Both discoveries were drilled by Khalda Petroleum Company, an Apache-operated joint venture with the Egyptian General Petroleum Company. Apache operates in Egypt in partnership with Sinopec International Petroleum Exploration and Production Corporation, which owns a one-third interest in Apache's Egypt oil and gas business. The Apache-Sinopec partnership has a 100-per cent contractor interest in both fields. Apache plans to drill several trend exploration wells in 2014 to evaluate and appraise the BAT discovery. Alternatives for delivering the production to market are under evaluation.

46 Oil Review Africa Issue Three 2014

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S12 ORA 3 2014 E & P 02_Layout 1 6/6/2014 12:16 PM Page 47

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Ghana Summit

Emmanuel Yartey reports from the 5th Ghana Summit on Oil and Gas, held recently in Accra.

Ghana must benefit from

oil discovery T

HE PASSAGE OF the local content law for Ghana’s oil and gas industry recently by parliament is indeed an onerous responsibility placed on government to practically translate such a laudable economic philosophy into reality for a buoyant Ghanaian economy in a few years to come. The local content law aims at ensuring that Ghanaians take commanding heights in the petroleum industry in a few years to come. Ghana is extremely lucky to have had manifold positive local content examples from Nigeria, Angola, Equatorial Guinea, Gabon, Algeria, Libya just to mention a few. These countries did not only achieve maximum benefits from the production of such an important but finite resource on a silver platter, but had to tackle the issue of nationalism with all the seriousness it deserves, and especially, the Nigeria example is manifesting strongly as the leading economy in Africa today, toppling South Africa which hitherto had been Africa’s biggest economy. Presently, Ghana’s stake in the oil production is a paltry 13 per cent. So Ghanaians are expecting policymakers this time round to put on their thinking caps and ensure that Ghana benefits substantially from the new-found resource. Speaking at the 5th Ghana Summit on Oil and Gas in Accra, Alex Mould, acting chief executive of GNPC said his outfit will be owning greater stakes in petroleum agreements in the areas of ancillary businesses that are integral in the continuous exploration and production of petroleum in the country. Mould made this announcement at a time when new contracts are yet to be signed. It would be recalled that in March this year parliament passed two petroleum agreements after passing two last December. It is gratifying to note that the GNPC boss revealed that three more agreements were being negotiated. He said, “There is no doubt that investments in billions of US$ will be spent to bring these fields to production. Hundreds of millions of US$ would also be spent in the next few years in exploration activities.” With such anticipated massive investments, he emphasised on the need to develop the local petroleum industry in such a way that will ensure the active participation of indigenous Ghanaian companies in businesses that are related to the Oil and Gas Exploration and Production sector. He said, “The Exploration and Production (E&P) Industry that is emerging as a result of the development and production activities provides significant infrastructural development opportunities in ‘oil communities’ and immediate environs.” According to him, there are opportunities such as infrastructure development for use by operators and their contractors, such as construction and fabrication sites, transportation facilities, and office and industrial space as some of those offering opportunities to Ghanaian businesses. Additionally, it is mandatory that there is development of new businesses and the expansion of existing enterprises and their infrastructure because of the supply of goods and services to the petroleum industry. He said, “Business opportunities in construction of offshore infrastructure are increasing with increased field development activities. In this respect, local fabrication yards could partner with world class companies to build and assemble structures for petroleum operations.” He indicated that the quantum of participation could be measured as the composite value added in the Ghanaian economy through the utilisation of Ghanaian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, healthy, safety and environmental standards in order to stimulate the development and growth of indigenous capabilities, without compromising standards.

48 Oil Review Africa Issue Three 2014

Ghanaians are expecting policymakers this time round to put on their thinking caps and ensure that Ghana benefits substantially from the new-found resource. Mould said, “Ghana’s Local Content Policy and its associated Legislative Instrument epitomises the best chance of not only ensuring increased Ghanaian participation in the oil and gas sector, but also Ghana’s best hope of effectively integrating the sector into the rest of the national economy. “When the appropriate plans and strategies are crafted and the law is implemented to the letter in this new industry, Ghanaian citizens and companies, especially those in Takoradi, in the Western Region, would develop new capabilities that could make them competitive in the petroleum and other industries. “These capabilities include, infrastructure development, technical capabilities, technology transfer, human resources, quality management, document control, accounting, bid preparation or other business capabilities. “This will make the companies more competitive and innovative within the petroleum and other industries, and will allow some of them to expand their work locally, nationally and internationally.” In a speech read for him, Ghana’s Minister for Energy and Petroleum, Emmanuel Armah-Kofi Buah said the purpose of establishing the Enterprise Development Centre (EDC) in Takoradi was to build the capacities of Small and Medium Enterprises (SMEs) to enable them to become competitive in the industry. He was optimistic that the Legislative Instrument (LI) on Local Content and Local Participation in Petroleum activities which was approved in December 2013 will finally given a legal backing to the Local Content Policy in Petroleum Activities which was approved by Cabinet in 2010.

Ghana’s energy mix shifting Theo Ahwireng, CEO of the Petroleum Commission reminded the participants that Ghana’s energy mix is now shifting from hydro electric to thermal, meaning the country will heavily be depending on gas to fire its thermal

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Ghana Summit

Alex Mould, acting chief executive of GNPC.

Theo Ahwireng, CEO of the Petroleum Commission.

plants to generate electricity. He promised that his commission would enhance its regulatory role to ensure quality standards in the production of oil and gas. Ahwireng assured investors of a positive Ghanaian business environment which will allow them to repatriate their profits to their countries of origin without any hindrance. Charles Darko, general manager of Tullow Oil Ghana Limited said his company was promoting new investment opportunities and assured that they would be realised for the mutual benefit of Tullow and Ghana. “We will continue to deliver on our commitment based on our philosophy of creating and sharing with Ghanaians,” he said Darko assured that Tullow would work hard to achieve its targets and challenged its other partners to do same. Dr Kwabena Donkor, chairman of the Parliamentary Select Committee on Mines and Energy who moderated the session, said Ghana is at a crossroads in view of her current electricity challenges and that “one of the leading lights to guide us from these challenges is the oil resource.” He however warned of a disaster for totally focusing on oil and gas at the expense of agriculture. He advised that oil alone could not help reduce poverty and pave the way for economic development and that “both agriculture and oil should be developed side by side.” Two exhibitors talked to “Oil Review Africa” at the summit. First, Rodrick Naidoo, team leader – Oil & Gas Sub Saharan Africa of Rockwell Automation. Naidoo said Rockwell Automation’s approach to smart, safe, sustainable manufacturing “helps replace disparate silos of technology with an integrated, information – enabled plant and supply network – our Integrated Architecture system.” He said the company’s flexible, scalable automation solutions are designed to lower total cost to design, develop and deliver machines and improve overall performance. According to him, “Now is the time to embrace sustainability, so you can increase competitiveness and overcome the rising costs of energy, raw materials and lost worker productivity. From regulatory compliance to zero – impact manufacturing, we can help make operations cleaner, safer and more resource – efficient.” The other exhibitor, Jones Annan, strategic & business development manager of Atuabo Free Port Ltd located in the western region of Ghana said his company is Ghana’s dedicated deepwater Freeport for the oil and gas industry. He said the port has different facilities including an offshore logistics supply base. Here, facilities are designed to ensure upstream and service companies can develop facilities such as warehousing, external storage, workshops and offices to support the supply chain related to the offshore oil and gas industry. According to him they need space to build workshops in order to construct large sub sea units adding, “Atuabo Free Port has the infrastructure available to support activities so the local content obligations can be met. Jones said the rig and vessel repair and maintenance unit is a base at which companies who provide repair and maintenance support to rig and vessel owners can set up to support the growing fleet of rigs and OSV’s in West Africa. Being optimistic, he said, “With construction commencing in 2014 and the port being operational from 2016, Atuabo Free Port will be a O&G industry in a safe and efficient environment.” ■

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Oil Review Africa Issue Three 2014 49

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Safety

The ongoing quest for safety in Africa’s growing offshore industry.

Putting safety

first

The Deepwater Horizon offshore drilling unit on fire in 2010.

AFETY IS INEXTRICABLY linked with every aspect of the oil and gas business the world over. In the offshore industry, however, where space is at a premium, and workers often live in close proximity to ultra hazardous environments - and where rigs can be located a hundred miles from the shore - these safety pressures are magnified many times over. Maintaining the integrity of offshore installations - and thereby the safety of workers can be an altogether more complex and costly consideration entirely. The Deepwater Horizon tragedy in the US Gulf of Mexico in 2010 reminds us (if one were needed) how there is no way to cut corners in this inherently dangerous environment. Eleven people lost their lives in the accident following a subsea blowout that also left millions of gallons of oil spewing out into the sea for months after. It is, quite literally, a matter of life and death, where nothing can be taken for granted. In May, an oil helicopter carrying eight people crashed offshore Ghana killing industry workers heading for a rig operated by Russia’s Lukoil. The aircraft, operated by Ghana’s Volta River Aviation, took off from the western port of Takoradi on a 15 minute flight to a rig drilling in the West Cape Three Points area.

50 Oil Review Africa Issue Three 2014

For the most part, the industry has responded to this challenge remarkably well. It is the greatest single tragedy yet experienced by Ghana’s nascent oil industry.

Safety track record Transportation services - from helicopters ferrying passengers, to tug and support vessels carrying supplies and equipment - are a major feature of the offshore logistics chain. But offshore safety covers a whole gamut of other areas, and with Africa’s offshore industry as strong as ever, this niche products and services market is set to grow accordingly. Like other parts of the offshore business, it is an area that has been marked by great innovation through the years, from explosion proof enclosures and gas detection equipment, through to fire resistant coatings and state-of-the-art lifeboats. Indeed, the offshore environment throws up unique and wide ranging challenges for operators, from the tough environmental conditions posed by rough seas and saltwater, to the sheer remoteness and isolation of many installations. As well as human lives, these facilities must also

protect infrastructure and production equipment. Factor in the nature of the business - drilling for highly combustible and volatile hydrocarbons in a condensed space, with potentially hundreds of people close by - and it is a deadly equation that must be carefully and expertly managed. For the most part, the industry has responded to this challenge remarkably well. Despite these few standout tragedies, the offshore industry in West Africa - and globally - has flourished, successfully producing many more barrels of oil than it did a decade ago. This would not have been possible but for a generally excellent safety track record. Unfortunately, when things do go wrong - in a similar way to the aviation business when an aircraft plunges from the skies - the results can be catastrophic.

Multiple threats and risks Offshore companies must contend with an incredibly diverse spread of risks from plant safety and operations and ultra hot working areas, to ensuring the continuous availability of all rig safety systems. Then there are some of the unique challenges posed by the offshore rig environment, such as confined space entry and escape rooms. It requires complex management on multiple levels, something that has been recognised by

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Safety

And this means it will most likely harness ever more sophisticated technology in its quest, throwing up yet more challenges for safety providers. “The industry will encounter increasing complexity due to its progression towards deeper, colder, more remote and environmentally sensitive areas,” said Søgård. “It is faced with more demanding production fluids and, in parallel, assets are becoming harder to test and it is more difficult to predict prospective failure modes. Complexity is now also increasing with the realisation of subsea processing and compression.

New offshore challenges

The world of offshore safety is likely to get increasingly difficult as operators push the boundaries in their search for new oil and gas.

leading services providers such as Dräger Technology. It’s portfolio includes everything from fire proof escape hoods to alcohol and drugs testing, and gas detection systems among other equipment. Many of its products feature portability, such as mobile gas detection sets designed to make the task easier for safety managers. Explosion hazards mostly arise from flammable gases and vapours but on an oil rig that risk is almost ever present and liable to arise anywhere.

In the offshore environment, prevention is key. The intention is to shift in all areas away from a ‘when it breaks, fix it’ approach to a predictive maintenance planning mode. This approach is already standard in many parts of the oil and gas chain to ensure that wells and pipelines continue to flow without interruption. In the offshore context, especially where human life is at stake, it is all the more crucial.

Classification agencies As well as private safety specialists and equipment providers, operators are also assisted by the major

classification agencies like DNV and Lloyd’s Register. These bodies have played a major role in facilitating the growth of the offshore industry by documenting standards for marine equipment, vessels, and critical safety areas. Since the 1980s the international offshore industry has grown hugely, an achievement made possible by the work of the classification societies.

The industry will encounter increasing complexity due to its progression towards deeper, colder, more remote and environmentally sensitive areas. More growth is to be expected, according to Bjørn Søgård, DNV’s segment director for subsea technology, as the industry continues to hunt down more oil and gas to feed the world’s rising demand for energy.

It means the world of offshore safety is likely to get increasingly difficult as operators push the boundaries in their search for new oil and gas. One of the big challenges facing operators in Africa right now is the development of the offshore gas industry on the other side of the continent. Again, it is big investors like BG, Anadarko, Statoil and ExxonMobil that will lead this drive in eastern Africa, to monetise huge gas discoveries off Tanzania and Mozambique. This is important since all these established players have strong track records and work closely with all the leading safety managers and equipment providers. Still, this is a new industry taking shape, and a long way from established production operations in West Africa. The exploitation of deep sea gas - to be piped onshore for conversion into super chilled liquefied natural gas (LNG) - is also very different from the extraction of crude oil, presenting even more hazards and challenges. With billions of dollars worth of investment at stake, however, safety is not something that is likely to be compromised in this new and emerging frontier area. Just as oil and gas companies the world over like to enjoy predictable flow rates from upstream wells, resulting in steady and stable cash returns, so too do they demand predictability and reliability when it comes to matters of safety. It’s a major challenge and comes at a cost especially given the anticipated rise in complexity in offshore engineering and production - but it is one that is always worth paying. ■

LDD strengthens global portfolio with foundation installation services offshore Gabon LDD, AN ACTEON company, continues to enhance its global footprint by installing drilled and grouted piles as part of the Etame Marin block field expansion programme, offshore Gabon. VAALCO Gabon (Etame) Inc is the operator. LDD will deliver a specialist foundation installation programme, including drilling, grouting, lifting and handling. The fieldwork phase for the LDD operation started in April. For the jacket installation, LDD will work closely with EMAS AMC to install four 48-inoutside-diameter piles for each jacket. Each pile will be 140 m in length, including a penetration of

52 Oil Review Africa Issue Three 2014

approximately 50 m below the mudline. The piles will be inserted into sockets drilled below the pile at each leg using 54-in.-diameter underreaming drill bits. LDD will utilise its LD2500 drill and associated downhole equipment and provide a range of grouting equipment, including grout stingers and reusable pile bungs. The lifting and handling aspect of the project will be carried out by Acteon sister company LM Handling. Lee Edwards, projects manager, LDD, said, “The contract was awarded on the basis of LDD’s track record, including the successful completion of drilling and grouting work on the Ebouri platform

for VAALCO Gabon (Etame) Inc in 2008. The results of our work on the Etame Marin block expansion programme will further raise awareness of our expertise in jacket installation and underline our strong market position as a jacket installation services specialist.” EMAS AMC is undertaking the block expansion project on behalf of VAALCO Gabon (Etame) and its working interest partners. The work includes engineering, procuring, installing and commissioning (EPIC) of rigid pipelines, along with transporting and installing flexible pipelines and two fixed production platforms in water depths of 80 m.

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East Africaâ&#x20AC;&#x2122;s Most Prestigious Oil and Gas Summit and Exhibition

15 - 17 October 2014 KICC, Nairobi, Kenya The 3rd East Africa Oil and Gas Summit (EAOGS) will build on the success of the 2013 Summit which welcomed over 350 delegates from 200 regional and international companies and 30 different countries. In 2014 this prestigious, government-led summit and exhibition will once again provide a platform for East African ministries and the National Oil companies to engage with international and local investors to examine the vast opportunities across East Africa.

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S14 ORA 3 2014 Technology 02_Layout 1 6/6/2014 12:35 PM Page 54

Technology

John Spain, Quickflange AS, addresses Africa’s offshore and onshore piping challenges.

A growing piping

infrastructure A

S AFRICA’S OFFSHORE and onshore oil & gas operations continue to grow, so have the maintenance and operational requirements that come with such growth. This particularly applies to the utility and production support systems and extensive piping networks that cover a wide variety of roles from fire fighting, cooling and water injection through to compressors, scrubbers and other crucial production-related activities. Furthermore, this associated infrastructure is only likely to grow as more and more offshore platforms, FPSOs and refineries come online. Recent offshore activities include a contract by ENI for the operation and maintenance of an FPSO in Block 15/06, offshore Angola and the development of a compressor platform by Marathon Oil on the Alba gas and condensate field, offshore Equatorial Guinea. Infield System’s Global Perspectives Fixed Platform Market Report to 2017 also predicts that fixed platform capital expenditure in Africa is likely to grow with Angolan and Nigerian developments leading the way. The growth in refineries is also likely to bring new maintenance and operational requirements. The International Energy Agency’s predictions that African oil consumption is likely to surge to 4.5mn bpd by 2018 has led to a focus on more Africanbased refineries. Nigeria, for example, is planning to

The Quickflange installation process.

build the continent’s largest refinery - a 400,000 bpd plant that would halve Nigeria’s fuel imports. Yet it is the continent’s older infrastructure that perhaps requires most attention. For many of Africa’s older offshore fields (such as Exxon’s Enang field, offshore Nigeria where production started in 1974 and peaked in 1978), ageing piping infrastructures and the threat of potential leaks and corrosion require speedy and effective modifications and repairs to piping. Onshore and many existing African refineries are ageing. Despite the renewed focus on refineries, only three have been built in Africa over the last decade. According to AT Kearney, for example, the average age of South Africa’s refineries is 43 years, with many of them needing increased levels of maintenance. Due to many offshore African platforms facing harsh and remote conditions aligned with older onshore refineries and regulatory, environmental and safety pressures, maintaining piping integrity is a key issue for today’s operators. So are today’s piping maintenance technologies

rising to the challenge? The answer is mixed.

The case for and against welding ‘Hot-work’ based welding remains one of the most common techniques for offshore piping repairs today, delivering robust and secure connections. Welding comes with disadvantages though, with by far the biggest drawback being the disruption to operations. While there may be the occasional instance where a piping tie-in can be relocated onto a line that is temporarily isolated, production shutdown is often the only option when it comes to welding. While there are clearly negative economic implications in the shutting down of production, there are other issues surrounding welding as well from the paper work required to perform hot-work on site and inevitable safety implications through to the personnel that need to be mobilised and transported to fields and onshore plants. Pressurised welding habitats are also often required as well as a need to isolate areas of operation.

A flexible, low impact alternative

It is the continent’s older infrastructure that perhaps requires most attention.

It’s with these issues in mind that Quickflange has developed a flexible, low impact alternative to ‘hot-based’ welding where a flange is machined in such a way with a patented internal groove profile that it can slide onto the pipe without the use of ignition sources. A hydraulic tool is then used to activate the flange, resulting in a mechanically robust flange-topipe connection with third party qualification proving that the process has no detrimental effects on the pipe and performance. The metal-to-metal seal also ensures that there are no gaskets that can be affected by temperatures and fluids. The solution is so simple and yet is already revolutionising offshore maintenance and piping connection requirements. It is suitable for pipe work and new spool tie-ins; replacing existing flanges; fitting flanges in space restricted areas; replacing damaged or corroded piping; and inserting valves. The fact that it has greater size coverage than many alternative solutions and covers a wide variety of pipe materials, ratings and flange types, only increases its flexibility and applicability across offshore and onshore maintenance activities.

North Sea, Brazilian, Middle East and African installations Today, the Quickflange pipe connection solution is being used globally with over 3,500 installations. Operators that have deployed it include Amerada

54 Oil Review Africa Issue Three 2014

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painted and installed on the discharge line of the jockey pump to replace the existing corroded spool. In this case, the Quickflange is significantly reducing the work scope and duration in connecting flanges to utility piping systems in a live environment. These examples from the North Sea, Middle East and offshore Brazil are also being seen in Africa with Quickflange having recently won its biggest ever contract with a leading operator, offshore Angola. The contract has seen a number of connectors – from 2” to 12”– being shipped to the platform to be utilised in operations. In the future, the operator in question will also be able to train up their own technicians to manage the Quickflange installation, reducing personnel requirements and costs on an already crowded FPSO.

Examples onshore There are onshore examples of the new pipe connection solution in action as well. A recent installation, for example, took place to repair a 10" fire ring main water line at an onshore gas terminal in the UK. A fire hydrant branch line had failed at the point it was welded into the ring main. The plant turnaround was unable to continue without the fire main being in operation and several hundred personnel were stood down. With the Quickflange, the entire repair took only 11 hours – 1.5 hours to cut out the existing

Technology

Hess, Apache, BP, BG, BHP Billiton, Chevron, ConocoPhillips, Exxon Mobil, Maesk, Petrobras, Shell, Statoil and Total. A recent installation, for example, was for the Dunlin Alpha Offshore platform in the North Sea in response to corrosion issues on a flare header drain. With the location of the required repairs in an area of limited access where no hot-work was allowed, the 12” Quickflange solution was applied to the pipe end with crevice corrosion protection and then tested with a flange weld tester. The entire activation and testing was completed comfortably within one shift. Another offshore installation was the replacement of a corroded section of 3” 600# pipe on a condensate scrubber line in very a dense area of piping on an FPSO, offshore Brazil. This allowed no access to the job for welding without first removing extensive amounts of surrounding pipe work. However, due to its cold-work approach and compact, easy to handle tools, within just a few hours Quickflange had provided a robust, secure and permanent repair to a corroded pipe without any removal of nearby piping. In the Middle East, two Quickflanges were installed on the Discharge Line of the Fire Water Jockey Pump at the accommodation platform for ZADCO (Zakum Development Company), part of the ADNOC Group of companies. After successful hydro testing, the fabricated spools were sandblasted,

The Quickflange solution where the flange is machined in such a way that it can slide onto the pipe and mechanically be joined.

pipe and clamp, 2.5 hours to fit two Quickflanges, 3.5 hours to pressure test the two Quickflanges, and the remaining time waiting for excavation work and shot blasting to take place.

Rising to the challenge With African operators looking to meet ever more stringent safety and environmental standards while at the same time ensuring that there is no negative impact on production, today’s climate is demanding ever more innovative piping installation and repair options. The emergence of cold-work solutions as an alternative to welding offers up important new possibilities for oil & gas operations across Africa. ■

Oil Review Africa Issue Three 2014 55

Technology

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Proposals that could enhance safety and efficiency are always a hot topic in the oil industry and the new project from ITF and Tullow Oil plc is no exception. In this case the area under study is well integrity and the proposal is the creation and management of a global library of well data. Vaughan O’Grady talks to Tullow Oil’s Simon Sparke, who is spearheading the initiative.

Well data: towards a truly

global resource

Eirik Raude semi-submersible rig operating on the Jubilee Field.

HEN ITF AND Tullow Oil plc announced plans to establish a comprehensive, global wells and completions reliability database, there was good reason for many in the oil and gas industry to sit up and take notice. Many readers will already know that ITF (Industry Technology Facilitator) is a longestablished not-for-profit organisation owned by 30 major global operators and service companies and driving oil and gas industry collaborative technology development. Tullow Oil plc is, of course, a leading independent oil and gas, exploration and production group, which, as many of our readers will also be aware, has a strong focus on Africa, among other areas. However, the scope of the joint industry project (JIP) they are proposing is of at least as much interest as its proponents.

Tackling efficiency and safety issues The aim of this JIP is to tackle efficiency and safety issues associated with well integrity through the

56 Oil Review Africa Issue Three 2014

The vision is for a database that includes information gathered from tens of thousands of wells. creation and management of a global library of well data. This will provide users with accurate and reliable information about a broader range of well types than is currently available, allowing a wealth of knowledge to be shared across the industry. Why now? How will it work? What could it mean for efficiency and profitability? Those are just three questions that come to mind when a concept as ambitious as this is mooted. Luckily we were able to discuss these and other points with someone intimately connected with this project: Simon Sparke, group head of well integrity for Tullow Oil, who is spearheading the initiative. ORA contributing editor Vaughan O’Grady, asked him to tell readers more about what the proposed

database means — and could mean — for the oil and gas industry.

Oil Review Africa: Can we assume that well types and construction components vary enormously? Does this mean dozens, hundreds or even thousands of potential models on your database? Simon Sparke, group head of well integrity for Tullow Oil: The variation in well types is driven by a wide range of factors. These can include the following: 6 Onshore, offshore platform, ABS [artificial buoyant seabed], subsea. 6 The produced or injected fluids; oil, gas or water, or CO2, drill cuttings etc. 6 The contents of CO2, or H2S, or sand 6 The production method: natural lift or one of several artificial lift methods 6 Well design life and flow rate 6 The availability and cost of rigs or vessels for well interventions 6 The number of tubing strings in a well: normally one, occasionally two and rarely three

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Technology

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components. Globally, there are more than 1.5mn wells in existence and more are being drilled all the time. At the moment data is only being shared on a small subset of these. However, one issue is the overall growth in the number of subsea wells and the more costly and time-consuming nature of subsea interventions.

6 The complexity of the completion and whether or not it is an intelligent completion 6 The regulatory requirements . By using the ISO standard naming convention these differences can be used and serve as a method of identifying well types and their components. This means that the database will not only collect all well types and their associated components but will also be able to query, sort and filter as required by the user. The vision is for a database that includes information gathered from tens of thousands of wells. The importance of the database is not just with respect to the range of components it includes but the amount of data that is collected to provide a more representative basis for decision-making.

ORA: Similarly is there any area in particular you would highlight as a continuing concern that this project could ease (corrosion, flow, hydrate formation, say)? Sparke: There isn’t any individual area that we are targeting — it is envisaged that the database will enable wells and completions of all types to be designed for maximum reliability under prevailing conditions.

ORA: If comprehensive, could such a project help to streamline wellhead construction and even lead to greater efficiencies among equipment suppliers as they use the information to plan investment and development? Sparke: If by ‘streamline’ you mean lead to

ORA: How important is the greater regulatory emphasis on safety in driving this project? Is it important, in other words, to be seen to be doing something that can contribute to safety? Sparke: Safety has long been of paramount

greater standardisation in components — not necessarily. It is envisaged that membership of the database JIP will be open to operating companies. Suppliers of construction components should already be aware of the conditions under which their own components fail, so the benefit is really for operating companies, who will gain information about experiences other than their own. What the database would do is allow participants to identify which components provide the most reliable operating efficiencies under what operating circumstances, and thus make more informed choices when designing new wells. Another benefit could be with respect to planning interventions for wells that are approaching or starting to exceed their design life. Having more information about how long parts might last could help avoid unplanned stoppages.

Simon Sparke, group head of well integrity for Tullow Oil.

ORA: How much are cost concerns also a driver for producer support? Have they become more of an issue in recent years? Sparke: Reducing costs throughout the life of

the creation of the database. However, the issue is really in maintaining confidentiality of data submitted; that is, we need to ensure that data cannot be traced to any individual participating company. There is a good track record of industry collaboration in this area with a number of wellknown databases in existence that were established through JIPs. Existing databases tend to focus on specific well types but their success suggests that confidentiality is not an insurmountable barrier. I believe that as an industry we have generally become more open to information sharing and there is a greater awareness and acceptance of what can be achieved in this way.

the well is an important driver for the creation of the database. For example as the industry strives to extract as much as possible from mature assets the economics of developments can sometimes be quite marginal. A comprehensive database could play a role in maximising reliability of well equipment and consequently reducing intervention costs. Also the more costly and time-consuming nature of subsea interventions make reliability a particularly big issue for subsea wells. However, it should be emphasised that it is important for all well types — land and platform as well as subsea. Operators are tackling increasingly complex and costly developments across the board: for example unconventional reservoirs such as tight gas sands can present a range of technical challenges that make their development economically marginal.

58 Oil Review Africa Issue Three 2014

The reasoning behind this database is really that the industry could benefit greatly from more information about all well types and components. ORA: How will you overcome the possible objection that some information may be seen as a commercial advantage that producers would be unwilling to share? Sparke: Confidentiality will be a major concern in

ORA: Is there any component or well type about which we are under-informed and whose representation on a database like this could benefit operators? Sparke: The reasoning behind this database is really that the industry could benefit greatly from more information about all well types and

importance to the oil and gas industry. If launched this project not only promises to make a positive impact on well reliability and integrity, but would also be very much in the spirit of the recent EU Directive on Safety of Offshore Oil and Gas Operations, which aims to ensure that best safety practices are implemented across all active companies operating outside EU-regulated waters.

ORA: Has something like this been mooted in the past? What has held back progress until now? Sparke: The idea of a wells database is not a completely new one and there is a good track record of collaboration in this area, with a number of well-known databases in existence around the industry that were established through JIPs. For example WellMaster and CFER’s ESP RIFTS [electric submersible pump reliability information and failure tracking system] and PCP RIFTS [progressive cavity pump reliability information and failure tracking] JIPs. Existing databases contain extremely valuable information and are well used, but have often been established to focus on specific well types. Therefore their application is inherently limited in terms of the industry as a whole. The benefits of a more comprehensive database have become increasing evident as the industry tackles more challenging developments, but the barrier to developing the database is really the amount of time and effort involved to achieve it.

ORA: If, in an ideal world, you get majority or even full support for this project, what could be the effect on E&P? Sparke: If successful, this database could transform the industry’s ability to manage well stock more efficiently and improve safety. A truly global database would be extremely useful in increasing efficiency and securing production in the years to come. ■ www.oilreviewafrica.com

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BAKER HUGHES HAS received an OTC Spotlight Award for the LaunchPRO wireless top drive cement head. LaunchPRO launches balls, plugs, or darts wirelessly during cementing of heavy subsea long strings and long, heavy liners. Its remote wireless operation reduces HSE risk by reducing manual intervention and rig time, while optimising reliability. The system’s operation is powered by rig air through a single pneumatic hose that can be tethered to the cementing line to reduce the risk of damage during cementing operations. A wireless pressure transducer provides real-time data to the cementing operator to allow for adjustments during cementing operations. The tool’s streamlined design greatly reduces the risk of external component damage that could result in non productive time. Its pneumatic operation is powered by rig air through a single hose which can be tethered to the cementing line to reduce the risk of damage and improve reliability. The cement head also features a hydraulically balanced internal cementing valve that operates independently from launching functions and allows for pressure testing with little to no intervention.

Baker Hughes’ LaunchPRO wireless top drive cement head.

A customised lift basket with a pneumatic trolley system enables easy onsite maintenance, and it reduces the labour required to make and break connections, and load equipment. The LaunchPRO cement head is compatible with the Baker Hughes Seahawk family of reliable offshore cementing equipment, and it offers industry-leading ratings to meet the demands of today’s longer, deeper subsea completions.

Innovations

LaunchPRO wireless top drive cement head

SBM’s VHP fluid swivel SBM OFFSHORE WAS awarded the prestigious Spotlight on New Technology award at the 2014 OTC for their Very High Pressure fluid swivel. (VHP). As a leading pioneer in floating production and mooring systems, SBM Offshore continually pushes the limits of technology to deliver higher performing, more cost-effective and safer solutions for the oil and gas industry. With the VHP fluid swivel, SBM delivers a solution that will allow operators to utilise FPSOs for the development of ultra high pressure reservoirs, which to date has not been possible where a weather-vaning system was needed in conjunction with fluid reinjection into the reservoir. Building on SBM Offshore’s unrivalled know-how and experience in state-of-theart fluid swivel design, this pioneering new technology increases the operating range of high pressure swivels by using a patented technique to cascade the pressure drop over multiple seals. The 12" prototype toroidal swivel has been fully qualified to 830 barg (12,000 psig), including long term endurance test runs, and has the potential to operate at over 1000 barg (14,500 psig). This swivel is specifically aimed at gas or water injection from FPSOs into ultra-high pressure reservoirs. To maximise the recovery of oil from reservoirs, operators use a range of techniques for pressure maintenance and oil displacement. This typically requires injection of a range of fluids into the reservoir; enhanced techniques include use of WAG (water alternating gas injection)

SBM Offshore’s VHP fluid swivel.

and water dosed with chemicals such as polymers. To do this from an FPSO located in areas where the vessel needs to weathervane, as is the case in the GoM and West Africa, one or more high pressure fluid swivels is needed. The current industry limit is around 520 bar (7500psi) – a limit inadequate for deeper HP/HT fields. Moreover, additional qualification testing is planned to take place during 2014 to further increase this capability to an operating pressure of 1,000 bar. SBM’s development programme, launched in 2009, has resulted in a patented technique to allow the swivel seals to accommodate much higher pressures. The resulting VHP fluid swivel is suitable for water injection, gas injection or WAG service. During 2012 and 2013 extensive tests were performed on the full scale prototype, culminating in a successful long-term endurance run at 830 barg (12,000 psi). The swivel design can accommodate operating pressures up to 1,000 bar (14,500 psi) and further tests during 2014 will complete qualification at this pressure.

EOR, seismic imaging, HP/HT lead the way BP USED THE 2014 Offshore Technology Conference as a venue to emphasise its areas of technological emphasis and advancements pertinent to offshore oil and gas exploration and development. High among these areas of importance to BP are its work in enhanced oil recovery (EOR), seismic imaging, and highpressure/high-temperature (HP/HT) drilling and production. On the enhanced oil recovery front, BP points in particular to LoSal as a new addition to the traditional gas and chemical recovery techniques. LoSal, or low salinity, is injection water treated to reduce the total dissolved solids from seawater’s typical 35,000 ppm down to a few thousand parts per million. The process also targets a reduction in the total divalent ion concentration to a point below that of the connate reservoir water. These two steps combine to help release the formation oil from the reservoir rock surfaces. In the same arena, BP is using a Micro-CT scanner to develop 3D images of the architecture within rocks taken in coring. The data from these images can be used to generate image-based simulations. One significant advantage is that the imaging can be done in a matter of a couple of weeks where it can take three to six months to get the same information using

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traditional laboratory methods. On the seismic imaging front, BP is using novel data acquisition techniques such as independent simultaneous sourcing and data processing in its recently opened high-performance computing center. BP is developing these technologies with the aim of getting better seismic data and resulting images more quickly and at a lower cost than with traditional systems. The HP/HT R&D is being done under an umbrella effort referred to as Project 20K. This refers to the target of 20,000 psi (138 MPa) for reservoir pressures and to 177°C for temperatures. The project is looking at four separate areas of focus, well designs/drilling and completions; rig/riser/BOP equipment; subsea production systems; and intervention and containment. An ongoing development tagged BP Well Advisor is also in progress. Well Advisor is to become a comprehensive real-time well operation monitoring system with a number of consoles devoted to specific drilling operations. Currently in the field are consoles for casing and cementing. By the end of this year, BP expects to roll out consoles for pressure testing, BOP monitoring, and rig-site fluid management.

Oil Review Africa Issue Three 2014 59

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Project Databank Compiled by Data Media Systems

OIL, GAS AND PETROCHEMICAL PROJECTS Project Federal Ministry of Works River Niger Bridge at Nupeko Stubb Creek Field CHEVRON TEXACO - Agbami Oil Field Development TOTAL - Egina Field Development Southern Swamp Associated Gas Solution Project (SSAGS ) FCTA - Nigeria Cultural Centre and Millenium Tower TOTAL - OML 58 Upgrade Phase 1 NEPA - Zungeru Hydro-Electric Power Plant OYO Field Development FCTA - Apo Estate Layout: Infrastructure Cross River State - Calabar Hospital (105 beds) FCTA - Utako Hospital (220 Bed) NPA - Rehabilitation of Yashi-Duguri-Yalo Road AR2 - Jabi Lake Mall FCTA - Galuwyi-Shere Road: Phase1 FCTA - Rehabilitation and Expansion of Airport Expressway: Phase 1 FCTA - Rehabilitation and Expansion of Airport Expressway: Phase 2 FCTA - Kubwa Satellite Town ( Districts 4&5 ) FCTA - Bwari Satellite Town ( Districts 1&2 ) FCTA - Karshi Satellite Town ( Districts 1&2 ) Shell - Bonga South West Project MART RESOURCES Umusadege Field Development YFP - Aje Blk OML 113 NEPA - Kashimbila Hydropower Station NPA - Lekki Deep Sea Port FCTA - Karshi-Ara Road FCDA - Completion of B6, B12 and Circle Roads in the Central Area of Abuja NERC - Yankari Power Plant FCTA - karshi Apo Road Okwok oil field - OML 67 AFREN - OML 115 Development Ebok Development Okoro and Setu Fields Development Akwa Ibom state government - Ibaka Deep Sea Port Federal Ministry of Health - Abuja Medical City AFREN - OPL 310 Development CHEVRON NIGERIA Escravos Gas-to-Liquids (GTL) Project NNPC - Olokola LNG (OKLNG) Plant BRASS LNG - Brass River LNG Plant Federal Ministry of Works - Vandeikya-Obudu Road FMH - Ekiti State Teaching Hospital Diagnostic Centre PPP Ofon Field Development Phase 2 NNPC - Qua Iboe Power Plant Ministry Of Power- Mambilla Hydropower Station Lagos State Government Lekki Epe International Airport Federal Ministry of Works - Lessel-Wajir road Shell - Trans-Nigeria Pipeline Loop line Project FCTA - A121 East-West highway: Section V Owowo Oil Field - OPL 223

Sector Infrastructure

Facility Bridge

Budget 44000000

Status Start Date Engineering 2011-Q1 & Procurement Construction 2003-Q4 Construction 1998-Q1 Construction 2003-Q4 Construction 2011-Q1

Oil Offshore Oil Gas

Oil Field Development Oil Field Oil Field Development Gas Production

200000000 5000000000 3100000000 1000000000

Construction Oil, Offshore Power Oil, Offshore Infrastructure Construction Construction Infrastructure Construction Infrastructure Infrastructure

2014-Q2 2017-Q1 2017-Q4 2016-Q2

Mixed-Use Development 550000000 Oil & Gas Field 1000000000 Hydro Power Station 1300000 Oil Field Development 1000000000 Roads 31000000 Medical/Health Facilities/Spa37000000 Medical/Health Facilities/Spa25000000 Roads 11000000 Malls/Retail Outlets 130000000 Roads 112000000 Airport 370000000

Construction 2006-Q1 Construction 2006-Q1 Construction Construction 2006-Q1 Construction Construction Construction Construction Construction Construction Construction

2017-Q1 2018-Q1 2018-Q1 2016-Q3 2015-Q2 2015-Q4 2014-Q4 2015-Q4 2015-Q1 2015-Q1 2015-Q1

Infrastructure

Airport

307000000

Construction

2014-Q3

Water Infrastructure Water Oil Oil

Water Storage Tanks Roads Desalination Mining Oil & Gas Field

119000000 82000000 130000000 600000000 500000000

Construction Construction Construction Feasibility Study Construction 2008-Q4

2015-Q2 2014-Q4 2016-Q1 2020-Q1 2014-Q4

Offshore Power Petrochemicals Infrastructure Infrastructure

Offshore Platform Hydro Power Station Terminal Roads Bridge

10000000 374000000 1350000000 24000000 402000000

Construction 2004-Q4 Construction Construction Construction Construction

2015-Q4 2015-Q2 2017-Q1 2015-Q4 2015-Q4

Power Infrastructure Oil Oil Oil Oil, Offshore Infrastructure Construction Oil, Offshore Gas

Gas Fired Power Station Roads Oil Field Development Oil & Gas Field Oil Field Development Oil Field Development Port Medical/Health Facilities/Spa Oil & Gas Field Gas to Liquids (GTL)

200000000 20000000 400000000 150000000 450000000 200000000 2000000000 650000000 200000000 1700000000

Construction Construction Construction 1968-Q1 Construction 2010-Q1 Construction 2007-Q2 Construction 2006-Q3 Construction 2012-Q1 Feasibility Study Construction Construction 2001-Q3

2017-Q3 2014-Q4 2015-Q4 2016-Q2 2014-Q2 2015-Q2 2015-Q4 2017-Q4 2014-Q3 2014-Q2

Gas Gas Construction

Liquefied Natural Gas (LNG) 10000000000 Liquefied Natural Gas (LNG) 15000000000 18200000 Medical/Health Facilities/Spa300000000

EPC ITB 2005-Q1 EPC ITB 2004-Q4 Construction EPC ITB

2018-Q3 2018-Q3 2015-Q1 2018-Q1

Offshore Power Infrastructure

Offshore Platform Power Plant Power Grid Airport

500000000 20000000 3200000000 450000000

Construction 2007-Q2 Construction Construction EPC ITB

2015-Q1 2018-Q1 2018-Q1 2018-Q2

Infrastructure Pipeline Infrastructure Oil

Roads

6000000 84500000 1007000000 250000000

Construction Construction Construction Construction 2005-Q3

2015-Q1 2016-Q4 2018-Q4 2015-Q3

Roads Oil Field Development

Completion Date 2018-Q1

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Innovations

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Deep Blue Engineering’s Shuttle Sub DEEP BLUE ENGINEERINGUK Ltd, a specialist engineering design and development company serving the international marine, oil, gas and renewable energy industries, has announced the introduction of the Shuttle Sub. The new lift and deployment system is a large payloadcarrying, remotely operated vehicle (ROV). Developed for companies involved in subsea operations, the Shuttle Sub offers an efficient and cost-effective way to deploy heavy payloads such as cables and umbilicals - to and from the seabed. It is used to install and retrieve equipment, lay cable and conduct salvage operations. Even when laden with a payload of 100 tonnes, the buoyantcontrolled Shuttle Sub can float, dive, surface and maintain neutral buoyancy, so it is ideally suited for work being carried out in deepwater environments on – or near - the seabed. Deep Blue's long-term objectives for this technology are diverse. “The Shuttle Sub is essentially an ROV in its own right, but it combines this with a transport function,” said David Webster, managing director of Deep Blue Engineering. “The vast majority of deployment operations are conducted from the surface, using ships with cranes, which has limitations. Shuttle Sub offers an alternative. Eighty per cent of our planet is covered with water. In the future, offshore industries will migrate into the vast, deeper and more remote areas where there is currently no activity. Whether installing generating equipment, laying cables, mining, conducting exploration or salvage operations, the industry needs a safe, efficient transport capability - a delivery vehicle and the Shuttle Sub fulfils that role.” It is the first lift and deployment system of its kind. It does not require an additional ROV to conduct visual monitoring or connector

installation activities subsea. Instead, technicians on a support vessel carry out these tasks remotely. As with a conventional ROV, they monitor and control subsea activities via an umbilical between the Shuttle Sub and the vessel at the surface. Where the Shuttle Sub is unique is that it is also the payload carrier, transferring deployment and retrieval tasks to the ROV. This provides optimum control and removes the need for lift line-based operations. It also removes the loads from cables and umbilicals during deployment when they are suspended between the vessel at the surface and the seabed. The Shuttle Sub performs all of the functions of a work class ROV, but is large enough to accommodate a payload that would normally be deployed or retrieved from a ship. In addition, deployment is very accurate when using the Shuttle Sub because equipment or cable can be placed into position as opposed to working with the lift line, which makes accurate positioning difficult. By using lightweight, low-cost hardware and smaller support vessels for umbilical and cable deployment, costs are dramatically reduced. This advantage also extends to maintaining installed equipment. Finally, in the event of a catastrophic subsea blowout or pipeline breach, heavy cutting and capping equipment can be swiftly deployed into deepwater for intervention purposes. This is especially important because it is currently not possible to 'fly' this special equipment from a remotely positioned rig or vessel.

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