Heading offshore: Deepwater drilling begins, as encouraging prospects emerge closer to the coast

In April 2013, the Ocean Rig Olympia started drilling a first well at 1700 metres of water depth to test the pre-salt potential of Diaba, an oil block located in Gabon’s southern basin and owned by Total Gabon (42.5%), Marathon Oil (21.25%), Cobalt International Energy (21.25%) and the government of Gabon (15%). This is the first deepwater or ultra-deepwater block to be explored in Gabon and the positive results, which were released in August 2013, provide encouraging clues as to the potential of similar blocks in the country’s waters. Several smaller companies have also begun drilling in shallower areas and have identified some promising new oil reserves.

SHALLOW WATERS: With production slowing onshore in the country’s mature fields, exploration activities in shallow waters (under 500 metres of water depth) have so far elicited encouraging discoveries. Houston-based Harvest Natural Resources, for example, struck oil in January 2013 while drilling a test well in the southern basin of Gabon, specifically within the Dussafu Marin permit, during efforts to evaluate the pre-salt potential of the Gamba and Dentale formations. The US company had already found oil in this block two times, and is currently appraising the commercial potential of its finds, a study that according to the CEO of Independent Petroleum Consultants, Charles Tchen, should be ready by the end of the year. Harvest shares the Dussafu Marin production sharing contract with Pan-Petroleum Gabon, a wholly owned subsidiary of Norwegian Panoro Energy. They respectively own 66.66% and 33.33% of the contract.

Australian Pura Vida Energy has also discovered oil in shallow waters while drilling to test the potential of a variety of plays, including post-salt, sub-salt and pre-salt, in the Nkembe block located in the northern basin. Following an initial evaluation of potential resources, based on a review of four prospects, the company announced in June 2013 the discovery of 815m barrels of oil in net average prospective recoverable resources. This added to the 20m barrels announced earlier in the year. Pura Vida owns 80% of the Nkembe production sharing contract and the government has the remaining 20%.

In 2010, VAALCO Energy drilled a successful exploration well in the south-eastern Etame area, and there are now plans to develop a second platform. The company has since continued exploring shallow waters for oil, but is yet to make new discoveries. After failing to encounter crude south-west of the Ebouri field, VAALCO announced in June 2013 that it would move the contracted drilling rig north of the Etame Marin block in the southern basin, to drill an exploration well in the Ovoka prospect and thus evaluate the Gamba reservoir and underlying Lucina formation. The company estimates Ovaka may have potential resources of more than 30m gross barrels of recoverable oil. VAALCO operates the Etame Marin block on behalf of a consortium of companies and holds a 30.35% interest in its exploration acreage.

DEEP & ULTRA-DEEP: The only operator in Gabon currently searching for oil in deep (between 500 metres and 1500 metres of water depth) and ultradeep waters (beyond 1500 metres of water depth) is Total Gabon. In April 2013, the Ocean Rig Olympia began drilling its first well to test a pre-salt play in the Diaba block, and full results are expected in the later half of 2013. As the first well to be drilled in ultradeep waters, Diaman-1 reached a total depth of 5585 metres and according to press reports, found roughly 55 metres of net hydrocarbons – primarily gas with condensate, although few other deepwater and ultradeepwater blocks have so far been attributed. In addition to Total Gabon, only Ophir Energy, Perenco and Shell Gabon hold such permits at the moment.

The London-based Ophir Energy has four offshore permits in the northern basin, including the Mbeli, Ntsina, Manga and Gnondo blocks, located between 100 and 2500 metres of water depth. According to Offshore Magazine, Ophir plans to drill up to two wells in early 2014, both targeting pre-salt plays. Perenco also hopes to drill in 2014, with the company planning to drill a subsidiary impact prospect deep offshore in the Arouwe block located in the southern basin. Shell has partial rights to two deep offshore blocks, BC-9 and BC-10, in the southern basin, both of which it shares 75:25 with the China National Offshore Oil Corporation. Shell also had a permit for the Igoumou Marin block in the northern basin, but this expired in 2010 and efforts to renew the permit have been stalled by a border dispute with Equatorial Guinea. The Anglo-Dutch firm is yet to announce a start date for the exploration of the BC-9 and BC-10 blocks.

IMPACT: The potential impact of a discovery in either shallow waters or deep and ultra-deepwaters will depend on the size of the find. Commercially exploitable reserves encountered in shallow waters would likely allow Gabon to maintain its current oil production levels, which reached 245,000 barrels per day (bpd) in 2012; yet without a major new find, oil production will likely decline in the medium term. Henri-Max Ndong Nzue, Total Gabon’s director for strategy, planning and business, said, “At the current levels of production, and without additional discoveries, studies and analysis suggest oil production should begin to decline again in 2016.”

Hopes of a major offshore discovery lay largely in the exploration of deepwater and ultra-deepwater blocks. This more technical exploration is comparatively new for Gabon, but it is hoped similar results will be found as were discovered in neighbouring countries such as Ghana, Nigeria and Angola, which have already discovered large deep and ultra-deepwater reserves. Furthermore, considering that South America and Africa were once the same continent millions of year ago, it may be that they still have similar geological characteristics – a positive indicator considering Brazil’s offshore success.

To explore these similarities, oil companies have purchased and examined further seismic surveys. According to Ndong Nzue, after recent evaluations of the seismic survey of the Diaba block, Total Gabon estimated the exploration success rate in Diaba to be between approximately 15% and 20%.

Deepwater discoveries could generate significant economic opportunities, starting with the investments necessary to exploit recoverable reserves and boost overall oil production. In Angola, for instance, there is currently a floating production storage and offloading vessel generating around 240,000 bpd from one block alone, which represents as much as Gabon’s total oil production.

CHALLENGES: The timing of deep and ultra-deep discoveries, together with the passage of the new hydrocarbons code, could affect the impact of such finds. By the time any discoveries are made and their commercial potential identified, oil production in Gabon may already be declining. “Deepwater and ultra-deepwater discoveries could take about 12 to 15 years to come on-line,” Tchen told OBG.

With a new code expected to come out soon and recent government moves to more assertively enforce contracts, the success of ongoing government negotiations with international oil companies interested in acquiring yet-to-be-attributed offshore blocks is still unclear. According to Tchen, “The uncertainty currently experienced in the hydrocarbons sector as a result of the legislation in debate and the government’s recent actions towards some members of the oil community is of concern, most notably in regard to the security of current investments, especially onshore, where most of the maturing oil fields lie.”

GOING FORWARD: Given the time required to develop deepwater and ultra-deepwater oil fields, Gabon is likely to continue relying on already active blocks to maintain production levels. In the medium to long run, the impact of discoveries will depend on the timing and size of recoverable reserves encountered in both the deepwater and ultra-deepwater blocks, as well as the investment conditions offered by the government to explore and produce on such blocks.