Phillips group exploring off South Africa

South Africa Acreage [25608 bytes]

Exploration is set to begin in a promising frontier area of the Indian Ocean off South Africa's eastern coast.

The South Africa National Oil Co. (Soekor) and the government of South Africa gave exclusive rights to a unit of Phillips Petroleum Co. and three partners to explore for oil and gas on Block 17/18. The sub-lease agreement with Soekor marks the first such pact with the state company in almost 20 years.

Meantime, South Africa has reported start-up of its first crude oil production, from Oribi field in Mossel Bay, where Soekor (Pty.) Ltd. is operator (OGJ, Mar. 17, 1997, p. 26).

Exploration

The 14.5 million acre Block 17/18 is in the Durban basin along the KwaZulu-Natal coast.

Phillips has pledged to spend $8 million during the 4-year sub-lease term. Minimum work calls for acquiring 1,500 km of seismic data and drilling at least one exploratory well. The sub-lease may be extended for two additional terms of 3 years each.

Phillips Petroleum South Africa Ltd., operator, holds a 40% interest. Holding a 20% stake each are PanCanadian Petroleum (Africa) Ltd., Energy Africa Bredasdorp (Pty.) Ltd., and Sasol Petroleum International (Pty.) Ltd.

As part of the deal, the partners also will contribute $100,000/year for training South Africans in the upstream energy industry.

New horizon

The agreement opens a promising new area for the Phillips partnership.

Soekor conducted seismic surveys on the blocks in the 1970s and 1980s that identified structures it considered to be "worth further investigation."

Paul Ellis, international group vice- president for PanCanadian, said, "The potential for significant hydrocarbon reserves in this large offshore contract area in the Durban basin is very high."

The agreement marks another step by South Africa to boost economic activity in its underdeveloped petroleum industry, following 2 decades of global economic sanctions targeting the apartheid regime (OGJ, May 12, 1997, p. 41). All told, South Africa's mostly unexplored offshore lands total about 100 million acres.

The South African government says it is eager to make terms and conditions for offshore leasing investor-friendly, so it can compete with other nations' offshore licensing efforts.

Oribi start-up

Oribi has estimated reserves of 20 million bbl of oil and was developed with a converted semisubmersible rig producing oil into a dedicated shuttle tanker.

Oribi is owned 80% by Soekor and 20% by Energy Africa, the upstream affiliate of Engen Ltd., Johannesburg. Engen reported oil began flowing from Oribi on May 12 and has reached 20,000 b/d.

John Bentley, Energy Africa's managing director, said, "The entire first shipment has been sold to Caltex and will be refined at its Cape Town plant, although it is anticipated that further production could be made available to other South African refiners."

Oribi is expected to produce 6% of South Africa's crude oil requirement at peak. Soekor is looking to develop six other finds in the Oribi vicinity, with combined reserves of 15-40 million bbl of oil.