The Ntorya Gas Condensate Discovery, Tanzania.
Monetization Potential for Solo Oil and AMINEX Quicker than the market might think
On the 27th March, Solo Oil (LSE:SOLO) announced that the
gathering of seismic data on the Ntorya gas-condensate discovery was
underway and that a program of up to 250 kilometres of
full-fold 2D seismic was in progress on the Ntorya Appraisal Licence tied to
the Likonde-1 well in the adjacent Lindi Licence of the Ruvuma Petroleum
Sharing Contract ("PSC"). Naturally the purpose of this seismic
work is to determine how best to optimize the location of where future wells
will be sunk.
At
this stage it’s important to put into context just how swiftly production can
actually start on a technically advanced and well-understood onshore gas
condensate field, which is what Ntorya is fast becoming.
For
those not familiar with development time lines, many readers of this article
might be very surprised to learn of a number of examples where the timeline
from discovery well to production is actually quicker than one might think.
That is why I am Reporting that Solo Oil and AMINEX are
Massively Under-Valued
It
is this speed of development of an onshore gas condensate field that forms the
basis for my assessment and why the speed of value release from Ntorya and its
potential to be monetized, is looking to be far quicker than the markets are
currently giving Solo Oil (LSE:SOLO) and AMINEX
(LSE:AEX) credit for.
Take
for instance Russia, where there are plenty of onshore gas condensate fields and
where its fair to say that climatic conditions particularly in the Arctic
regions are a little more challenging to gas field infrastructure development
than sunny Tanzania. For example, the Yuzhno-Russkoye oil and gas field is under development
by Gazprom, BASF and E.ON Ruhrgas, is an oil and gas condensate field located
in the harsh Krasnoselkupsky District of the Yamal-Nenets Autonomous
Okrug region of north west Russia. Construction work on the Yuzhno-Russkoye field infrastructure started in
January 2006, by September 2007, the field was connected to Gazprom's Unified
Gas Supply System (UGSS), the world's largest gas transmission system and commercial
operation of the field started in October 2007.
“By 2012, Yuzhno-Russkoye produced its hundred billionth cubic metre of
gas”
Whilst there is no
disguising the fact that considerable work had gone on in the 1990’s on the
Yuzhno-Russkoye field to determine its commercial viability, once the location
of wells and a development plan for the field had been decided upon,
construction to production was actually very quick. Once you know where to sink
your wells you can get into production, all be it not full scale production, in
a year, even in Russia.
Another example of
how fast gas condensate wells can be brought into production can be seen in the
case of OMV, Austria’s oil and gas
production and exploration company. Back in 2011 OMV Petrom, OMV’s Romanian oil and gas subsidiary announced that it
had started test-work exploration on Totea the largest onshore gas condensate
well in Romania.
The well was put in production after only 100 days from the
discovery by using an early production facility that allowed the operator to
start production and generate revenue whilst still working on the wider field
and exploration development work. It was reported that daily production
initially amounted to approximately 430,000 cubic meters of gas and 58 tonnes
of condensate.
Back to Russia
International oil and gas company TOTAL
SA and Novatek, Russia’s second largest gas producer, is currently putting
their most sophisticated expertise and technology to work at the Termokarstovoye
field, an oil and gas condensate project located in the isolated tundra region
in the Yamal-Nenets district, which for two-thirds of the year is actually inaccessible.
Development of the very deep multilayer gas condensate
reservoirs began at the end of 2011 Drilling is underway on 22 wells coinciding
with the construction of a 180-km-long pipeline built over the permafrost
designed to carry the gas from Terneftegas’ treatment plant (the company that
holds the license to the gas condensate field) to Novatek’s gas pipeline.
Production is scheduled to begin in 2015 (Four
years from the commencement of drilling) with capacity of 65,000 barrels of
oil equivalent a day, broken down into 6 million m³ of gas and 25,000
boe/d of liquid (LPG and condensates).
Closer to Home: Mozambique
The development of Mozambique’s hydrocarbon economy,
serves as a useful reference point for Tanzania. One example is the Pande and
Temane onshore gas fields, discovered in 1961 and 1967 respectively by US Major
Gulf Oil. Civil war and an absence in the appetite for gas left both
discoveries under developed until 2003 when Sasol Petroleum International began intensive exploration and where
development of Temane commenced in January 2004 and Pande started in 2008.
Commercial production of gas began in 2004 from Pande and 2010 from Temane,
essentially made possible by the financing of an 865 km pipeline and other
infrastructure, provided by the World Bank, EIB and other lending institutions,
enabled Sasol to transport natural gas from Mozambique to South Africa. A situation that mirrors very closely what
is happening in Tanzania with their very own Chinese built and financed gas
pipeline.
Summary:
Both Solo Oil and AMINEX are
on the cusp of something special. The gathering and analysis of infill 2D seismic
data on Ntorya will be complete this autumn and the next stage of development
would be the drilling of further wells. Ntorya is
an advanced discovery (Ntorya-1 was
spudded on the 22 December 2011) that is developing at a pace that perfectly coincides
with the development of the Mtwara to Dar es Salaam gas pipeline currently
being constructed by China National Petroleum Corporation (CNPC). We
understand from local news sources that CNPC
successfully laid and connected the subsea pipe on the 15th April. The
Mnazi Bay to Dar es Salaam Gas 532 km Pipeline from Mnazi Bay in the Mtwara
region and Songo Songo in the Kilwa District, to Dar es Salaam, consists of a
36 inch mainline and a 24 inch spur line. Upon completion, the pipeline is
expected to have a capacity of 784 MMcf/d and will pass just 20 kms from Ntorya and is expected to be complete in
January 2015. We understand that the construction process is going according to
plan and with the subsea connection now in place, completing the onshore
pipeline construction should now go according to plan, with no threat of being
held back by the more technically challenging sub sea construction.
These developments provide investors in both
Solo and AMINEX a series of value catalysts that will be game changing for both
companies. Not only would it be possible for Ntorya to be monetized quickly,
the securing of value adding 2D seismic data results later this year coupled
with the start of a potential drill campaign at Ntorya would see Solo, AMINEX
and Ntorya become attractive investment targets.
Solo Oil closed Friday 2/04/14 at just 0.016p and AMINEX closed 0.075p
both look incredibly cheap given the year ahead.
Author
André T Morrall
Brand:Petrogas
RUVUMA PSA
The
Ruvuma PSA originally covers 12,360 square kilometres in the extreme south-east
of Tanzania of which roughly 80% is onshore and 20% offshore when first granted
in October 2005. Within the PSA are two specific, adjoining licence areas,
known as Lindi and Mtwara. Following the first exploration period and an
extension about 75% of the area was relinquished and the remaining PSA covers 3,447
square kilometres. Prior to the award of the current PSA 1153 kilometres of 2D
seismic had been acquired in the area of the PSC between 1981 and 2002. No
wells had been drilling within the boundaries of the PSA, but a well at
Lukeledi-1 to the north had been drilled by Texaco in 1992 and the Mnazi Bay-1
well to the southeast had been drilled by Agip in 1982. Following award of the
PSA Ndovu Resources, a subsidiary of Aminex, acquired 370 kilometres of
offshore seismic in the Lindi Block and a further 430 kilometres of 2D seismic
onshore in the Lindi and Mtwara Blocks.
The
first well under the Ruvuma PSA was drilled in 2010 on the Likonde prospect.
Likonde-1 is located in the Lindi Block and encountered thick sands with
hydrocarbon shows. The well was drilled to a total depth of 3,647 metres and
results of drilling, wireline logs and side-wall coring showed that the well
intersected two sandstone intervals of over 250 metres (820 feet) combined
thickness with evidence of residual oil and gas. Drilling had to be terminated
in the deepest objectives due to the high rate influx of gas.
Based
on the encouraging results of the Likonde-1 well the available 2D seismic was
reprocessed and reinterpreted to select the location for a second exploration
well, within the Mtwara Block. The chosen location, Ntorya-1, was intended to
target the updip extent of the sands encountered in the Likonde-1 well.
On
the 6 October 2011, prior to the drilling of Ntoya-1, Solo announced that it
has increased its stake in the Ruvuma Basin PSA from 12.5% to 18.75% by
assuming the additional obligations associated with the additional interest
relinquished by Tullow Oil who reduced their over holding from 50 to 25%.
Ntorya-1
was spudded on the 22 December 2011 and intersected a gross 25 metre section of
Mid-Cretaceous sandstones with gas. The upper 3.5 metres of the gas bearing
zone were tested at a maximum rate of 20.1 mmscfd with 139 barrels oil per day
of 53 deg API condensate through a 1” choke. The flow rate was considered to be
of potential commercial interest and well has been suspended.
After
intersecting the primary target, but prior to deepening to the eventual
discovery level in the Ntorya-1 well Tullow Oil elected to transfer their
remaining 25% interest to the partners, Ndovu and Solo in proportion to their
existing interests in return for the assignees accepting future obligations in
the second exploration period. As a result Solo increased its interest in the
Ntorya-1 discovery and the Ruvuma Basin PSA to 25%.
A
resource report has been prepared by ISIS Petroleum Consultants that attributes
5.75 tcf of potential gas-in-place resources to the Ruvuma PSA. ISIS calculates
that Ntorya holds mean 1.17 tcf of unrisked gas in place of which 178 bcf are
considered discovered. The Ntorya-1 discovery is now the subject to an
application for an appraisal extension to the licence to carry out a two-year
program of additional infill seismic and a further well. Elsewhere in the PSA
an additional seismic program and two additional exploration wells are planned
to follow-up the success of the first two wells. It is anticipated that a
farm-in partner will be found to take up to a 50% interest in return for a
substantial financial contribution to the remaining work program.
