Equatorial Guinea on Fast Track

West Africa Oil Party Has Another Guest

Recent exploration successes by U.S. independent oil companies in Equatorial Guinea are fueling a drilling surge that's boosted what used to be one of the world's poorest countries to become one of the world's fastest growing economiesy.

Indeed, the tiny nation, nestled between the prolific Niger Delta and the Congo Basin, is commanding a mighty presence.

It's a fairly recent story, emerging just three years ago when Triton Energy — responsible for three giant field discoveries in the last decade in Colombia and Thailand — discovered the basin-opening Ceiba Field in the Rio Muni Basin. After setting a world record for a deepwater development by bringing the oil field on production in just 14 months, the company has drilled six additional discoveries — and only 15 percent of the company's acreage off Equatorial Guinea has been assessed.

Last year Amerada Hess Corp. acquired Triton, primarily for the upside potential in Equatorial Guinea.

"Amerada Hess had the vision to recognize the significant upside — all of which was in Equatorial Guinea," said Brian Maxted, Amerada Hess' senior vice president of West Africa. "The exploratory drilling results since the acquisition have vindicated this vision — we have announced four new discoveries and there is plenty of room left to search.

"Equatorial Guinea is extremely important to our worldwide portfolio," he continued. "Today it is the largest production base outside the North Sea and the United States — and eventually West Africa will overtake both of those regions and become the primary source of production."

A Strategy Develops

So how did it all start? Why did Triton take a chance on a completely unexplored basin off West Africa?

"Back in 1997 Triton was looking for a third leg to balance its South American and Asian business focus," Maxted said, "and we decided on West Africa because there was significant open acreage in the emerging deepwater play outside of Angola and Nigeria."

The company knew, however, that a small- to mid-size independent couldn't compete with the majors in those hunting grounds. The signature bonuses alone were extremely prohibitive.

"So, we decided to walk along the West African margin and see if we could identify similar play types that were largely unlicensed, where we could gain a significant footprint in a basin," Maxted said.

"The Rio Muni Basin was completely unlicensed at that time," he said, "but we realized the geology of the basin was similar to the Ogooue delta off Gabon, which had about 2.5 billion barrels of proved reserves."

Triton purchased 2-D seismic spec data in the area and saw the opportunity to extrapolate the Upper Cretaceous turbidite play in the Ogooue delta north into Rio Muni.

"On the basis of that work, in April 1997 we speculatively licensed blocks F and G, which covered about 5,000 square kilometers — or 350 Gulf of Mexico sized blocks — for a $1 million bonus per block," he said.

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Recent exploration successes by U.S. independent oil companies in Equatorial Guinea are fueling a drilling surge that's boosted what used to be one of the world's poorest countries to become one of the world's fastest growing economiesy.

Indeed, the tiny nation, nestled between the prolific Niger Delta and the Congo Basin, is commanding a mighty presence.

It's a fairly recent story, emerging just three years ago when Triton Energy — responsible for three giant field discoveries in the last decade in Colombia and Thailand — discovered the basin-opening Ceiba Field in the Rio Muni Basin. After setting a world record for a deepwater development by bringing the oil field on production in just 14 months, the company has drilled six additional discoveries — and only 15 percent of the company's acreage off Equatorial Guinea has been assessed.

Last year Amerada Hess Corp. acquired Triton, primarily for the upside potential in Equatorial Guinea.

"Amerada Hess had the vision to recognize the significant upside — all of which was in Equatorial Guinea," said Brian Maxted, Amerada Hess' senior vice president of West Africa. "The exploratory drilling results since the acquisition have vindicated this vision — we have announced four new discoveries and there is plenty of room left to search.

"Equatorial Guinea is extremely important to our worldwide portfolio," he continued. "Today it is the largest production base outside the North Sea and the United States — and eventually West Africa will overtake both of those regions and become the primary source of production."

A Strategy Develops

So how did it all start? Why did Triton take a chance on a completely unexplored basin off West Africa?

"Back in 1997 Triton was looking for a third leg to balance its South American and Asian business focus," Maxted said, "and we decided on West Africa because there was significant open acreage in the emerging deepwater play outside of Angola and Nigeria."

The company knew, however, that a small- to mid-size independent couldn't compete with the majors in those hunting grounds. The signature bonuses alone were extremely prohibitive.

"So, we decided to walk along the West African margin and see if we could identify similar play types that were largely unlicensed, where we could gain a significant footprint in a basin," Maxted said.

"The Rio Muni Basin was completely unlicensed at that time," he said, "but we realized the geology of the basin was similar to the Ogooue delta off Gabon, which had about 2.5 billion barrels of proved reserves."

Triton purchased 2-D seismic spec data in the area and saw the opportunity to extrapolate the Upper Cretaceous turbidite play in the Ogooue delta north into Rio Muni.

"On the basis of that work, in April 1997 we speculatively licensed blocks F and G, which covered about 5,000 square kilometers — or 350 Gulf of Mexico sized blocks — for a $1 million bonus per block," he said.

The company shot additional seismic in 1998 and by October 1999 drilled its first well and made the Ceiba discovery in 2,300 feet of water.

Triton and now Amerada Hess has an 85 percent working interest in blocks F and G, with South Africa-based Energy Africa holding the remaining 15 percent.

Triton's timing was fortuitous, because in 1999 the industry was in the throes of a downturn and contractors were anxious for business.

The firm acquired a massive tanker that was being converted to a floating, production, storage and offloading vessel on a speculative basis with just a few months of work remaining. Also, equipment such as rigs, subsea trees and installation vessels were available at attractive prices.

The result: Triton brought Ceiba onto production by November 2000.

"Reducing the development cycle time so that huge amounts of capital isn't locked up for long periods and ready cash flow is available is extremely important to making this kind of deepwater play viable for an independent," Maxted said.

Having an 85 percent working interest helped, too.

"That's unique for West Africa," he added. "This has given us significant control over our operations and allowed us to make decisions quickly: along with the Equatorial Guinea government."

Amerada Hess continues to fully develop Ceiba, which will take the current production of 70,000 barrels of oil a day to its peak of 100,000 barrels of oil daily in the first half of 2003.

Reserve estimates for the field were never officially announced, but Maxted said 250 million is a good minimum.

Other Players

Not surprisingly, Triton's success has attracted other players to the Rio Muni Basin.

  • Amerada Hess has extended its holdings with a 25 percent stake in block L that is adjacent to blocks F and G and is operated by ChevronTexaco.

  • In 2000 Vanco Energy Co. licensed the 1.1 million-acre block K, which is southwest of Amerada Hess's block G, and the firm indicated the structural setting is similar to the Ceiba Field.

    "Immediately following Triton's 1999 Ceiba discovery we were given an executive order to look at Equatorial Guinea long and hard," said Janice Walden, a spokesperson for Vanco. "By March of 2000 we had signed the deal for block K, or Corsico Deep, where we are operator and 100 percent interest holder."

    The firm has acquired existing 3-D seismic data over the block's northeast region, and Vanco currently is conducting a risk assessment and full reservoir evaluation of the area.

    Vanco hopes to have two partners on the block in place by later this year and the first well on the block could be drilled in 2003. The drilling commitment for the block calls for two wells by 2005.

  • Vanco also was part of a consortium that acquired block N in the Rio Muni Basin earlier this year. Petronas is operator and has a 60 percent interest in the block, while Ocean Energy holds 30 percent and Vanco has 10 percent. The 2,744 square-kilometer block is on the Corisco Bay shelf.

    Of course, the Rio Muni Basin accounts for just part of Equatorial Guinea's offshore territory. North of Bioko Island, another U.S. independent was successful in uncovering a giant oil discovery in Equatorial Guinea's portion of the Niger Delta.

  • United Meridian Corp., which is now Ocean Energy Corp., got involved in Equatorial Guinea in 1991 when interest in the country was small.

    "Equatorial Guinea's northern offshore region is just south of and borders Nigeria and is impacted geologically by the Niger Delta," said Scott Griffiths, senior vice president of exploration for Ocean Energy. "Several large companies had explored the area in the 1960s and '70s, but the only successes were two gas accumulations found at that time."

    One of those wells eventually turned into the giant Alba gas field. At that time gas was not deemed economic, and Equatorial Guinea fell out of favor." Today the Alba Field is operated by Marathon Oil.

A 'Crown Jewel'

Unlike virtually the rest of the entire industry, United Meridian believed this northern region had potential. The area is situated on one of the world's major producing provinces in the Niger Delta, and it had a proven working petroleum system, even though it appeared gas prone.

"This was United Meridian's strategy," he said. "The company looked for countries where majors had been in the past but had deemed either the quality or size of the reserves uneconomic."

United Meridian acquired blocks A and B in 1992, but at that time the firm was relatively small in terms of capitalization and funding and needed partners to drill the initial exploration wells on block B. The company showed its prospects to more than 40 companies over two years — no one saw the technical merits of taking the deal.

"Everybody's technical assessment of Equatorial Guinea was that it had a large gas risk, so it was a tough sell," Griffiths said.

Mobil finally agreed to take a farmout, however, and drilled two wells. The first test was a dry hole, but the second wildcat drilled in 1995 discovered the Zafiro Field in Pliocene-age reservoirs between 5,000 and 6,000 feet. The discovery tested oil at a rate of 10,000 barrels a day, and three follow up wells were all successful.

"All four of those wells tested at high rates," Griffiths said, "and all four are still producing seven years later."

Based on those four wells, Mobil and United Meridian planned a fast track development for the field. Zafiro was on production in 18 months via a FPSO.

The Zafiro story over the years has been phenomenal. At the time of the discovery reserves in the field were thought to be between 15 to 35 million. However, additional drilling has grown the reserves to about one billion barrels today.

Plus, the facilities have been expanded and include the jade production platform, the Zafiro producer and a floating storage and offloading facility. An additional FPSO will come on line next year.

"Over time we have learned that the field covers a much larger area and the interconnectivity of the reservoirs is far greater than expected," Griffiths said.

Today Exxon-Mobil is the operator and Ocean Energy has a 23.75 percent working interest in Zafiro. Development is ongoing, with about 34 producing wells and current production of approximately 170,000 barrels of oil a day.

"This is the crown jewel of Ocean Energy's property base in terms of field size and production," Griffiths said.

The Zafiro field is on the toe thrust of the Niger Delta, which is a structural trend that sits out in front of the delta just moving into deepwater. The field is in 600 to 1,500 feet of water.

"The field is formed by an underlying structural high draped over by multiple channels deposited in a slope environment," he said. "The main reservoir rocks were deposited by channels funneling sands into a laterally confined area."

Consequently, many of the channels are interconnected. Instead of having 35 different channels, the company produces from three main reservoir tanks with a great deal of interconnectivity.

"That's a situation you can't predict prior to development," he said.

Of course, it hasn't been all smooth sailing at Zafiro, which sits right on the border between Equatorial Guinea and Nigeria. Territorial disputes clouded a portion of the field's future until earlier this year.

In April Equatorial Guinea and Nigeria signed an agreement relating to unitization of an oil field that straddles the maritime border between the two countries, according to IHS Energy Group's International Oil Letter. This agreement follows the protocol signed in December of 2001 and unites TotalFinaElf holding rights to the Ekanga oil field in Nigeria and ExxonMobil's Zafiro field in Equatorial Guinea.