The Namibian Oil Rush
While BP has been busy spewing oil into the Gulf of Mexico, many other oil companies have been busy finding oil under the waters of other gulfs, seas and oceans. In fact, Brazil’s state-controlled energy giant, Petrobras (NYSE:PBR), just announced a major oil discovery in offshore Angolan waters. Water depth is about 1,500 feet. The “net pay” zone is almost 1,500 feet of oil-bearing reservoir, far below the seabed. The preliminary estimate is that there are over 500 million barrels or recoverable oil in place. That’ll likely grow, as additional wells go down over time. It’s always nice to strike oil.
The offshore block, where the discovery is located, is operated by Italian oil company Eni, which holds a 35% stake. Petrobras and Statoil each hold 5% stakes. Angola’s national oil company (NOC), Sonangol, holds 15%. The balance is held by SSI Fifteen Ltd. (20%), France’s Total (15%) and Falcon Oil Holdings (5%).
It may not seem like a big deal that Petrobras and Statoil are 5% owners in this discovery. Except this is just the tip of the iceberg for these two oil companies. Petrobras and Statoil each hold many other Angolan blocks, with much larger interests. What’s going on is that they’re drilling, exploring and proving up their acreage, but spreading the risk among numerous firms and using other people’s money.
Notice the truly international nature of this one large discovery. You’ve got Brazil’s Petrobras and Norway’s Statoil. Then there’s Angola’s home team NOC, Sonangol, which seems a very competent firm from my dealings with them. You’ve got French and Italian companies. Plus, a large US independent. This kind of risk sharing is the nature of things these days, particularly with super-expensive deep-water exploration.
The moratorium on drilling in the Gulf of Mexico will only accelerate the “internationalization” of oil exploration. With the moratorium, deep-water drilling rigs will leave the Gulf. The newest, most modern, most capable rigs (and the “safest,” if you REALLY care about safety) will be the first to go. They’re in demand from firms like Petrobras and Statoil to drill in places like Angola and Namibia.
Then the US-based offshore work force will migrate to other things. The vendor base and supply chain will contract. Wells that don’t get drilled in the next six months in the GOM won’t be around in 18 months to supply oil. It’s going to come back around and hurt the US very badly as time goes by.
Not to put too fine a point on it, but this moratorium on deep-water development in the Gulf of Mexico is national energy suicide. It’s pure folly. It’s political theater, from pathetic, energy-ignorant politicians who want to give the appearance of doing something.
So you’re reading it here. The US is sowing the seeds for its next major energy crisis by screwing up its domestic deep-water oil industry. But meanwhile, the moratorium will create new urgency to explore and develop deepwater projects elsewhere in the world. I recently told the subscribers of Energy and Scarcity Investor about a small Canadian oil developer with BIG acreage offshore Namibia. Out of deference to my Energy and Scarcity subscribers, I can’t divulge the name of Company “X”. But I’ll share a few details about it, just to give you a flavor of the terrific investment opportunities that are now emerging.
Company “X” holds astonishingly large acreage in oil prospective waters in the southerly regions of Namibia’s offshore. We’re talking about HUGE amounts of prospective oil resource – in the billions of barrels. Yes, billions.
How good is the acreage? Well, let’s look at the neighbors. You’re known by the company you keep. Petrobras holds the Namibian blocks to the north. Shell holds the South African blocks to the south. Company “X’s” acreage also surrounds a multi-trillion cubic foot natural gas discovery. This natural gas field also contains oil. The oil comes from an “oil kitchen” that the seismic indicates is deep, and to the west, of the gas field. And that’s EXACTLY where Company “X” holds prime acreage.
What else? Well, if you do the plate tectonic reconstructions, you can see that Namibia used to be right next to what’s now Brazil, in South America. And what part of Brazil did Namibia used to be close to? Why, the pre-salt areas off Brazil which hold oil resources in the range of 100 to 200 billion barrels – although the Brazilians hate it when people like me use such large numbers. “We really have not found all that oil, not officially,” one Brazilian told me. No, not yet. But it’s just a matter of time.
To be perfectly accurate, most of the Namibian offshore doesn’t have the miles-thick salt layers that we see in Brazil. But that’s just an issue of the “seal” over the oil-bearing structures. The Namibian waters, instead, have miles-thick shale formations acting as a seal over the oil-bearing strictures.
In many respects, the shale cap makes for better seismic and better drilling conditions. Shale tends to be more transparent to seismic energy, which makes for better resolution of the deep structures. That makes for more accurate drill-hole placement.
Plus, those Brazilian salt-beds are a pain, as the Halliburton people have explained to me. When you drill in deep, thick salt the salt tends to move in a “plastic” manner. It squeezes the hole thinner. Sometimes, the salt-squeeze even sort of “grabs” the drill pipe. Bottom line is that it makes for tricky down-hole operations.
Despite these challenges, exploration activity is heating up on both sides of the southern Atlantic Ocean. On the eastern side, the “Namibian Oil Rush” is still in the early stages. Opportunity abounds.