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ExxonMobil Plans Expansion into Namibe Basin Energy Monitor Worldwide ExxonMobil Plans Expansion into Namibe BasinWith production declining at its existing Angola assets, the major acquires three licences off the countrys south coast ExxonMobil has signed risk service agreements (RSAs) to become the operator of Namibe deepwater blocks 30, 44 and 45 two years after penning a memorandum of understanding to explore the basin. The RSAssigned with the Angolan National Oil, Gas and Biofuels Agency (ANPG) and NOC Sonangoldiffer slightly from production-sharing contracts, with the latter usually awarded following formal licensing rounds, whereas the ExxonMobil agreement was an ad hoc deal. The taxes and some terms are different, says Adam Pollard, a senior upstream analyst at consultancy Wood Mackenzie. At a news conference announcing the deal, ANPG president Paulino Jeronimo predicted more contracts would soon be signed with other oil companies. Jeronimo says ExxonMobil would pay for the exploration work for these three blocks, with Sonangol later reimbursing the American major should oil be discovered and produced, according to news agencies. ExxonMobil general manager Andre Kostelnik told reporters his firm had already spent $50mn to buy and evaluate seismic data. The blocks are located 50-100km from Angolas coast at depths of 1,500-3,000m. Licensing activity globally has been severely subdued since the outbreak of the pandemic, so to secure an agreement with an IOC covering three ultra-deepwater blocks in an underexplored basin is fairly significant, says Emma Richards, senior industry analyst at Fitch Solutions. It is quite a risky move to make, at a time when the markets tolerance for risk is not all that high. If they have drill-ready targets, we could see a well spud next year, although I would be surprised to see them gamble on this before the market recovers more fully. ExxonMobils Angola blocks 15, 17 and 32 combined produced 135,000bl/d in 2019down from 169,000bl/d in 2016and the company is Angolas third-biggest producer with a 19pc market share, according to a US government report. ExxonMobil signed the Namibe RSAs despite major reductions in its capex this year as a result of the coronavirus pandemic and the decline in oil prices. Cost control It is different timescales, says Pollard. The short-term issue is preserving cashflow and focusing on cost control, but in the longer term, Exxons business in Angola is mature, with block 15 production declining quite steeply. So, looking ahead, ExxonMobil is seeking to replenish its portfolio and the company clearly likes the look of Namibe because it has blocks on the Namibian side as well. Angolas proven oil reserves are in the Lower Congo and Kwanza basins off the countrys north coast, with most production near the Cabinda enclave. Until now, the Namibe basin, in southern Angola, had largely been unexplored, although oilfield services heavyweight Schlumberger describes it as one of the worlds largest remaining prospective frontier areas for oil and gas exploration. In January, Angola agreed to sell two Namibe blocks to foreign oil companies as part of a licensing round in which the country had hoped to offload nine blocks in the basin and another elsewhere. Italys Eni was awarded operator rights for block 28, with a 60pc stake. Total acquired block 29 with a 46pc interest and operating rights, with Norways Equinor holding 24.5pc and BP 9.5pc. Overall, Angola aimed to sell up to 55 oil blocks from 2019 to 2025: 30 via public bids and the reminder through bilateral negotiations. Angola has had better success with these more ad hoc awards, says Pollard. Governments are now competing for exploration dollars rather than companies competing for the acreageit has become a buyers market. The exploration business is a lot smaller and leaner than it was a few years ago. There is activity in Angola. I would not describe it as busy, but there are some interesting things going on. The pandemic had caused Angolas rigs to cease drilling, with development work coming to a near-halt, although floating production, storage and offloading units were able to carry on. Total has resumed drilling and BP and Eni will get back to work towards the end of the year or into next year, says Pollard. We began 2020 quite optimistic on Angola. There was a bunch of development projects underway or about to start that were subsequently put on hold. In 2021, they should resume. 2020 Global Data Point. |
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