The future great African eldorados of gas (first part): case of Senegal
- Wednesday, 23 October 2019 13:30
(Ecofin Hebdo) - In the hydrocarbon sector in Africa, they are called emerging nations. In recent years, discoveries of gas that are multiplying on their territories, preparing them for a destiny of major exporters. These include Senegal, Mauritania and Mozambique. Focus on Senegal, a country located in the MSGBC basin (Mauritania, Senegal, Gambia, Bissau, Guinea Conakry) whose total proven resources, to date, is housed at sea. Experts believe that with the reservations in the presence , the country will play a leading role in the global supply of natural gas, starting in 2023.
Perseverance paid
Begun in the 1960s, oil exploration was not very successful in its early days. It nevertheless led to the discovery of very small pockets of heavy oil off the coast of Casamance and some minor reserves of crude oil and gas off Dakar. These reserves will for the most part be considered non-commercial.
It was between the late 1990s and the early 2000s that, aware of the potential, industry leaders conducted several international roadshows to convince exploratory firms to invest in the country.
Some industry experts have called Senegal "the future emirate of gas".
Successful efforts since, from the beginning of the 2000s to the present, a dozen research and production sharing contracts have been negotiated and signed.
Several British, Australian and American independent companies have been awarded research and production sharing contracts along the coast. These are Kosmos Energy, Cairn Energy, Far Ltd, among others. The 2D and 3D surveys coupled with the various boreholes have so far made it possible to get hold of gigantic reserves of gas and also oil.
The country has thus become one of the Top 30 holders of the largest gas reserves in the world. Gas production is expected to begin between 2022 and 2023.
Today, the discoveries have revealed a potential between 50 and 100 Tcf of gas and reserves of more than a billion barrels of recoverable oil on the SNE field alone, offshore. As a reminder, the country has several other areas with high potential where research work is not as advanced. With the publication of these figures, some experts of the sector qualified Senegal as " future emirate of gas ". The country has thus become one of the Top 30 holders of the largest gas reserves in the world. Gas production is expected to begin between 2022 and 2023.
A remarkable political will
Having realized the size of its gas reserves and the role they can play in the transformation of its economy, the government of Senegal has very quickly, as early as 2012, undertaken to join the Initiative for transparency in industries Extractives (EITI). President Macky Sall has repeatedly stated that efforts are being made to ensure that the country's gas resources are exploited with the utmost transparency.
To this end, in early 2016, he installed the Cos Petro-Gaz (Strategic Orientation Committee for Oil and Gas), made up of local specialists in the sector, who worked on drafting a law aimed at optimizing revenues from exploitation of the country's hydrocarbon resources.
Cos Petro-Gaz will also oversee the various legal agreements and contracts between the State and the partners concerning the financing, the realization of the petro-gas projects and the marketing of the extracted resources. The Senegalese head of state added that information on contracts and what they generate will be regularly published by the committee. What to install a climate of confidence to encourage the arrival of new investments.
Cos Petro-Gaz will also oversee the various legal agreements and contracts between the State and the partners concerning the financing, the realization of the petro-gas projects and the marketing of the extracted resources.
Thanks to his commitment to build a strong hydrocarbon industry in Senegal, President Sall received on October 10th, the Man of the Year award in the African oil sector. The distinction was awarded by Africa Oil and Power which is the continent's leading investment and energy policy platform.
"An excellent example of a successful country in the energy field."
"While African countries aim to stimulate growth and diversify their economies, Senegal is a great example of a successful energy country, creating an environment for business success, attracting huge numbers of people. investments, while offering strong local capacity and downstream investment options , "commented Guillaume Doane, CEO of Africa Oil & Power.
Senegal attracts large energy groups
According to a report by the Africa Oil and Power organization published in April 2016, Senegal is the sixth best African destination for exploration firms in the oil industry. According to the document, the political stability enjoyed by the country is a major asset. Administrative simplicity, attractive hydrocarbons code for investments, a 2 to 10% royalty for oil production and 2 to 6% for gas, and a 30% corporate tax are ideal conditions that will promote economic transformation.
Following its discoveries in Senegal, the Cairn Energy share rose on the stock market.
Recently, large energy groups like BP have entered the exploration market and the pace of discoveries, as well as the potential, suggest a surge of big players in the industry, in the coming years.
The pace of discoveries, as well as the potential present, suggest a surge of big players in the industry, in the coming years.
In December 2016, the British giant BP announced to become a partner of Kosmos Energy in Senegal. At the end of the negotiations concluded between the two parties, the major acquired a 32.49% stake in the blocks Saint-Louis Deep and Cayar Deep offshore. This against a $ 916 million envelope and its participation in the investment efforts previously granted by Kosmos, over the entire area that covers more than 33 000 km2.
The Chinese giant CNOOC has also expressed interest in offshore schemes in the country.
An international tender will be launched on November 4th. It is related to 10 exploration blocks in onshore and offshore. This is the first time that a tender procedure has been opened in the oil sector. The authorities explained that this operation is part of efforts to ensure transparency in the licensing process.
An international tender will be launched on November 4th. It is related to 10 exploration blocks in onshore and offshore. This is the first time that a tender procedure has been opened in the oil sector.
According to sources close to Senegalese officials in the sector, several experienced companies in the industry would seek to establish partnerships with the players involved.
What does Senegal actually gain?
In June 2018, Mamadou Faye, the managing director of the Senegalese state oil company (Petrosen), the exploitation of the SNE and Grand Turtle oil and gas fields, will generate revenues of more than 30 billion dollars. This, over a period of 30 years.
Petrosen controls a 10% stake, with no contribution in projects under development, and the contracts signed with foreign companies offer him the possibility to increase his participation to 20%. In this case, Petrosen will participate in the development costs.
As for the State, it will benefit, according to the contract of production sharing which binds it to the companies, from 10 to 15% of the production of each project. It will also collect a tax on companies, as provided by the general tax code. Thus, the state can earn money through three channels: via Petrosen, through its share in production and via taxes.
Thus, the state can earn money through three channels: via Petrosen, through its share in production and via taxes.
This should help boost economic growth and help reduce the unemployment rate. The authorities have indeed explained that tens of thousands of direct and indirect jobs can be created thanks to energy resources.
The funds generated will provide more leeway for the Senegalese government, which can easily invest in social and community development projects.
Senegal's major oil and gas discoveries
In Senegal, the last five years have witnessed an incalculable number of world-class gas discoveries. Operated by different exploration firms, they are spread over several offshore blocks. Here are the most important ones.
FAN-1
On August 27, 2014, after several months of research work and a few days of drilling, the first well drilled by the Australian Far Ltd. was a success. The FAN-1 well housed on the Sangomar Deep block 100 km off the coast of Senegal had a high level of gas and fluorescence in a secondary objective at shallow depth.
The well had been drilled to a depth of 4402 meters and Far and its partners (Cairn Energy, ConocoPhillips and Petrosen) were planning to continue the program to a depth of 5000 meters. It should be noted that the FAN-1 well is located at a water depth of 1427 meters. Apart from this, the document explains that no water was detected in a crude deposit of more than 500 meters.
Cath Norman, CEO of Far Ltd.
Two months later, on October 7, 2014, Sangomar Deep partners announced in a joint statement that they drilled up to 4927 meters and intercepted a 29-meter net oil reservoir. The first results of the analyzes performed on the samples revealed oil types in the range of 28 ° API to 41 ° API.
In addition, FAN-1 would contain a total of (P90) 250 million barrels, (P50) 950 million barrels and (P10) 2.5 billion barrels of oil to the satisfaction of Cath Norman, Far's general manager. " The discovery of oil with the FAN-1 well is an important event for Senegal and the joint venture, " she said.
With Sangomar Offshore and Rufisque, Sangomar Deep is 40% controlled by British operator Cairn Energy, 35% by American ConocoPhillips, 10% by Petrosen and 15% by Far Ltd. The three perimeters cover an area of 7490 km2.
SNE-1
Like the FAN-1 deposit, SNE-1 was discovered on Deep Sangomar. On November 10, 2014, the Australian group Far published an update of its activities in which it indicated to have got hold of a column of crude oil of 95 m on this well.
Distant 24 km from FAN-1, it is at a depth of 1100 meters that the tanks came into contact with the fuel. It was expected that the drilling would reach 3000 meters deep. The first results of the samples show recoverable resources of P90 (1C) of 150 million barrels, P50 (2C) of 350 million barrels and P10 (3C) of 670 million barrels. On the other hand, the quality of the crude is the same as on FAN-1. " This is an important oil discovery for Cairn and Senegal. Based on preliminary estimates, this is a commercial discovery and opens up a new pool in the Atlantic Margin , "said Simon Thomson, CEO of Cairn Energy, after the release of the results.
SNE-2
Started on November 4, 2015 on the SNE field, in the Deep Sangomar block, drilling of the SNE-2 well was completed on December 3, 2015 and reached a total depth of 2825 meters.
On January 4, 2016, at the end of the SNE-2 well production tests, Cairn Energy revealed that there was a daily flow of 8,000 barrels of oil per day. The company also claimed to have managed a flow of 1,000 barrels of low quality oil per day, at another depth in the same well. As a reminder, the tanks met the crude on a column of 100 meters. Results that confirm the quality of the tank. According to Reuters, these data offer investors a clear overview of the concession's potential and should further sharpen their interest in Senegalese oil. As a result of these results, the Cairn Energy share rose on the stock market, particularly in London.
SNE-3, BEL-1, SNE-4
Located 3 km from the SNE-1 well, the SNE-3 well is intended, according to Cairn Energy experts, to confirm the potential of the SNE field and the continuity of the reservoirs. SNE-3 shows the same results as the SNE-2 well. A crude column was encountered over 100 meters and the first indications confirm an oil temperature of 32 ° API, as on SNE-2. It was the same for wells BEL-1 and SNE-4. Following the successful drilling of the SNE-4 well, Simon Thomson said: "The operations in Senegal have been conducted safely ... We have now drilled four successful evaluation wells on the SNE field and we are delighted with results to date from the multi-well assessment program, which has confirmed the scale and potential of this world-class asset. "
Located east of the SEN field, the SNE-4 well is intended to confirm the nature of the upper reservoirs in the oil zone. The drilling report issued by Cairn also explains that the sand layers with which the tanks came into contact are the same as those encountered on SNE-1, SNE-2, SNE-3 and BEL-1. Like the other wells, it is located on Sangomar Deep, but 85 km from the coast at a water depth of 942 meters.
VR-1
Well VR-1 is adjacent to the area of the first well in the field, SNE-1. Drilled to a depth of 2759 meters, the well has, unlike the last, encountered a column of crude over 97 meters through several reservoirs and experts say, with only the post-drilling results that this is the highest net oil remuneration on SNE. " The VR-1 well is a great success. It provides important information on the geology of the western flank of the SNE field and in particular on the nature of the 500 series reservoirs. Understanding these reservoirs is essential to finalize the design of the Phase 1 development plan [...] ] We look forward to providing our shareholders with the results of the upcoming drilling in this formation Cath Norman said. The SNE field showed 8 oil discoveries in 8 drilled fields, representing 100% efficiency. After the analyzes of the oil engineers, each of the wells of the field has a commercially viable oil.
Teranga-1
The Teranga-1 Well is located 65 kilometers northwest of Dakar, on the Cayar Offshore Deep block, in the Grand Turtle complex, at a water depth of 1800 meters. It was drilled to 4485 meters deep and met 31 meters net of natural gas in a good quality reservoir in the Lower Cenomanian.
Guillaume Defaux, Kosmos Energy.
Apart from this, the reservoirs indicated that a prolific channel of natural gas extends up to 200 km from the Marsouin-1 well, Mauritanian side. The American Kosmos Energy controls Teranga-1 at 60% and is the operator.
Guembeul-1
Located off Saint-Louis, the Guembeul-1 reserve was discovered in January 2017 off Saint-Louis, in the Grand Tortue complex that straddles the common maritime border in Senegal and Mauritania. It was drilled to 5245 meters deep. The tanks reached 331 feet of gas of excellent quality in two tanks. It is 184 in the Lower Cenomanian and 148 in the underlying Albian, without coming into contact with the water.
According to the release, this well has demonstrated the continuity of the reservoir and the communication of static pressure with Turtle-1 in the lower Cenomanian. The first results obtained on the spot indicate that there is a high probability that the gas flow on Guembeul-1 is equal to that of Teranga-1, ie 17 Tcf. Guembeul is controlled by Kosmos Energy.
Olivier de Souza
FAR Price at posting:
5.2¢ Sentiment: Buy Disclosure: Held
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