Tanzanian investment to continue

July 17, 2013

Tanzania has become hot property, with BG Group and Statoil eying LNG export from the gas-rich offshore region. Tanzania’s recent rise up the resource rankings has been fast, despite it having taken a long time to reveal its potential reserves.

BG’s licenses offshore TanzaniaWhile drilling offshore started in the 1950s, the first production did not happen until 2004, from the 1974-discovered Songa Songa gas field.

Nearly 10 years on, Songa Songa, operated by Orca Exploration, a subsidiary of Toronto-listed PanAfrican Energy, is one of only two fields producing. The Mnazi Bay development, gas from the Mnazi and Msimbiti fields, is the second. Mnazi Bay production currently supplies the local Mtwara Power Plant but the Tanzanian government recently received Chinese bank support to fund a 532km pipeline to the capital Dar-es-Salaam.

Historically, lack of infrastructure, along with little 2D data, has hindered further development in the country, which ranks 152 out of 185 in the lower quartile of the Human Development Index.

However, recent gas finds have changed Tanzania’s fortunes. BG and partner Ophir have made six consecutive discoveries in deepwater Blocks 1, 3, and 4, while Statoil and partner ExxonMobil have made three discoveries in Block 2.

Early design studies are now being worked on for the country’s first LNG processing trains, with plans to reach a final investment decision by 2016-17.

Tanzania’s government estimates there are 41.7Tcf of recoverable natural gas reserves in the East African Rift Valley and in deep water offshore. The country is working on new policies for the upstream sector, including restructuring the state-run Tanzanian Petroleum Development Corporation (TPDC), which sets exploration and production policies, making operators list on a local stock exchange, and creating a gas revenue fund.

The country’s delayed 4th licensing round is expected to launch in October, with seven deep offshore blocks to be offered.

Early days

More than 102,000 sq km of deepwater offshore acreage has been awarded off Tanzania in total, most since 2000.

Shell was awarded Blocks 9-12 in 2003, but it is still waiting to agree a production sharing agreement to allow it to start exploration activities.

During 2005-06, Ophir was awarded Blocks 1, 3 and 4, covering 20,850sq km of the Deep Mafia Offshore basin and northern portion of the Rovuma basin, Statoil was awarded Block 2, with partner Exxon, and Petrobras, as operator in a 50% owned joint venture with Shell, Block 5. In 2006, the Petrobras-led JV with Shell added Block 6 to its acreage, followed by Block 8.

Tanzania’s first deepwater drilling campaign was operated by Ophir, in Blocks 1 and 4 in 2010, partnered by BG Group.

However, before deepwater exploration could start, the country needed investment in port and logistics infrastructure, as well as agreements on commercial contracts with government.

Over two years, Ophir negotiated terms for an LNG gas commercial project for Blocks 1, 3 and 4 withTPDC. Ophir Energy and Petrobras also agreed in 2009 to join forces and initially invest $9million upgrading Mtwara Port to create a joint base of operations for the Mnazi Bay gas development— now also shared by BG Group and Statoil and undergoing further investment.

The Mnazi Bay project brought power and light to Mtwara, paving the way for future development.

However, by 2009, while Mtwara had electricity, it was intermittent. Just 58 ships passed through during a twoyear time frame. The airport had no road connection to Dar-es-Salaam and there were fewer than six flights per week.

It opened in July 2010, coinciding with $500,000 of investment by Ophir in the airport. The airport now handles 14 flights per week and the port could handle up to four drilling rigs and the supply vessels and marine security to support them.

Exploration to date

The Deepsea Metro-1 is contracted to BG Group for drilling offshore Tanzania.Between October 2010 and April 2011, Ophir and BG Group drilled three deepwater discovery wells with Odfjell’s new semisubmersible, Deepsea Stavanger. In Block 4, the Pweza-1 well was drilled in water 1400m deep, and the Chewa-1 well was in water 1300m deep. In Block 1, the Chaza-1 well was drilled in 950m water depth.

In 2012, BG Group, now operator in the partnership, then went on to make further discoveries; Jodari-1 and Mzia in Block 1, and Papa-1, the first discovery in Block 3 about 100km offshore, in 2180m deep water. At the end of 2012, BG drilled another discovery, the Jodari North-1 well, the seventh consecutive find.

In March this year, a drill stem test on the Jodari-1 well flowed at a maximum rate of 70MM scf/d, constrained by testing equipment. In May, a drill stem test on the Mzia-2 appraisal well, saw a maximum flow rate of 57MM scf/d, also constrained by testing equipment. Both drill stem tests exceeded expectations, says BG. Mzia was BG’s first Cretaceous discovery in Tanzania; Papa-1 was second.

Petrobras started drilling in 2011, using the Ocean Rig Poseidon on Zeta-1 in Block 5, with a second well in 2012. However, no results have been announced in the Shellpartnered block.

In 2012 and 2013, Statoil and partner ExxonMobil made a string of discoveries, also using the Ocean Rig Poseidon. These were the Zafarani, Lavani and Tangawizi discoveries in Block 2, covering about 5500 sq km in water 1500-3000m deep. Statoil has a 65% working interest and Exxon 35%. The Lavani-2 well tested the deeper Saffron target, described as a “promising new discovery” by Statoil. Together, Statoil says the finds add up to 10-13 Tcf of recoverable gas resources.

In May this year, Statoil acquired 12% WI in Block 6 from Petrobras. The block covers 5549 sq km in the Mafia basin, about 170km north of Block 2. Petrobras retains 38% WI, Shell has 50%.

Ophir has also added Block 7 to its licenses, operated in partnership with Dominion Petroleum.

Planning for LNG

BG, with Ophir, are planning for the country’s first LNG facilities, with final investment decision planned for 2016/7.

Statoil said its finds have added “robustness” to a future decision on a potential LNG project. Statoil may recommend an LNG site this year and says planning to recommend a site in 2Q this year and says there is potential for at least two trains to handle production from existing finds on Block 2, including BG’s.

Exploration continues

London-listed Afren is currently processing 620sq km of 3D seismic shot over the Tanga block, to the north of Tanzania, earlier in 2013, with a view to pin-pointing exploration targets.

Operations offshore on the Deepsea Metro-1 for BG Group.Earlier this year, Afren said it signed a letter of intent to use a rig to drill the Calliope prospect with partner Petrodel Resources Ltd., a privately held company based on the Isle of Man. Statoil and ExxonMobil are working on additional prospects in Block 2 and have recently acquired 3D seismic data in areas covered only by 2D seismic. Planning is also underway for an appraisal well on Zafarani.

Petrobras is still assessing data from the Block 5 Zeta-1 well, alongside 3D seismic interpretation work on Block 6.

Shell says it is in conversation with the TPDC with a view to finalizing a production sharing agreement on Blocks 9-12, which would allow it to start exploration activities.

The BG/Ophir partnership completed drilling of an exploration well, Ngisi-1, using the Deepsea Metro-1, operated by Odfjell, last month [June]. It is also planning further drilling after an agreement signed in May extended use of the Deepsea Metro-1 for a further 18 months, from June.

Exploration targets will be sought using 3D seismic acquired on Block 1 earlier this year, with an intention to explore the potential continuation of the Tertiary basin floor fan prospectivity in the Rovuma basin found in Mozambique.

Ophir will also have access to the rig to drill exploration wells on Mlinzi in Block 7 and Maembe, in the East Pande block, closer to shore.

The Mlinzi subsurface is thought to have analogues to ENI’s giant Mamba discovery offshore Mozambique with Ophir estimating gross mean resources of 25.6Tcf. OE

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