Angolan Oil: 2m barrels per day ‘very feasible’

After several years of stagnation, the Angolan oil sector looks set to expand yet again. Production reached 1.9m b/d in 2010 but averaged just 1.623m b/d for the first quarter of this year, despite new fields coming on field.

This was largely the result of maintenance work on a number of wells. The government of Angola currently estimates its oil reserves at 12.9bn barrels but this figure could greatly increase over the next few years if ongoing exploration efforts prove fruitful and add to the new fields are being brought on stream in the near future.

Output on Total’s Cravo Lirio Orquidea Violeta (CLOV) project, which is located on Block 17 next to its established Dalia, Girassol and Pazflor fields, is being ramped up to 160,000 b/d this year. The biggest new project is also being developed by Total: the ultra-deepwater Kaombo venture on Block 32.

The scheme has been delayed several times but in April the French firm said that it would now proceed, although it was now committing $16bn to the project instead of the previously budgeted $20bn. Half of the saving will be generated by converting two oil tankers into floating production storage and offloading (FPSO) vessels, rather than ordering two bespoke vessels. The FPSOs will tie in six different oil fields comprising 59 wells.

The government of Angola currently estimates its oil reserves at 12.9bn barrels, but this figure could greatly increase over the next few years if ongoing exploration efforts prove fruitful and add to the new fields are being brought on stream in the near future.

However, the company has now upgraded its production forecasts from 200,000 b/d to 230,000 b/d, with first output due in 2017. Yves-Louis Darricarrère, Total’s president for upstream, said: “Total has significantly optimised the project’s design and contracting strategy in recent months.”

The French firm operates the block with a 30% stake, with the remaining equity held by state owned Sonangol (30%), Angolan-Chinese joint venture Sonangol Sinopec International (20%), Exxon Mobil (15%) and Galp of Portugal (5%).

Sinopec’s involvement is particularly interesting as China now imports a massive 46% of Angolan oil output.

José de Oliveira, the head of the Energy Nucleus at Luanda’s Catholic University, says: “With the investments it is making in Blocks 17 and 32, it will be very difficult for any other oil company to overtake Total as the leading operator in Angola. Kaombo is very important if Angola wants to put production at 2m b/d, because output at some of the older fields, namely in blocks 14 and 15, is declining.”

The 2m b/d target should come within reach when two other new projects, operated by Eni and ExxonMobil respectively, jointly contribute a further 140,000 b/d next year.

Both the government and foreign oil companies hope that new areas of oil production can be opened up, particularly in pre-salt areas. Without going too far into the country’s offshore geology, very similar pre-salt formations containing huge amounts of oil have been found on the opposite side of the South Atlantic Ocean, off the coast of Brazil. Given that the Angolan and Brazilian formations were previously connected and laid down at the same time, Angolan acreage containing pre-salt structures has long been considered prospective. At least a dozen pre-salt exploration wells are planned in Angola this year.

A series of small finds had already been made on such acreage but in November, Cobalt International Energy announced that its Lontra well had revealed a “discovery on a global scale”. Then at the start of May, Sonangol announced that Cobalt had found “significant quantities” of oil on Block 20/11 in the Kwanza Basin, as well as significant volumes of gas. The US firm itself estimates reserves at up to 700m barrels of oil. Sonangol adds, “the results confirm the importance of the find, which is considered the biggest to date in the Kwanza basin”.

Cobalt, which has a 40% stake in Block 20/11 alongside partners BP (30%) and Sonangol (30%), is an interesting company. It is owned by a variety of backers including private equity firm Riverstone and Goldman Sachs; and is currently drilling a pre-salt well on Block 21.

In addition, the government of Angola had previously slowed down the pace of licensing in order to give it more control over the distribution of future acreage and to encourage investors to develop the acreage that they already controlled. However, a series of new onshore and offshore licensing rounds are planned over the next two years, as Luanda looks for more discoveries to ramp up production.