High hopes for Gabon’s pre-salt after new discovery
A discovery for Eni, a commercial field for Harvest and new licence awards raise the outlook for Gabon’s pre-salt play
Italy's Eni said it discovered a pre-salt gas and condensate field potentially holding 500 million barrels of oil-equivalent (boe), just 10 days after US firm Harvest Natural Resources said it will submit a development plan for its pre-salt Ruche oilfield. Then, in early-August, the authorities signed contracts for deep-water licences with pre-salt potential, which they hope will revitalise the country’s flagging exploration-production activity.
Eni said its discovery, made with the Nyonie Deep-1 well, showed a 320-metres hydrocarbons zone in a structure with an area of more than 40 square km – and the water-depth, 13 km offshore, is just 28 metres. The find was made in the D4 licence and extends into the adjacent D3 licence, both held 100% by Eni.
Appraisal work will start soon but development studies will start immediately, Eni said. The company holds only two offshore and two onshore blocks in Gabon, having pulled out of the country 10 years ago before making a limited return in 2009. Having made two similar finds recently in Congo (Brazzaville) to the south, Nene Marine and Litchendjili Marine, Eni estimates that the three discoveries have added potential reserves of 3 billion boe, with scope for more.
Harvest’s development plan, to be submitted in October, covers four pre-salt discoveries in its Dussafu Marin licence, off southern Gabon and adjacent to the maritime border with Congo (Brazzaville). The firm is planning to develop its 2011 discovery, Ruche, and its 2013 find, Tortue, together with two finds made by earlier operators.
The combined four-structure Ruche field, mostly at a water-depth of 116 metres, will flow through a floating production, storage and offloading (FPSO) vessel, which will also be able to handle production from the many undrilled structures adjacent to the discoveries. Proven and probable reserves in Ruche are estimated at 33.4m barrels, but this is expected to rise. Harvest holds 66.667% of the Dussafu licence, with Norway’s Panoro Energy holding 33.333%.
Gabon’s deep-water areas have also yielded pre-salt oil. Total made the first deep-water pre-salt find in August last year, when its Diaman-1B well found 50-55 metres of hydrocarbons zone – and, located nearly 100 km from the nearest other pre-salt find, confirmed a working petroleum system. The well was drilled at a water-depth of 1,730 metres in the Diaba licence, where interests are Total, 42.5%, Marathon, 21.25%, Cobalt, 21.25% and the state, 15.0%. Total says it has carried out a re-evaluation of the prospects in the Diaba licence, and was due to start a new 3-D seismic survey in the western part of it in August.
Pre-salt progress raises the stakes for the country’s 10th licensing round, which finally saw awards in early-August. The round, offering promising deep-water areas that have seen little exploration with modern techniques, was due to open in 2010 but was cancelled after the Gulf of Mexico disaster. It eventually opened in November last year, with reports since then hinting at tumultuous negotiations.
At the time of writing, Marathon has confirmed that it was awarded 100% of Block G13, Noble Energy has confirmed it was awarded the operatorship of Block F15 in a 60:40 venture with Woodside, UK-registered Impact Oil & Gas confirms it was awarded 100% of Blocks B7, D13 and D14, and Repsol says it was awarded 80% (with a 20% carried share for the state) in Block E13. The other company said to have been successful is Petronas.
It is understood that Total and Shell, both large producers in Gabon, took part in negotiations but were not short-listed. ExxonMobil, Perenco and Ophir had all reached the late stage of negotiations but were unsuccessful, while Noble, Cobalt and Elenilto dropped out earlier.
Marathon said its G13 block, named Tchicuate, lies 80 km offshore and covers 1,110 square km, with water-depths in the range 990-2,515 metres. There are shallow-water pre-salt discoveries nearby. The state will take a 20% financed interest in producing fields, the firm said.
Noble’s F15 lies 140 km offshore and covers 2,700 square km, at water-depths of 2,300-3,000 meters. The firm said it has a seismic commitment for the first four years, followed by an option for drilling.
Impact’s B7 covers 2,250 square km and lies southwest of Port Gentil, while D13 and D14 are contiguous areas, each of 2,500 square km, lying off the southern part of the coast. The state will have a 20% interest in producing fields. The firm is the only small private company to be successful in what it describes as the “challenging but transparent” negotiations.
In part, the slow progress of negotiations reflects the government’s introduction of a new petroleum code, which sets out to update and unify existing legislation while opening the way for tougher contract terms. After a long delay, the oil ministry announced in February that the new code had been officially adopted – but it seems it is not yet in force.
The problem is that the final version of the new legislation, published in the official journal in April, differs substantially from the version signed in February. Consequently, according to Nicolas Bonnefoy of the law firm Ashurst, the changes in the first version that did not appear in the second have not taken effect, while the changes in the second version are unenforceable. Until the problem is resolved and the legislation is approved by parliament, the new law has become null and void and the old petroleum law of 1983 applies, Bonnefoy says. However, his understanding is that the contracts signed in early-August incorporate most of the new terms.
For companies considering high-cost deep-water ventures, the new terms might seem arduous. State participation is set at 20%, carried, while the new state entity – Gabon Oil Company (GOC), set up in 2011 after Gabon had been without a state oil firm for many years – has the right to take a paying interest of 15%. Additionally, the government has the right to buy a 20% shareholding interest in the oil companies’ local subsidiaries.
Terms for the country’s production-sharing contracts are also being made more arduous, with the state’s share of profit-oil rising and corporate tax being charged in addition to the production-share for oil taxes. Exploration costs may only be set against revenue from the field to which they relate, and licence periods are being made shorter. There are also clauses which might facilitate renegotiation of fiscal terms in the future.
Gabon needs to encourage the explorers with an attractive fiscal regime, because its production is in long-term decline. The last large field to come on stream, Shell’s onshore Rabi-Kounga, lifted the country’s production to a peak of 370,000 b/d in 1997, but output has struggled to maintain 250,000 b/d in recent years and dipped below 240,000 b/d last year. The largest producers are Shell (with an output of about 65,000 b/d), Total (55,000 b/d in 2013), Perenco (about 65,000 b/d) and Maurel & Prom (29,000 b/d in 2013).