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East Africa On Sale

By Sa’d Bashir, in Dar es Salaam.
East Africa is experiencing a major sale season in the hydrocarbon property market, and it doesn’t matter whether Tanzania, Kenya, Mozambique or Uganda has opened any bid round.
China National Petroleum Corporation(CNPC)’s payment of $4.21bn for a 20% stake in Eni operated Area 4, off Mozambique, is major signal that the stakes are heavenward in those countries located in the vicinity of the Indian Ocean. The deal gives the Chinese giant a large share in the block’s massive gas reserves, and reduces Eni’s exposure to the development costs. Eni is the operator of Area 4 and now has a 50% participating interest. The other partners, apart from CNPC of the are Galp Energia(10%), KOGAS(10%) and ENH(10%, carried through the exploration phase).
CNPC’s hefty investment typifies the fact that the buying up of East African tracts has largely featured Asian companies. Inpex, the Japanese independent, has farmed in to a 25 % working interest in Statoil operated exploration licence offshore Mozambique. The licence, which consists of two blocks, under one licence agreement, is located in areas 2 and 5 offshore Mozambique in the Rovuma basin.

Anadarko itself is considering a joint venture to monetize up to 33% of its interests in Mozambique’s prolific offshore Area 1, where it has reported discoveries it claims may be over 65Trillion Cubic Feet of gas in reserves. John Colglazier, the company’s vice president for investor relations, told analysts at a conference recently that a joint venture would help the company share the costs of developing its massive gas discovery off the coast of Mozambique. “
It’s a pretty significant piece of the portfolio for something that’s not producing,” Mr. Colglazier said. Shell is reportedly interested in having a stake in this large pie. The Anglo Dutch major’s loss to Thailand’s PTTEP, in the $1.9Billion takeover of Cove Energy, which had 8.5% stake in the same block, has sent Shell scampering back to the drawing board.

Gazprom, the Russian giant, has also indicated interest in the Eni operated Area 4, off Mozambique
Meanwhile, the Mozambican government has decreed that “Foreign operators”, as African governments routinely, if discourteously, called IOCs, “will have a new tax applied to their operations”. The government is enacting a 32% tax on the future sale of hydrocarbon assets.

It wasn’t immediately clear if the “future sale of hydrocarbon assets”, referred to government auctions alone or involved sale of stakes between companies, which ultimately has to have government sanction. But all the sale of hydrocarbon assets in Mozambique in the last three years have been company to company.In September 2012, French major TOTAL bought 40% interest in the PSC which covers Mozambican offshore blocks Area 3 and Area 6 from Petronas, the Malaysian state Hydrocarbon company. TOTAL has had significant E&P presence in After Kenya and Uganda and was now entering into the southern part of the prolific Rovuma basin, hoping that the reserves there might be as huge, or at least commercial sized, as the Northern part where ENI, Anadarko and Statoil led joint ventures have struck gold.

The interest, however, is region wide. Kenya’s Energy Ministry Permanent Secretary Patrick Nyoike said in March 2013 that the country was proposing to raise the signature bonuses companies pay for exploration and drilling licences to $1 million from $300,000.00
Tanzania’s fourth offshore licensing round, announced since 2011, has been postponed again and again, with the latest likely date said to be Q4 2013. Uganda has mentioned a possible bid round of hydrocarbon tracts in its Albertine Basin, once the current ban on licencing of new acreage is loifted. Speculations have been that the lift will happen before end of 2013.
Mozambique’s last bid round, which focused on the less popular onshore tracts, ended in October 2010, with Norway’s DNO the only successful bidder for an acreage. There’s no word on the next round.

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