Statoil, BG Plan LNG Plant to Develop Tanzania Natural-Gas Finds

Statoil ASA (STL), Norway’s largest energy producer, said a third “high-impact” discovery in its Tanzania offshore block added sufficient natural-gas volumes to secure a joint development with BG Group’s neighboring license.

Statoil will recommend a site in the second quarter for the country’s first liquefied natural-gas plant with at least two trains to handle production from its Block 2, where recoverable volumes are now seen at 10 trillion to 13 trillion cubic feet, and BG-operated Block 1, the Stavanger-based company said today.

“We now have the gas we need to underpin a commercial development,” Tim Dodson, executive vice-president for exploration, said in a phone interview from Stavanger. “It’s going to be a huge project: Big offshore element, pipelines to land and a very large onshore development.”

Statoil is expanding abroad to raise production to 2.5 million barrels of oil equivalent a day from about 2 million today. The 67 percent state-owned company will this year drill as many as four more wells in Tanzania and Mozambique, where explorers including Eni SpA (ENI) have found more than 100 trillion cubic feet of gas, enough to meet global demand for a year.

The facility that Statoil and BG are considering would have at least twice the capacity of the Norwegian company’s only LNG plant at Hammerfest in Arctic Northern Norway, Dodson said. That site handles gas from the Snohvit field in the Barents Sea and produces 90,000 barrels of oil equivalent a day, he said.

Too Early

While it’s too early to give a cost or exact timeline, Tanzanian authorities’ assessment last year that output could start within seven years is “not unreasonable,” Dodson said.

“We’ll be moving this into the development phase very shortly,” he said. “It will be both a costly and fairly lengthy development.” The plans will be presented in the second quarter to the authorities, which have asked Statoil and BG to work on a joint development of blocks 1 and 2, Dodson said.

Statoil is the operator of Block 2 with a 65 percent share, and Exxon Mobil Corp (XOM) has 35 percent. BG operates Block 1 with 60 percent, while partner Ophir Energy Plc (OPHR) holds 40 percent.

Statoil said earlier it had made its fourth discovery in Block 2 in a year, containing as much as 6 trillion cubic feet of gas. That was the third “high-impact” find in the block, defined as holding more than 250 million barrels of oil equivalent or 100 million barrels net to Statoil.

Jodari Field

BG estimates gross recoverable resources from its Tanzania Blocks 1, 3 and 4 at near 10 trillion cubic feet of gas “with extensive further potential to be explored” and hasn’t got a specific figure for Block 1, spokesman Mark Todd said by e-mail.

A stem test on BG’s Jodari field in Block 1 showed “better than expected reservoir qualities” and reduced uncertainty as the partners consider a potential LNG project, BG said today in a separate statement. The company said last month plans for exports would proceed more slowly than planned because Tanzania lacks infrastructure and capacity to handle big investments.

“We have the gas now, and that’s the most important thing,” Dodson said. “It will still be quite demanding to do this, given the fact that this will be the first development of its kind in Tanzania.”

The new discovery, called Tangawizi-1, is worth a net 1.3 kroner to 1.9 kroner a share for Statoil, Teodor Sveen Nilsen, an analyst at Swedbank First Securities who has a buy recommendation on the company, said in a note to clients.

Statoil fell 0.4 percent to 140.4 kroner by 1:49 p.m. in Oslo.

High-Impact Opportunities

Statoil will drill two to four more wells in east Africa this year and still sees opportunities for high-impact discoveries in Tanzania and Mozambique, Dodson said.

The “Discoverer Americas” drillship sailing from the Gulf of Mexico is scheduled to arrive in the first week of April in Mozambique, where it will search mainly for oil in Blocks 2 and 5, Dodson said. “These are high-risk opportunities with the potential to be fairly large,” he said.

The ship will then move north to Tanzania to test further potential in Block 2, where Statoil has identified “two to three other prospects” described as “quite sizeable,” although not as big as the three high-impact finds already made, he said. The company is interpreting new 3-D seismic material that may show the presence of further prospects, he said.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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