Resource Potential Turns Up The Heat On LNG Plans

BMI View : Tanzania ' ' s offshore gas potential has been reaffirmed by Ophir and BG ' ' s latest appraisal programme. It is only a matter of time before companies in Tanzania draw up plans to export this gas. Proposals have been made for a liquefied natural gas (LNG) export plant and the country could see firms who sit on these large assets – - Ophir and BG on one hand and Statoil and ExxonMobil on the other – - come together in a joint development. Combining their resources could become increasingly attractive to BG, in face of its current operational woes.

Ophir Energy and its partner BG Group have confirmed the gas resource potential of the Jodari field offshore Tanzania. Under a three-well appraisal programme, the Jodari South-1 and Jodari North-1 wells hit 50 m and 32.4m gas column s respectively, certifying that the field possesses high quality Oligocene reservoir properties. Jodari lies within the Block 1 licence area .

Ophir ' s chief executive Nick Cooper said that th e appraisal ha d 'significantly de-risked the Jodari field' and 'underline[ d ] its potential to anchor Tanzania's first multi-train [liquefied natural gas (LNG)] development'. Tanzania ' s first flow test will be conducted at Jodari-1. The partners will also begin appraisal of the Mzia discovery, which is due to be completed in late - January 2013.

Notably, Cooper disclosed that the joint venture (JV) ' expects to return to high impact exploration drilling in Block 1 during Q1 2013'. This could yet lead to more gas finds in add ition to the discoveries that have contributed to t he offshore gas bonanza in East Africa t o date.

Table: Tanzanian Gas Discoveries To Date
Blocks Licenses Wells Gas Pay (m) Gas-in-place (bcm)
*Official estimates, updated 19 Oct 2012. Source: Ophir Energy, Statoil, Eni, Anadarko, Cove Energy, BMI
Block 1, 3 & 4 BG Group (60%), Chaza-1 na 85*
Ophir Energy (40%) Chewa-1
Jodari-1 na 71-125
Jodari South-1 50
Jodari North-1 32.4
Mzia-1 55 113-255
Block 2 Statoil (65% working interest - operated on behalf of TPDC), Zafarani-1 120 170**
ExxonMobil (35%) Lavani-1 95 85**
Total Tanzanian Gas In Place 411-465
Est. of recoverable natgas reserves* 924

All This Gas

Plans for LNG export terminals in Tanzania are germinating. Statoil , licence holder of Block 2 , which has an estimate of 225bn cubic metres (bcm) of gas-in-place - has already contracted Houston-based engineering firm KBR to conduct a pre-front end engineering and development (pre-FEED) study for a proposed plant. Ophir and BG have also started looking closely at this opportunity. BG has been screening potential s ites for a two-train LNG plant, which could be expanded if more discoveries are made.

There is still room for the different players to develop one LNG facility in partnership . This appears to be the option favoured by the government: the principal petroleum geologist at state-owned Tanzanian Petroleum Development Corporation (TPDC) said in an interview that this is more cost effective 'and works for us', as 'it is government that will pay for the plants through foregone revenues in companies recovering costs'. Statoil's vice president for global strategy, John Knight, appears to agree. In June 2012, he was confident that 'between [Statoil] and BG we've got a lot of experience' in the LNG business.

A joint LNG project could be increasingly attractive for BG, given the firm's current operational woes. Cost blowouts at its Australian LNG project have raised its capital expenditure (capex) burden. This has contributed to a wane in market confidence in the sustainability of the company's large - scale projects , a nd the share price has been trending downwards since 2011. Help from capital-rich Statoil and ExxonMobil could prove in valuable to BG; it will allow the British firm to monetise the huge gas assets it is sitting on in Tanzania as quickly as possible , reviv ing confidence in its long-term future.

Seeking Revival
BG's Share Price Performance (in GBp)
This article is tagged to:
Sector: Oil & Gas
Geography: Tanzania

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