Rush for African oil gathers speed
Oct 10 2010 19:53
Jan de Lange
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Johannesburg - An African oil-rush is gaining momentum since it is evident that, within the next five or ten years, the continent will become one of the world’s most important sources of oil.
Observers reckon than in less than ten years’ time Africa will produce at least 20% of global oil – compared with less than 10% today – as oil resources in America and the North Sea become exhausted.
Next year the continent will already produce more oil than North America does, and by 2020 it will be the world’s third biggest oil region.
Over the past year it has become clear that Nigeria and Angola, which traditionally have been the two largest oil producers in Africa south of the Sahara, are far from being the only or even the biggest sources of oil on the continent.
Tullow Oil, an Irish company, which in 2004 took over the South African-listed Energy Africa, is one of the forerunners in this race. Before the end of 2010 Tullow expects to produce its first oil from the Jubilee oilfield in Ghana.
It is developing this oilfield with $3.35bn worth of investments in collaboration with Anadarco Petroleum and Kosmos Energy.
Later this year the project will begin to pump 120 000 barrels per day, and this will double by 2014.
The only South African company that is participating is SacOil Holdings [JSE:SCL], which previously was called Samrac but changed its name after concluding an agreement with the DRC two years ago to obtain exploration assets in that country.
Investec and the Moseneke family jointly control SacOil.
Metropolitan and Stanlib are the next largest shareholders, with 13.6% and 6.4% of SacOil respectively.
SacOil is one of three companies listed in the oil and gas sector on the JSE.
The others are Sasol [JSE:SOL] and Oando [JSE:OAO], the Nigerian petroleum distributor which is also busy entering the world of oil production thanks to new legislation in Nigeria which obliges the world's oil giants in that country to dispose of reserves they are not exploiting.
The most promising area is around Lake Albert on the DRC’s eastern border with Uganda, where oil reserves amounting to 800m barrels have been found on the Ugandan side of the border during the past two years.
Two of the most exciting finds belong to Tullow in Block 3A and Block 1, where 28 oil wells have been drilled and 27 have proved fruitful.
Usually oil found in one hole out of every 10 drilled indicates exploitable resources.
Tullow had a partner, Heritage Oil, in these two blocks, but in July this year Heritage sold its stake to Tullow for $1.5bn (about R10.5bn).
Tullow now owns Blocks 1.2 and 3A, but is busy selling off two-thirds of these to Total and other petroleum companies so that they can develop it as partners, each owning a third of the property.
Blocks 1 and 2 on the DRC side of the border previously also belonged to Tullow, but earlier this year they were allocated to Caprikat and Foxwhelp, owned by President Jacob Zuma’s nephew, Khulubuse Zuma.
Across from Tullow’s Block 3A, in June this year SacOil received undisputed exploration rights on Block 3, a 3 177km2 piece of land on the Ugandan side of the border.
Geologically there is no distinction between Tullow's Block 3A and SacOil’s property, said Robin Vela, SacOil’s chief executive.
The investor community apparently also thinks so, because SacOil’s share price has risen from 15c to more than 90c since the rights were awarded to it by presidential decree in June this year.
Vela said that in the next two years he will spend about R45m on exploration work in this area.
He will be following a five-year programme to explore the area and complete both the field and geochemical studies.
He will compile two-dimensional data about some 400km2 and drill at least two exploration holes.
After the first two years he will draw up a new capital expenditure programme for his assets in the DRC.
It's an expensive game.
SacOil also owns a manganese plant near Graskop in Mpumalanga which is generating cash, but will probably be sold because it does not fit SacOil’s ambitions to be a producer of petroleum oil and gas.
To provide for the enormous capital expenditure required to develop oil resources to production level, SacOil last week concluded a partnership with Energy Equity, a junior Nigerian oil producer.
Last week Tullow announced that it anticipated starting production in the Lake Albert region by the end of 2011.
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