UK-Listed Afren in a $200million Oil and Gas Exploration Deal with Tanzania


By ADAM IHUCHA--
UK-listed explorer firm, Afren is expected to invest over $200 million in 2014 to explore oil and gas resources in Tanzania’s northeast coast, raising hope for country’s faltering economy.

Afren, with a 74 percent shares, and its partner Petrodel Resources Ltd with 26 percent stake, holds a production-sharing agreement in the Tanga block, located offshore and onshore northeast Tanzania.

Exploration activities are anticipated to commence in the coming weeks, and will involve the Chungwa-1 and Mkonge-1 wells.

Afren says surveys and drilling prognosis have been completed for both the Chungwa-1 and Mkonge-1 wells and are in ready-to-drill status. 

“The partners are now in the process of securing a suitable rig for the shallow water Chungwa-1 prospect, which will be the first of the two wells to be drilled commencing early 2014” says Afren on statement.  

Interpretation of previously acquired 900 km 2D seismic data reinforced the partners’ views that the prospectivity in the deeper water parts of the acreage represents a potentially lower geological risk exploration opportunity.

Tanga block lies south of, and is contiguous with, Afren’s 100 percent owned and operated blocks L17 and L18 in Kenya. 

It contains a southerly extension of the same coastal high and basin trough plays allowing the company to leverage its regional expertise and knowledge.

Tanga block lies across a deep basin with a very thick sedimentary section that has the potential of hosting several source rock intervals and multiple reservoir or seal pairings.

There are structures, chiefly fault blocks, particularly along the western side of the basin, which are interpreted to form viable traps. 

“Some of these lie in shallow water and could present relatively inexpensive drilling targets” Afren says. 

The Tanga block is also a possible source of charge into the southern parts of the adjacent Kenya block L17 and L18. 

Oil seeps and shows encountered in previous wells drilled on the nearby Pemba Island attest to the oil potential of the block and surrounding area.
Commercial terms

In consideration for the acquisition of the interest, Afren has agreed to reimburse Petrodel a percentage of the back costs in relation to the block. 

Afren will also fund all costs associated with the acquisition, processing and interpretation of an agreed seismic survey over the block amounting to 900 km of shallow and deeper water 2D coverage, after which, when supported by the seismic, Afren will carry Petrodel through the drilling of one shallow water exploration well subject to a cumulative cap on gross costs of $40 million.

Tanga Regional Commissioner Ms Chiku Gallawa says that the Afren Company has informed her administration on the planned massive investments on oil and gas exploration spree in 2014.

“There’s hope of striking natural gas and oil in the Tanga coastal strip because the signs of the presence of hydrocarbons deposits are evident. It is these symptoms that have prompted the Afren to invest in exploration” Ms Gallawa said.

Major recent natural gas finds in offshore Tanzania have bolstered the country’s profile as one of the World’s major hydrocarbons producers. 

Until September 2013, Tanzania had discovered 43.1 trillion cubic feet of recoverable natural gas reserves, worth $500 billion.

 Gas deposits are anticipated to boost domestic growth in the medium-term, as further gas explorations are planned.

Energy and Minerals Minister, Prof Sospeter Muhongo, hopes that processing of natural gas into LNG is a lucrative business that is expected to boost the national economy by 2025 as the global demand for the commodity will almost double.

Prof. Muhongo says that Tanzania is in strategic position to market natural gas, given its closer tie with Asia which anticipated to account for 60 per cent of global demand for LNG come 2025.

Indeed, global demand for LNG, which stood at 240 million metric tonnes per annum in 2012, is anticipated to hit 440 million metric tonnes per annum by 2025.

More recently, the BG group has announced that they have sufficient resources for a two-train LNG project in Tanzania.

“The aim of our appraisal programme now is to optimise future development plan and place the most economic gas into the proposed project first to extract the most value across the chain,” reads part of BG group report.

The company now has a total of 15 trillion cubic feet, thanks to an increase in total recoverable resources for the Mzia discovery and across Blocks 1, 3 and 4 offshore in southern Tanzania.

Tanzania also plans to boost its gas-based power capacity by 900 megawatts, taking the country's generation capability to 2,400 megawatts by 2015-16.

State plans are to generate power to meet the country's demand. Also will encourage the use of gas in institutions, household, motor vehicles, and then for export of LNG.

Oil-fired power plants currently account for 45 percent of Tanzania's power generation costs, followed by gas-fired power plants at 42 percent and hydropower stations at 13 percent, according to Tanzania's state-owned power utility, TANESCO.

Tanzania's peak power demand stands at around 900 megawatts, while its installed capacity is 1,500 megawatts.

To make ample gas available across the country, the government is planning to build two new pipelines, totaling 1,400 kilometers long, connecting major areas.

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