Sao Tome confident of first oil as Dangote eyes higher block stake

Aliko Dangote

Sao Tome & Principe is confident that first oil production in Block 1 will start in 2015, despite disappointing drilling results and a string of disinvestments in waters shared by Nigeria and the island nation, a senior official said.
Nigeria's Dangote Energy Equity Resources (DEER), which is the sole stakeholder in Block 1, is likely to increase its minority 9% equity and is also looking to bring in a technical partner to help with its development,
said Luis Prazeras, chairman of the Abuja-based Joint Development Authority, an agency set up to manage oil activities in the Joint Development Zone, Wednesday.
"Dangote's main focus is on Block 1, and it has indicated interest in becoming operator," Prazeras said.
DEER, which is owned by Nigerian billionaire Aliko Dangote, has been present on Block 1, in the area known as the Joint Development Zone, for over 10 years and has seen Chevron and Total come and go after disappointing drilling results.
Total drilled two wells on Block 1 in 2012 and made some discoveries.
But the French company, the operator since 2010, with a 49.5% interest taken over from Chevron, believed the reserves were too limited to justify a development and pulled out of the permit in September 2013.
The decision was a serious blow for the JDZ, which was set up in 2001 by Nigeria and Sao Tome and Principe, and from which revenues will be shared 60/40 respectively between the two governments.
Prazeras said that all indicators point to a commercially viable oil find in Block 1, however, with proven reserves estimated at 100 million barrels, based on studies conducted by Total after it had drilled the Obo-2
and Enitim-1 prospects.
The company was expected to tie any discoveries to the adjacent OML 130 in Nigerian waters, where the Akpo field was discovered in 2000. OML 130 also contains the Egina oil field, which is expected to hit peak production of 150,000 b/d when it comes on stream around 2017.
In 2006, Chevron drilled the exploration well Obo-1 in Block 1, which was the first drilling in the JDZ. In the same year, however, the company revealed that no commercially viable hydrocarbons had been discovered and it threw in the towel on the block in 2010.
DEER officials were not available for comment Wednesday.
INVESTORS SOUGHT FOR OTHER BLOCKS
Industry experts say it is highly unlikely the JDA will easily find investors with adequate financial and technical capacities available to invest in its other deepwater blocks in the JDZ, where several major oil companies have come and gone over the years.
But Prazeras said that the JDA has already seen interest from independent medium-sized oil companies with adequate financial and technical capacities to invest in Blocks 2, 3 and 4.
In 2013, Sinopec, its subsidiary Addax, Equator Exploration and all other investors, with the exception of the Nigerian company ERHC, abandoned Blocks 2, 3 and 4 due to poor results from the four exploration wells drilled in 2009 and 2010. The other two JDZ blocks awarded in 2005, Blocks 5 and 6, have not
been developed.
Sao Tome and Principe is highly indebted and counts on foreign donors to cover more than 90% of its $150 million annual budget. The government is hoping to profit from the commercial exploitation of its offshore reserves.