Analyst: Angolan Gas Discovery Has At Least Decade Before it Comes Online

Analyst: Angolan Gas Discovery Has At Least Decade Before it Comes Online
The recently announced gas discovery in the offshore Kwanza basin has a number of hurdles to overcome, say oil and gas analysts.

The recently announced gas discovery in Angola’s offshore Kwanza basin won’t be developed before the end of the next decade, Readul Islam said, a senior oil and gas analyst at Rystad Energy.

Angolan state oil company Sonangol revealed the find at the end of June, stating that the discovery in Block 20/11 held an estimated 313 million barrels of condensate and 2.8 trillion cubic feet of gas.

The reason for the delay in the development of this discovery is partially due to problems surrounding the ownership of the block in which the find is located, Islam said.

The sale of Cobalt International Energy’s operated stake in Blocks 20 and 21 to Sonangol, for a total price of $1.75 billion, was originally announced Aug. 24, 2015. After the Angolan government withheld its approval for the deal for over a year, however, the transaction was eventually automatically terminated.

Shedding some light on why the deal was never approved, Islam implied that the oil price environment was largely to blame.

“It’s widely expected that if the transaction … [went] ahead to completion, Sonangol would try to sell on some or all of the acquired properties to another international oil company (IOC) capable of taking the projects through development to production,” he told Rigzone.

“After the transaction was announced in the third quarter of 2015, the oil price continued to drop until midway through the first quarter of 2016. In that environment, it was unlikely any IOC was prepared to make an offer … for the assets Sonangol wished to sell … [which] Sonangol and the Angolan government would have found satisfactory,” Islam added.

As a result of the termination of the deal, Cobalt now retains an asset it originally wanted to sell. This development isn’t good news for the progression of the discovery, according to Jane Morley, The Economist Intelligence Unit’s regional manager for the Middle East and Africa.

Morley told Rigzone that Cobalt is currently facing pressures of its own, “at least vis a vis its share price”, and implied the company’s appointment of a new chief executive could potentially delay future development.

Even when the ownership issues at Block 20/21 are sorted out, the recently announced discovery would be at the end of the development line, Islam said.

“During its operatorship, Cobalt Energy International (CIE) had been quite successful in racking up a number of prior discoveries at these blocks: Cameia, Mavinga and Bicuar in Block 21 and Orca and Lontra in Block 20,” Islam told Rigzone.

“CIE had already taken Cameia to a high level of development readiness at the time of announcement of the sale to Sonangol, having reportedly started development well drilling during the first half of 2015,” he added.

Development plans for Block 20 are also expected to focus on monetizing the liquids content of existing discoveries first, for which there’s a ready market, Islam added.

“The development of the discovered gas resources will first require the identification of and signing of gas sales agreements with potential gas markets,” Islam said.


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