Angola rolls out the barrels
  from: Offshore Engineer
  by: Darius Snieckus
  Monday, April 07, 2008

Angola has, inside five years, orchestrated an upswing in its oil production that should see output climbing past the 2 million boe/d mark in 2008 as the next large-scale fields being developed in its deep and ultra-deepwaters are brought to plateau. The question, as Darius Snieckus reports, is how long this crescendo of production can be sustained.

Assuming international oil company development timelines are met, Angola should early next year outstrip Algeria and Libya to move into position as the second largest producer of oil in Africa, with only Nigeria still in front in the production race. Total Dalia (OE August), BP Greater Plutonio and ExxonMobil Kizomba C are together providing the confluence of crude to carry Angolan production past the 2 million b/d milestone and most calculations suggest that although output from the region will likely plateau in 2009, it will be on the climb again by 2010 as Angola’s flagship ultra-deepwater fields – the first likely to be BP’s block 31 Northeast development – are brought onstream.

There is no question that Angola has finessed something of an economic miracle in the last five years, with crude production now flowing at more than double the average 902,000b/d recorded in 2003. Just how long the boom time will last is less certain. Deepwater wildcatters witnessed a better than 85% success with the drillbit between 1995-2003 to pave the way for many of the current wave of megadevelopments now coming onstream and Angola will need to see similar strike rates going forward if production is to hold above 2 million b/d.

‘The production growth between 2010-14 will not be as steep as is currently being achieved, due to production declines in other, earlier deepwater projects,’ forecasts Wood Mackenzie Africa analyst Chris Brown, noting that though Greater Plutonio is in line to push Angola past the ‘psychological threshold’ of 2 million b/d, it will be Kizomba C that will maintain output above that mark through 2009 as other projects see production decline. ‘By modeling existing and probable developments, we predict that Angolan crude production will be peak at 2.7 million b/d in 2014.’

Bolstering Angola’s production rate above the symbolically important 2 million b/d level for the longer term will be largely dependent on future exploration successes, he underscores. ‘Our current profile shows a steep production decline once the peak is achieved – this is because deepwater projects produce at a high initial rate, over three to four years, and then enter a period of rapid decline. As most of Angola’s deepwater developments use second recovery techniques [such as gas lift and water injection] from the outset, there is little potential for reserves growth.’

‘There is potential for reserves growth in the shallow water regions, but this is likely to be relatively small,’ Brown adds. ‘The long-term production will be driven by new projects.’

Certainly the reserves are there to be built on.WoodMac estimates put Angola’s commercial and technical reserve base at just under 13 billion barrels of crude, 78% of which are housed on the so-called ‘golden blocks’ – 14, 15, 17, and 18 – along with ultra-deepwater blocks 31 and 32. ‘Exploration on these blocks rapidly increased Angola’s reserves base,’ states Brown. ‘The combination of an exceptional 85% technical success rate and the discovery of large finds equated to an average of 161 million barrels discovered per well.’ The success rates on the ultra-deepwater blocks that followed early this decade, he notes, is ‘slightly higher’ at 86%, with the distinguishing feature of this exploration phase that average discovery size was ‘ about half that in the deepwater’, some 84 million barrels per well.

State-owned oil company Sonangol, as sole concessionaire for exploration and production in the country, will doubtless be looking to the resident quartet of Western operators – Chevron, ExxonMobil, Total and BP – to continue working their magic offshore.

New era, new economics

Having commissioned the compliant tower on its block 14 Benguela, Belize, Lobito and Tomboco development last year, Chevron is now pressing ahead developing Tombua-Landana for first flow in late-2009 – and continued to add to its portfolio on the block with Malange, its eleventh find, this August. Kizomba A and B operator ExxonMobil is also targeting production start-up for its C development on block 15 next year. Total, with its block 17 Girassol and Dalia fields up and running, has turned its attention to the next two FPSO ‘pole’ projects on block 17, namely Pazflor and CLOV (Cravo, Lirio, Orquidea, and Violeta), slated onstream in 2011 and 2012 respectively. BP, having last month brought Greater Plutonio into operation, is looking to add the Cesio tieback and a standalone development for the nearby Platina and Chumbo finds.

‘Angola’s future exploration growth will again turn towards the deepwater acreage, with the re-licenced blocks 15/06, 17/06, and 18/06,’ states Brown. ‘It is likely that the signature bonuses paid, totalling $3.1 billion, will drive the partners to embark on very aggressive drilling programmes. However, this is now mature acreage and the large prospects have already been drilled, so reserves growth in the re-licenced acreage is likely to be lower.’

As the signature bonuses intimate, the oil and gas industry is showing an unwavering dedication of capital expenditure to the region. By WoodMac calculations, annual capex is likely to ramp up to some $8.5 billion in 2010, with a ‘slight levelling off ’ to follow. ‘With the 15, 17, and 18 blocks being re-licenced with huge signature bonuses attached, the oil companies are going to drill extensively and quickly to move these developments toward production so as to make the economics of these block work.’

Opec’s influence on the timing of development of member Angola’s remaining offshore oil resource continues to be something of an unknown variable. So far the African state has stayed quota free with most observers speculating this status quo will continue through 2007/08, meaning projects already in production or soon to see first flow will be unaffected. Looking ahead, however, depending on the actual quota eventually set, sanction of projects scheduled to come onstream in 2010 and later may be pushed back – unless rising worldwide demand levels over the same period prompt Opec to open its taps accordingly.

‘Considering our global demand assumptions and supply projections, we expect an increased call on Opec crude over the coming years,’ states Brown. ‘Consequently, Angola many see little constraint on its oil production as a result of its Opec membership.’

‘If Opec set Angola’s quota at 2.5 million b/d, this would not be far off what they are likely to produce anyway and so would not effect many – if any – of the region’s projects,’ he continues. ‘Indeed much of the area being re-licenced is mature and so discoveries are not going to be of the size we saw in the mid- and late-1990s. If, however, Opec set a quota that is much lower than 2.5 million b/d, then you will probably see some problems with getting projects sanctioned.’

First flow from Kizomba C will mark the end of an era off Angola. And at the same time herald the start of the next. ‘The last eight years have been an extremely sharp increase in the level of growth, particularly in the three years with the various large-scale FPSOs coming onstream,’ says Brown. ‘This is changing now, with Kizomba C the only one due to come online before 2009. The majority of current projects are subsea tiebacks being put in to compensate for the decline in production from the earliest FPSOs, so we are entering something like a period of stability in terms of production off Angola. This will all change again in 2010 with the next tranche of FPSO being brought into the area – to produce BP’s ultra-deepwater fields along with the likes of Total CLOV and Pazflor – and then we are going to see production ramping up once more.’

Production ramp-ups – to offset rapid decline – are destined to become Angola’s stock in trade. Unlike Nigeria which continues to enjoy a stabilised production profile, Angola dependency on deep and ultra-deepwater developments means it will ‘always going to need to find a lot more oil to keep production at the levels now being achieved’. Moving beyond the peak in production forecast for 2014, the state, through Sonangol, will have to find a way to bring a ‘raft’ of new fields onstream if it is to see any growth in future output levels – and reinventing an production growth strategy that will have harder time balancing the ‘very attractive acreage and very big signature bonuses necessitation very aggressive drilling programmes’ equation so successful until now. OE

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