Since the first discovery of the massive Jubilee oilfield in Ghana by a start-up
company, the West African playing field has begun to change, and so too have
investor sentiments, disappointed most recently by the low fourth-quarter 2013
results of major integrated oil companies like Exxon, Shell, Chevron and BP.
But while the supermajors are struggling with soaring project costs and poor
balance sheets, innovative juniors and start-ups are increasingly swooping
in to take advantage of new highly prospective plays--and as long as they don't
come up dry they are turning into superstars overnight.
West Africa's emerging hotspot
of Ghana is one of the best indicators of how the oil and gas playing
field is undergoing a major transformation.
In 2007, a Dallas-based start-up company, Kosmos
Energy LLC, jumped on this scene to great fanfare, making the Jubilee
field discovery. It was the company's first major discovery, and one of the
largest discoveries in all of West Africa in two decades. First production
came online in 2010 and average production today is about 104,000-110,000
bpd.
A record-breaking inflow of offshore oil investment followed this discovery,
bringing in British operator Tullow Oil, which remains the key player in Jubilee,
and a whole list of major oil and gas companies eyeing not only Ghana's Jubilee
field, but everything in the West African vicinity.
But at the end of the day, it was a small Dallas-based start-up that prompted
the unparalleled development of oil and gas plays in West Africa.
Another start-up, the African-based subsidiary of CSE-listed Gondwana Oil,
is continuing the trend in Ghana. Earlier this week, the company won exclusive
rights to negotiate for the offshore Cape Three Points South Block in the highly
prospective Tano Basin, about 30 kilometers from Jubilee.
This particular block hopes to take off where Kosmos left off with Jubilee.
The block is surrounded by 20 producing discoveries in an area that has a commercial
success rate for drilling of over 60%.
Gondwana is in a similar position to Kosmos when it made the Jubilee discovery.
So while there is some safety in the diversification of the major oil companies,
it's also harder for investors to get big returns on a hot new play like Ghana.
As such, investors are increasingly willing to risk on juniors and start-ups
who are focused on a single hotspot that promises a big reward. If these low-market-cap
companies can actually get their hands on significant acreage in venues like
Ghana, investors seem ready to take notice.
In the meantime, the bigger companies continue to make significant headway
in with Ghana's oil, despite a
few setbacks , including delays to the country's gas infrastructure, which
means that associated gas is being lost to flaring or has to be re-injected
into wells.
Italian
oil giant Eni has been successful in the Tano
Basin, not far from Jubilee, estimating that field holds around 150 million
barrels of recoverable oil. Hess
Corporation is also prioritizing Ghana, with seven successful wells so
far in the Tano Basin and new exploration planned for this year.
Source: http://oilprice.com/Energy/Energy-General/Sma...e-in-Ghana.html
By. James Burgess of target="_blank" Oilprice.com
