AFRICA OIL & GAS TODAY

On the Rebound
09/05/08, Biodun Omojola

Exploration activities are once again gathering pace in the Gabonese oil and gas sector after years of decline.

Despite more than 50 years of oil and gas activities, Gabon's coastal basin remains mostly unexplored. However, the central African country will soon launch an international licensing round beginning from the fourth quarter of 2009 to open up this virgin territory. The licensing round comes at a time when there is an upsurge in oil exploration in the central African country.

Oil reserves in Gabon have been on the slide with no major new discoveries made until recently. Just last year Shell Gabon and its partners announced the discovery of a new onshore field. Vaalco Energy also announced that Gabon's offshore Etame field has increased production.

Paris-based geophysical company CGGVeritas said the new licensing round is expected to be for the offshore deep water areas, with particular emphasis on the pre-salt targets in the southern Gabon. Pre-salt targets are currently creating a considerable interest following the recently announced successes in deep water offshore Brazil. It is expected that a number of open deep-water blocks will be made available, covering 110,000 sq. km. of total acreage.

Only a few years ago, Gabon had been widely seen as a country which may be deprived of new oil investment. This was because its reserves were rapidly being exhausted. In 1997, Gabon's oil production reached 371,000 bpd. By 2003, however, it dropped to less than 240,000 bpd. However, incentives from the Gabonese and U.S. governments to explore for new oil resources led to the discovery of new oil reserves. In fact oil reserves since 1996 have doubled and have now reached an estimated 2.6 billion barrels. Production is, however, still decreasing, although at a much slower rate than in the late 1990s. Gabon is a country with proven hydrocarbon resources and recent years have seen an increase in licensing and exploration activity, encouraged by high oil prices and growing global demand for the commodity. In support of the upcoming licensing round, CGGVeritas has announced a contract with the Direction Generale des Hydrocarbures (DGH) to acquire a new extensive non-exclusive 2D survey in Gabon's highly prospective waters, to be completed in 2008.

CGGVeritas chief geologist, Steve Toothill, said "there is considerable untapped potential in the salt province of Gabon, especially in the pre-salt section which is currently poorly resolved on seismic. Petroleum systems have been identified in all the coastal basins and rich source rocks are present, the Melinia shale, for example, averaging 5-6 percent TOC. Sand-rich sediment supply and both pre- and post-salt deposition provide excellent reservoir potential, while an active tectonic history and salt movement, are ideal for generating large structural traps with potentially very significant reserves."

The statistical and geological opportunities offshore Gabon are complemented by its impressive record as a mature and stable environment in which to do business. The fiscal and production terms outlined by the DGH are tailored to the needs of the modern explorer and recognise the importance of both flexibility and stability in defining a productive business environment. There is growing global pressure to replace depleting oil reserves throughout the hydrocarbon sector, but new opportunities to effectively meet these demands are few. CGGVeritas believes there is potential in Gabon that will provide an important contribution to meeting these challenges.

Gabon covers an area of 267,667 sq. km. Its economy is dominated by oil which has been the spur of its economic growth since the 1970s. Revenues from oil account for 63 percent of government budget, about 51 percent of gross domestic product (GDP), and more than 80 percent of exports. Gabon's oil revenues have given it a high per capita GDP of more than $5,500. Despite this strong per capita GDP, however, most of the population lives below the poverty line as evidenced by Gabon's rating of 124 (out of 177) on the Human Development Index (HDI), and unemployment stands at about 40 percent.

Oil and gas exploration in the country dates back to the 1920s when the first commercial discovery, the Ozouri field (brought on stream in 1956) was made by the French oil company, Elf. Gabon is sub-Saharan Africa's sixth largest producer of oil. Because declines in production have raised concerns about Gabonese reserves, the government has begun to encourage development of the non-oil sector to diversify its economy. After oil, logging and manganese mining are the other economic drivers.

Gabon is a relatively stable country located in the Gulf of Guinea region although it has been in dispute with Equatorial Guinea over three islands in the Corsico Bay that could potentially contain oil deposits. Gabon is a signatory to the Extractive Industries Transparency Initiative that supports governance and revenue transparency from the oil, gas and mining sectors. In 1996, it renounced its membership of OPEC citing high annual dues.