Madagascar's oil fortunes evolving slowly

Feb. 6, 2012
Madagascar Oil Ltd., Houston, said it is encouraged by brightening prospects for the blocks that contain its Tsimiroro and Bemolanga giant heavy oil deposits in nonproducing Madagascar.

Madagascar Oil Ltd., Houston, said it is encouraged by brightening prospects for the blocks that contain its Tsimiroro and Bemolanga giant heavy oil deposits in nonproducing Madagascar.

As reviewed at the company's annual meeting in early December 2011, Netherland Sewell & Associates Inc. reevaluated original oil in place in Tsimiroro field on Block 3104 and increased the best estimate OOIP case to 1.688 billion bbl, a 75% increase from the previous estimate, and the best estimate prospective OOIP to an additional 2.189 billion bbl.

At Bemolanga on Block 3102, Madagascar Oil's partner Total E&P is centered on the block's conventional hydrocarbon potential deeper than the heavy oil accumulation. The companies are processing data from an 8,400-km airborne gravity gradiometry survey.

Madagascar Oil was admitted to trading on the AIM market of the London Stock Exchange in November 2011 in an effort to help finance a Tsimiroro steamflood pilot project and further develop drillable prospects on the 3105, 3106, and 3107 exploration blocks when permitted. It is also attempting to resolve the issue of a value added tax on foreign services (OGJ Online, June 24, 2011).

Tsimiroro's outlook

Madagascar Oil is on track to start a 28-well steamflood pilot at Tsimiroro at the end of 2012, said Laurie Hunter, chairman and chief executive officer.

The company drilled 12 wells in 2011, 11 of which had good oil shows in the Amboloando sand formations.

The company also acquired nine lines totaling 47 km of electrical resistivity tomography (ERT), a geophysical technique for imaging subsurface structures. And it acquired a 16,700 line-km airborne gravity survey with coverage of 6,000 sq km over the entire block.

Madagascar Oil previously drilled 24 wells in 2010, 75% of which found favorable oil accumulations. Three of the wells were water-bearing, and three were drilled in faulted areas to assess ERT interpretation.

The ERT survey and 2010 drilling identified a new field area southeast of the main Tsimiroro deposit, but insufficient data are available to calculate a resource estimate for the new area at present.

The company estimated that an expanded steamflood could start as early as mid-2017 at Tsimiroro and that based on the 1.7 billion bbl contingent resource could reach a peak production rate of 150,000 b/d in 12 years. Double this production rate could be expected when the prospective volume is added.

Based on terms of the production sharing contract, a producing life of 50 years could be expected.

Up-front cost for installation of the initial wells for 10,000 b/d of oil production and an initial 50,000 b/d processing facility and export capability is estimated at $1.25-1.5 billion. This calculation includes the capital investment for a viscosity upgrader for export. All economic cases use a 29% discount to the Brent price, which is based on the estimated raw crude value.

Delineation in 2011

Results of the 2011 Tsimiroro airborne gravity survey are expected to be available for further decision making in April 2012.

Madagascar Oil proposed to tie the Tsimiroro data to the Bemolanga survey, but the gravity survey has several other purposes.

One is to provide a detailed tectonic analysis over all current shallow wells and improve clarity of trend in the main field.

Another is to assist in interpretation of 150 m thick, oil-filled Isalo reservoir identified in south Tsimiroro field.

A further purpose is to evaluate the hydrocarbon fairway that extends from the 41° gravity oil tested in the Manandaza-1 well in Block 3107 north to the 150 m of Isalo pay identified in the MOX-49 well.

All of the 2011 Tsimiroro delineation wells were drilled through the Isalo, 50-100 m below the Amboloando, to test and quantify the additional heavy oil potential.

Of the first 10 of the 12 wells drilled in 2011, nine were successful in the Amboloando while one had poor shows in the Amboloando and good shows in the Isalo. Seven further locations were identified, two of which were drilled by the time of the annual meeting with successful results.

The company planned to assess the 2011 delineation well data in January 2012 to determine whether a further resource upgrade is practical in early 2012 before drilling more delineation wells in mid-2012.

Site preparation for the steamflood pilot in the southern part of the field was well along in late 2011, and drilling of the pilot wells was to start in January 2012.

Pilot operation was to last through 2013 and into 2014, when analysis would take place. Pilot production could reach as much as 1,000 b/d of oil in late 2013.

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