8 th PESGB / HGS Conference on African E & P, Extended Abstract Africa: New Concepts for the Oldest Continent

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1 8 th PESGB / HGS Conference on African E & P, Extended Abstract Africa: New Concepts for the Oldest Continent The Songo Songo Gas Field, Tanzania: Increasing Reserves and Expanding Gas Distribution. Lucy Williams PanAfrican Energy Tanzania Ltd lwilliams@orcaexploration.com Introduction The Songo Songo gas field ( Songo Field ) located just off the coast of Tanzania was the first developed and remains the largest commercial producing gas field in East Africa. The field represents a strategic asset to Tanzania as the gas produced generates approximately 50% of the county s electricity and reduces the country s reliance on imported fuel oil. PanAfrican Energy Tanzania ( PAT ) currently supplies 25 industrial sites in Dar es Salaam with gas from the field and is developing a new CNG market. With the addition of more gas reserves, Tanzania has the potential to become a thermal generation hub for East Africa. Figure 1. Songo Songo Field location map The Songo Field is located on and slightly offshore Songo Songo Island ( SSI ) off the coast of Tanzania and approximately 200 kms south of Dar es Salaam (Figure 1). Natural gas was discovered by AGIP in 1974 with well SS-1 (Figure 2) in an area now called Songo Songo North

2 ( Songo North ), and tested gas from Lower Cretaceous Neocomian sands. SS-1 penetrated a total 1,200m of Neocomian sand but found no further hydrocarbon shows. The well was plugged and abandoned and the permit relinquished to the Tanzanian Petroleum Development Corporation ( TPDC ). Figure 2. Top Neocomian depth structure map Between 1976 and 1982 TPDC drilled a further eight wells to appraise the field. Of the eight wells, five were gas wells (SS-3, 4, 5, 7 and 9) located on the main Songo Field. The field lay undeveloped until 1991 when Ocelot International Inc., later becoming an affiliate of Orca Exploration Inc; the parent company of PAT, entered into an agreement with TPDC to evaluate the economic viability of the field to generate electricity. After studies indicated sufficient quantities of gas to supply a gas to electricity project (the Songo Songo Project), a formal development plan was submitted in May 2001, and production commenced in June 2004 from the five wells originally drilled by TPDC. Under the terms of the Songo Songo Project agreements, gas produced from the Songo Field is processed at a gas processing plant on SSI and then transported to Dar es Salaam where it is sold under contract to Songas Limited. The gas supplied to Songas is known as Protected Gas and is a maximum average of approximately 45 MMscfd. Also under the terms of the project agreements, PAT has the exclusive right to explore, develop, produce and market all the gas in excess of the Protected Gas from the license. This is termed Additional Gas. 2

3 The Songo Songo Field The Songo Field is mapped as a broad N-S to NNW-SSE trending, faulted anticline. The top reservoir depth structure map (Figure 2) shows how the field is divided into a dominant west flank and lesser east flank in the hanging wall and footwall respectively of a major NS trending normal fault that separates production wells SS-3 and 4 from SS-1, 5, 7 and 9. The main reservoir is developed in the Lower Cretaceous aged Neocomian to Albian sandstones ( Neocomian ), while Upper Cretaceous Cenomanian sands provide additional reservoir where developed. The Neocomian reservoir was deposited predominantly in shallow to marginal marine environments, with minor fluvial deposition. The environments vary little throughout the reservoir from lower shoreface to upper shoreface to tidal sand flat. There is very little interpreted shale in this high net to gross system. Gas reservoir quality is good with average porosity and permeability of approximately 20% and 40mD respectively. In 2007 PAT drilled development well SS-10 to provide production from the main Songo Field and to ensure added security of deliverability. Formation evaluation logs from the well, including nuclear magnetic resonance, provided the first new data on the field for 25 years and allowed for a modern evaluation of reservoir parameters and formation productivity. Figure 3. Petrel Model work flow 3

4 In 2008 a number of reservoir studies were initiated as outlined below. The driver to review the reservoir model and input to the model was based on conclusions from an April 2007 Simulation Model Report which stated both the 2007 Eclipse TM simulation model and material balance modeling work supported a larger Gas Initially In Place ( GIIP ), that was difficult to justify with the existing volumetric model. Depth conversion study to review Gross Rock Volume ( GRV ). Lead to an 18% increase in GRV over 2007 audited numbers. Field wide petrophysical review incorporating learnings from well SS-10 which indicated a 13% increase in Net Pore volume when compared to results using the historical petrophysical model. Re-evaluation of reservoir facies and the depositional model involving examination of approximately 940ft of core. Re-build of the static Petrel TM geological model (Figure 3). Re-build of the dynamic ECLIPSE TM simulation model. The new Petrel model incorporates the latest top reservoir depth structure maps, and revised reservoir zonation and zonal facies distributions. The model represents the management Base Case (P50 or most likely) view of the Songo Field, and has a volumetric GIIP of 1,571 Bcf, which is closely aligned to the total field GIIP as determined from material balance estimates. The Petrel model has been imported to the Eclipse reservoir simulator and a new Base Case dynamic model initialized and history matched to October The Eclipse simulation model is used to monitor and continuously evaluate the reserves of the Songo Field in order to ensure that the Protected Gas deliverability requirements can be met and to manage forecast Additional Gas sales. The model is used to predict well performance and identify the investments in wells and field compression that will be required to meet forecast gas demand. Resources The Songo Songo West ( SSW ) prospect (Figures 2 and 4) is located approximately 2.5km west of the Songo Field. It has a similar geological structure to the Songo Field and is expected to have trapped gas in the same reservoir. The discovery of gas in 2008 by Ndovu Resources in the Kiliwani North field to the east of Songo Field, with a GWC approximately 30m deeper than the Songo Field, proves there is significant upside to the resource potential of SSW. A resource report prepared by independent reserves evaluator, McDaniel and Associates Consultants Ltd ( McDaniel ) in September 2008 estimates 450 Bcf of unrisked P50 resources, with a geological chance of success of 52% in the main Neocomian reservoir and 32% in the Cenomanian reservoir. PAT estimates the unrisked P50 resources to be 546 Bcf, with a similar geological chance of success. 4

5 Figure 4. Songo Songo West to Kiliwani North geo-seismic section. A conceptual development scenario for SSW (Figure 5) envisages the drilling of a southern exploration location first, which if commercially successful would be integrated with the existing Songo Field facilities for a long term well test. The structure would be appraised in the north, to prove the aerial extent of reservoir and closure thus reducing the uncertainty on reserve assessment. Field development would be via two unmanned, wellhead platforms feeding into a new gathering manifold just upstream of the current SSI gas processing facilities. A new offshore pipeline would transport gas from SSI to a new processing facility onshore. Transportation to Dar es Salaam would be via a new onshore pipeline with further trunk lines to more distant markets and connection to the low pressure ring main in Dar es Salaam. Figure 5. Conceptual Songo Songo West Field development SSW is located in water depths between 18-35m requiring a jack-up for drilling. PAT anticipates drilling on the main field in 2011, and SSW may become part of this campaign. Tanzania is a 5

6 remote location in which to conduct drilling operations where consideration must be made for the provision of support services, an offshore operations base and the general high cost of drilling. Rig availability will be a key focus for well planning. PAT seeks to actively engage with other operators in East Africa to understand their intent to drill in shallow water and encourage a jackup rig share, thus helping to reduce mobilisation and de-mobilisation, and shared service costs. Increased Reserves Figure 6 gives a summary of PAT s estimated P50 GIIP for the Songo Field and Songo North discovery and the forecast unrisked P50 resources for SSW prospect. PAT s combined Songo Field and Songo North P50 GIIP of 1,571 Bcf compares with reserves as determined by McDaniel as at the 31 December 2008, as presented in Table 1. Figure 6. Songo Songo License; PAT estimate of Gas Initially In Place (GIIP) During 2008, PAT s gross (excluding Protected Gas) life-of-field, proven (1P) and proven and probable (2P) reserves in the Songo Songo license increased by 18% to 433 Bcf and 17% to 649 Bcf respectively. Since production from the Songo Field began in 2004 reserves growth can be attributed to continuous planned subsurface data acquisition incorporated into and annual cycle of field evaluation. Based on these reserves and deliverability profiles, PAT is looking to develop gas markets that can consume approximately MMscfd of Additional Gas. To meet these sales 6

7 levels, it is assessed that there is a need to drill two new field development wells and install two phases of field compression. 1P 2P 3P McDaniel Songo Songo Field GIIP (Bcf) 1,236 1,433 1,562 Table 1. McDaniel end 2008 Songo Songo Field reserves Gas Markets The potential combined 2P reserves and P50 resources of the Songo Field and SSW prospect are in excess of 2 Tcf. The challenge for PAT is to build on its successes to date in creating new gas markets and hence to rapidly grow the use of gas in Tanzania to be able to commercialise the large potential reserves. There are four potential markets for the Additional Gas from the Songo License: a) The power markets in Tanzania and East Africa; b) Industrial markets in Dar es Salaam; c) CNG for vehicles, hotels and industries; and d) Gas markets in Tanga and Mombasa. Currently gas is sold in markets (a) and (b) (Figure 8). Gas is supplied to Songas Limited for use in their sixth turbine at the Ubungo facility in Dar es Salaam and to TANESCO for use at their 100 MW plant also at Ubungo (operated by Wärtsilä). Tanzania power demand is forecast to grow significantly in the period 2010 to 2026 and will absorb a significant proportion of gas from the Songo license. Like Tanzania, Kenya is heavily reliant on hydro and imported oil for its power generation. With some investment in transmission networks, Dar es Salaam has the potential to become the thermal generation hub for East Africa. All PAT s industrial customers are located in Dar es Salaam. Since 2004 PAT has constructed 43 kms of low pressure pipeline to deliver gas to 25 industrial customers. A further nine customers have signed contracts to consume Additional Gas, and there is now significant surplus system capacity to accommodate further growth in this market. Supply to the Wazo Hill cement plant commenced in April 2009 for a contracted period to July 2014, and represents a significant contract in terms of volume and growth. In Q PAT will start the sale of CNG in Tanzania for vehicle refuelling and supply of some industries, hotels and institutions that cannot be connected to the low pressure, downstream network. The CNG market is currently a low volume high value market since it is often displacing expensive alternative energy (Table 2). In the event that there are sufficient gas reserves, a pipeline could be constructed to Tanga which is located some 220 kms north of Dar es Salaam and near the Kenyan boarder. It has the second largest port in Tanzania and has several potential industrial gas users, some of whom are burning imported coal.. This pipeline could in due course be extended to Mombasa in Kenya where there are significant power and industrial markets. 7

8 Figure 7. Dar es Salaam area Additional Gas supply network Sub-market Alternative fuel July 2008 market price (estimated) (US$/GJ) Cars Gasoline 45 Trucks Diesel 46 Hotels LPG/Diesel 35 LPG, 46 diesel Institutions Charcoal 16 Industry HFO 20 Table 2. Target CNG market 8

9 Conclusion PAT has seen significant year on year growth in its Songo Field reserves through the acquisition, evaluation and integration into the geologic and reservoir simulation models of key subsurface data. Combined with the low risk, high resource potential SSW prospect, PAT recognises the opportunity to grow existing markets for the sale of Additional Gas, as well as positioning itself to grow the new CNG market and potentially supply gas pipeline gas to Tanga and Mombasa. Tanzania has the potential to become a thermal generation hub for east Africa, and PAT is well positioned to assist in this vision. 9