Tanzania surfaces - natural gas potential for east Africa
Recent deepsea exploration looks set to put Tanzania on the commercial
energy map. Martin Cox, Technical Business Development Consultant at
Aberdeen Drilling Management Ltd, examines the challenges the country
faces in exploiting its vast natural gas reserves.
East Africa is emerging as one of the world’s most prolific new regions for oil and gas exploration, with large gas strikes in onshore and offshore Tanzania, and offshore Mozambique. These discoveries are pointing towards the area becoming a global natural gas hub, and a new frontier in deepwater oil and gas exploration.
Repeated gas finds off East Africa’s coast have led to predictions that the region could become the world’s third-largest exporter of natural gas, and plans are being developed for liquefied natural gas (LNG) facilities to be built to process and export the liquefied product to overseas markets.
Unlike oil, for which the market is ready and robust worldwide, there is need to establish and confirm the natural gas market before any solid investment decisions are made. Mature and strong natural gas markets are not found locally or regionally, but rather in Europe, Asia and America.
The Tanzanian Government is being open about plans for its economy – it sees the availability of lowcost domestic energy as the foundation of developing an economy that will cultivate a range of industries. While gas exports would help fund investment in LNG technology needed to support the export of liquefied gas to the international market, it would also provide opportunities for the entire population. Furthermore, optimising the benefits of natural gas would help to aggressively develop the local market and effectively spread these benefits along the value chain. Intensive energy industries such as petrochemicals, cement factories, iron smelters, ammonia plants, methanol and other derivatives of natural gas also need to be established to strengthen the local market beyond the power generation and domestic consumption.
Revenues generated from gas exports will enable the development of other sectors, including transport, health and education, with the intention of supporting Tanzania’s population, providing infrastructure and further growth in non-energy related sectors.
Tanzania has been exploring for oil and gas since 1952, making its first natural gas discoveries in 1974 at Songo Songo Island and Mnazi Bay. The Songo Songo natural gas was commercialised in 2004, followed by the reserves at Mnazi Bay in 2006. In 2010, deepsea exploration activities encountered commercial reserves for natural gas. Its estimate of recoverable reserves has recently been revised to 33 trillion cubic feet (tcf) from 28.74tcf, following recent large offshore discoveries.
The Mnazi Bay Concession Area is located in coastal south-eastern Tanzania in the Ruvuma Basin. The area lies between onshore Aminex’s Ruvuma Concession Area and BG Group’s offshore Block 1. The 756km2 concession area contains two discovered Tertiary-aged gas fields, Mnazi Bay and Msimbati, and holds additional Tertiary, Cretaceous and Jurassic hydrocarbon potential. Five wells have been drilled to date, all of which encountered hydrocarbons. One well is currently producing gas at a rate of two million standard cubic feet (MMscf) a day, which is transported via a 20cm pipeline running 27km to the Mtwara Power Plant, where it generates electricity for numerous local communities.
The Tanzanian port of Mtwara is set to become a major deepwater service support centre for this area, with technology requirements enabling deepwater exploration and development. This continues into the production support phase in the region of North Sea Standard, with many technologies having been developed and trialled in the North Sea.
Mnazi Bay Concession partners are preparing to contract to acquire around 210km2 for offshore 3D seismic exploration over the Mnazi Bay Concession, with work to acquire new seismic data expected to commence by the end of 2013. The acquired data will lower the risk of existing offshore leads and map potential extensions to the offshore discoveries made by BG Group and Ophir in the adjacent Offshore Block 1. The acquisition of new 3D seismic data, as well as the on-going work to fully reassess existing concession geology and geophysics data, will prepare for future development and exploration drilling.
Appraisal drilling of three wells in the Jodari field (which crosses between Mozambique and Tanzanian waters) demonstrated consistent reservoir quality across the field and confirmed a recoverable estimate of 3.4tcf (96 bank cubic metres [bcm]). It also proved the feasibility of high-angle (sub-horizontal) drilling, which should reduce the number of development wells required. The gas play extends north to Tanzanian waters, where there have been three deepwater discoveries to date (Pweza-1, Chewa-1 and Chaza-1) with combined recoverable reserves of 3–4tcf. All three wells were drilled by BG International and Ophir Energy in 2010–2011.
Aside from its recent acquisition of Block 7, Ophir’s concessions lie offshore. In late 2005, the company was awarded Jodari-1 in Tanzanian block 1 and the following year it picked up adjoining blocks 3 and 4. The three concessions span a total of 20,853km2 over the Mafia Deep offshore basin and the northern section (45%) of the Rovuma basin, in depths ranging from 100–3,000m.
Ophir commissioned infill 2D and 3D seismic surveys over all the blocks between 2006–2008, which it used to build an inventory of drill-worthy prospects. In June 2010, BG farmed into 60% of each of the PSCs (Production Sharing Contracts) and in mid-2011 assumed operatorship from Ophir following completion of the three discovery wells. Ophir, meanwhile, has extended its holdings, taking a 70% operating interest in 2012 from RAKgas in the 7,500km2 East Pande block, which overlaps the Mafia Deep offshore basin and the Mandawa sub-basin.
Investment and infrastructure
Not only can exploration for oil and gas be risky, but it also requires huge capital for the collection of geo-scientific data and the later drilling of wells required to confirm the resource. With drilling going to depths of at least 1,500m (some extending to 5,000m) below the surface and water depths off East Africa reaching 2,600m, this is truly a deepwater environment.
In a bid to attract investors, a production sharing agreement (PSA) model was drawn up – a facility provided by the worldwide money markets, with London being one of the biggest investors in Africa and the energy markets. The Agreement provides direct foreign investments from multinational companies hoping to recover their investment and share profits with the state should discovery be made. However, the state has no obligation to compensate for the losses made – but this is the nature of risk inherent to the oil and gas industry.
Once natural gas has been discovered and confirmed to be of commercial value, the following tasks have to be performed:
- development of facilities including flow lines.
- processing plants for gas purification.
- pipelines for gas transportation and distribution – this stage is equally capital intensive, particularly in the case of a deepsea discover.
Between gas discovery and first gas production, around 5–10 years of continuous investment is required to develop the gas field and associated infrastructure. This investment varies with the amount to be recovered and the market to be served. For example, export to overseas markets calls for investment in LNG facilities on top of the usual gas processing plant, while for the local or regional market, gas pipeline and associated equipment are required.
The problems faced by governments in attempting to share and prosper in the potential economic benefits through development of this natural resource are significant. However, there is a certain determination in the area to look closely at what is required for the population to benefit from a sustainable and environmentally aware approach to the gas finds, which could help to transform an economy that, at present, largely depends on farming, mining and tourism.
Recognising a lack of institutional and legal frameworks in the region, the Tanzanian Government has been looking abroad for support in the development of a more modern, business-orientated environment. The country has plans to restructure its state-run petroleum regulator and have in place a gas policy and legislation before the end of 2013, to help regulate its vast natural gas discoveries.
Should Tanzania capitalise on its energy resources, its most recent discoveries could mark a turning point in its history and map out a new future for the developing country. For Tanzania, the future looks promising.
For more information, please contact Martin Cox, IMMa@iom3.org