Numerous independents have acquired sizable acreage in low producing or nonproducing countries in West Africa, and several have advanced to discovery and production stages.
Many have found their prospects by studying seismic information collected decades ago by the majors.
Today's companies see economic opportunities in this cyclic business, whereas earlier players did not consider the region worth their effort at the time for various reasons including lack of deepwater operating technology and low oil and gas prices.
These independents' management teams report warm receptions from the various governments. It's a region where executives of small oil companies can meet fairly easily with a country's oil minister and president, the independents report.
Equatorial Guinea
In particular, Equatorial Guinea has been in the limelight since Triton Energy Ltd., Dallas, announced its Ceiba discovery in 1999 and brought it onstream 14 months later (Fig. 1 and 2).
Since then, Triton was purchased by Amerada Hess Corp., New York, which has announced three consecutive discoveries off Equatorial Guinea following Ceiba.
On Jan. 30, Amerada Hess announced the Ebano oil discovery in the Rio Muni basin. The well, in 2,052 ft of water 10 miles northeast of Ceiba, encountered reservoirs similar to those of Ceiba field and also the Okume and Oveng discoveries. Amerada Hess operates Block F and Block G with 85% interest. Energy Africa Ltd., Cape Town, has 15% interest. The government of Equatorial Guinea will carry 5% participating interest in any Okume, Oveng, and Ebano area commercial production.
For 2002, Amerada Hess plans to drill 8 exploratory wells off Equatorial Guinea.
"As we drill, explore, work, and rework seismic data, we are seeing other interesting targets emerge," said John O'Connor, Amerada Hess president of worldwide exploration and production. "I would not be surprised to see a number of different play types tested in addition to what so far have been reliable ones."
Amerada Hess expects to ramp up Ceiba's production to 85,000-90,000 b/d by the end of the year. The company's share would be 44,000 b/d.
Meanwhile, Marathon Oil Co., Houston, has acquired CMS Energy Oil & Gas's upstream and downstream interests in Equatorial Guinea for $993 million, calling it a new core area for Marathon.
Marathon operates Alba Block with a 52.4% interest. The block, which borders Nigerian and Cameroon waters, contains Alba gas field, undeveloped discoveries, and several undrilled prospects in the Gulf of Guinea. Marathon also got 37.6% interest in the adjacent offshore Block D (Fig. 2).
Alba field, which began producing in 1991, has reserves of 5 tcf of gas and 300 million bbl of condensate. Other Alba partners are Noble Affiliates Inc., Ardmore, Okla., 33.75%, Globex International, Dallas, 10.87%, and the government of Equatorial Guinea 3%. Globex International is a subsidiary of Globex Energy Inc.
In late January, Marathon was drilling a development subsea well, Alba 11, and planned to drill a total of six development wells during the year. The company was uncertain whether any exploration wells will be drilled there this year. Before the CMS acquisition, Marathon already had production in Gabon.
The UMC model
Joe Bruso, now president of Sovereign Oil & Gas Co., Houston, was one of two people assigned to establish an international oil and gas division for United Meridian Corp. (UMC)-now Ocean Energy Inc.- in 1991. Within 4 years and a $1 million annual budget, Bruso was involved in the Panthere gas-condensate and Lion oil discoveries off the Ivory Coast and Zafiro field off Equatorial Guinea.
"We went to countries that were not on the flavor of the month list, they were countries that were not seeing much investment at the time. In some cases, the majors had come and gone.ellipseAs a small company, we were very well received, able to access data and negotiate excellent terms," Bruso recalled.
UMC used existing data and its technical skills to demonstrate low risk, high volume reserves. It secured the licenses for those prospects and then convinced other oil companies to join as project partners. For instance, Mobil was a partner on Zafiro.
Bruso and partner Jim Allen started Sovereign in March 2000 using the UMC model and focusing on the Nigerian shelf and onshore.
"The deepwater has become so heated. We believe there are a number of countries in West Africa that have many undeveloped areas both on their shelf and onshore," he said. "My advice to other small independents is that Nigeria is open for business. You will have a good reception thereellipseThey are producing 2 million b/d and have been for decades. There is an extremely well developed infrastructure."
Part of Sovereign's strategy is developing partnerships with indigenous companies.
"There are probably 20 or so Nigerian independent oil companies. They vary in their technical capabilities and their financial capabilities. The majority are quite open to teaming with foreign investors," Bruso said.
In addition, the Nigerian government is encouraging independents to develop several hundred undeveloped discoveries.
"Anybody who has worked in the Gulf of Mexico would feel right at home working with the geology in Nigeria. The difference is that Nigeria is so under explored that it looks like Texas and Louisiana in about 1940," Bruso said.
Sovereign also is partnering with Oriental Energy Resources on license OML 115 about 100 miles offshore. Sovereign hopes to acquire 3D seismic this year in 250-300 ft of water.
"OML 115 is in the southeast corner of Nigeria just a short distance from the Zafiro field, which made it attractive to us. We think the same Qua Iboe play exists in OML 115," Bruso said.
Sovereign has been invited to negotiate with ExxonMobil Corp. on behalf of Oriental to take farmouts on two small undeveloped oil fields in ExxonMobil's OML 67, adjacent to OML 115.
Bruso hopes an agreement can be concluded within 3-6 months. If successful, Sovereign would exercise its option to acquire 40% interest in the Oriental acreage. Farmouts to foreign investors are subject to government approval.
Separately, Sovereign also will earn a working interest in and around Nigerian independent Summit Oil International's onshore discovery.
In the onshore blocks OPL 205 and 206, Summit Oil said it discovered a 50 million bbl oil and condensate field that tested 3,300 b/d. Sovereign plans to drill two wells for Summit this year to earn a 40% interest in the field and numerous large untested structures nearby.
Vanco Energy
Gene Van Dyke, president of Vanco Energy Co., Houston, believes the future of the offshore oil business is in more than 1,100 ft of water and is putting his money on deepwater West Africa.
Vanco has emerged as the largest deepwater license holder there.
"A lot of majors did deepwater seismic around Africa in the 1970s and 1980s, but they couldn't drill at that time so they didn't do anything about it," Van Dyke said.
But he is counting on major oil companies joining Vanco as project partners on prospects on its licenses off Ivory Coast, Namibia, Equatorial Guinea, Morocco, Madagascar, and Senegal. And he is still accumulating acreage.
In February, Vanco gained a 10% interest in Equatorial Guinea's Corisco Bay block adjacent to Vanco's Corisco Deep block. Petronas, 60%, will operate, and Ocean Energy has 30%.
At this writing, Vanco was on the verge of securing a block off Ghana. Once the Ghana deal is signed, Vanco will have licenses on more than 30 million acres off Africa. Last year, Vanco concluded a $30 million 3D seismic program on its existing acreage. Outside estimates put recoverable volumes from all blocks held by Vanco at 10 billion bbl of oil equivalent.
After being in the oil business 50 years, Van Dyke believes he is in a position where his company of 50 people will grow to 200 people in the next 5 years.
Off West Africa, Vanco started in 1997 with Gabon's Lower Congo basin where it explored and developed the Anton and Astrid Marin permits. Vanco assembled the Vanco Gabon Group with TotalFinaElf SA as operator with 28%. Partners were Unocal Corfp. 25%, Vanco 22%, Kerr-McGee Corp. 14%, and Reading & Bates Development Co.-now Transocean Sedco Forex Inc. 11%.
In April 2001, Shell Gabon bought half of Vanco's 22% interest. Van Dyke said he made "considerable money" from partnering with the other companies, which helped finance the rest of his West Africa licenses.
"As a general rule, we are going to bring in two companies as partners [on each license]. Each of them will have a 25% interest. Vanco will keep 50%, and we will be the operator," he said of future agreements.
By the end of 2003, Vanco expects to be drilling two wells off Morocco, one off Senegal, one off Ivory Coast, and one off Namibia.
This year, he hopes to drill a couple wells in shallow water Equatorial Guinea. Vanco has 1.1 million acres in the Rio Muni Trend, just south of Amerada Hess's holdings.
"We have two structures that are exactly like what you see in Ceiba field. We've got about 20 other major structures. This should have as much as 2 billion bbl. All the companies are trying to make a deal with us here," he said.
Vanco obtained its block 6 months after Triton announced the Ceiba discovery.
Of Morocco, Van Dyke said it's "a sleeper. We have maybe 30 major structures up here and two licenses. This geology is exactly like Sable Island and Nova Scotia. It's a big salt basin. Nobody has drilled deepwater wells off Morocco. So the deepwater area where you have salt is very virgin [for exploration]," Van Dyke said.
As the largest license holder off Morocco, Vanco was the first company to shoot 3D seismic off Morocco and plans to be the first to drill in deepwater there. It has 5 million acres in the Safi Haute Mer permit and 3.4 million acres in the Ras Tafelney permit.
Van Dyke said the geology of Vanco's Morocco license holdings is similar to Woodside Mauritania Pty. Ltd.'s Chinguetti-1 oil discovery (OGJ, Jan. 21, 2002, p. 30). Other partners in that discovery are ENI Agip British Borneo Ltd., Hardman Resources NL, Fusion Oil & Gas NL, and Roc Oil Ltd.
"Now, it's a matter of keeping up with it all," he said. "Most independents are taking acreage that majors don't want. We believe in getting out there ahead of the majors and then bringing in the majors as partners."
Van Dyke said Vanco has been successful in getting licenses because the West Africa countries like to work with independents.
"These countries generally like to be able to work directly with the guy that runs the oil company. With the majors, that is very difficult because you can't ever find out who makes the decisions. These governments really relate to independents," Van Dyke said.
When asked about future plans given Vanco's anticipated growth, Van Dyke said he had no immediate plans of taking Vanco public although it is a consideration for the future.
"We might need to go public to get the kind of money that we need to develop these properties. We had thought about going public several years ago but didn't," he said. "A private company, if it is run by the right person, is a lot more efficient than a public company."
Vaalco Gabon
Vaalco Energy Inc., Houston, has begun evaluating a number of prospective leads with particular attention to North and South Tchibala fields, also on the Etame concession off Gabon.
Vaalco plans three subsea completions during the second quarter and, upon the installation of the Petróleo Nautipa floating production, storage, and offloading vessel, anticipates bringing its Etame discovery onstream late in the third quarter. The discovery is in 250 ft of water.
Initial production is expected to be between 12,000-15,000 b/d, said Robert Gerry, chairman and CEO. Neither North or South Tchibala probably was commercial as a stand alone field, but the presence of the FPSO enhances its potential, Gerry said.
Oil in place in Etame is estimated at more than 150 million bbl with 30 million bbl proved recoverable. Gerry believes the recovery factor will be better than the initial outside estimates.
"We've got to get on production before they are going to bump those numbers favorably. It's a world class reservoir, and we fully expect to recover between 40% to 60% of the oil in place."
Vaalco operates the Etame concession with 30.35% interest. Partners are Pan African Energy Corp. Ltd. 32.5%, Sasol Petroleum International 30%, PetroEnergy Resources Corp. 4.525%, and Nissho Iwai Corp. 2.625%.
"Gabon depends on petroleum for 80% of their gross domestic product. With production on the decline, the government encourages independents to explore in Gabon and works diligently to ensure that licensing is favorable for exploration," Gerry said.
Ocean Energy
Ocean Energy plans to spend at least $125 million off Equatorial Guinea for the continued development of Zafiro field this year. Ocean holds 25% interest with ExxonMobil being the operator with 71% interest.
Off Angola, Ocean Energy has interest on Block 19 with TotalFinaElf as the operator and on Block 24 with ExxonMobil as the operator. Two exploratory wells each are planned on Blocks 24 and 19 this year. In addition, Ocean Energy has production off Ivory Coast.
"We have probably been one of the most active US independents in West Africa thanks to our long-term relationships with our partners and key government officials," said John Schiller, Ocean Energy executive vice-president of operations. Schiller and James Hackett, chairman, president and CEO, along with other members of operational management annually visit each West African country where Ocean Energy has holdings.
"We have met with most of their presidents or prime ministers and key oil officials," Schiller said.
Ocean Energy plans to start shooting 3D seismic this year on its recently acquired Block 10 off Angola, a 1.2 million acre concession. It is the operator with 35% interest. Sonangol has 20% interest with the remaining interest expected to be awarded in 6 months. Ocean Energy is scheduled to drill exploratory wells next year.
The block lies in water as deep as 1,500 ft at the deepest in Benguela basin, a sub-basin of the Kwanza basin. The agreement increased Ocean's overall holdings in Angola to 3.6 million gross offshore acres.
The company is the only US independent selected as an operator in Angola. "We are trying to move into an operatorship position wherever possible," said Earl Reynolds, senior vice-president of Ocean International.
Although some independents act like discoveries off West Africa are a sure bet, Schiller said Ocean Energy's biggest lesson in West Africa is that drilling does not always result in success the first time.
"We didn't discover oil on the first well we drilled in Zafiro, but we continued to evaluate the data and pursue the search. Today, Zafiro is the most prolific of our asset bases-producing 150,000 b/d with an estimated 900 million boes in reserves," he added.