New Investors Under African Skies
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Any retail investor or government trawling the Africa Upstream Conference in Cape Town last month for suitable companies and explorers could have been forgiven for feeling like a child in a sweet shop -- or perhaps a sturgeon swimming through shark-infested waters. While high oil prices have expanded the volume and range of new players and opportunities, so the risks have also increased -- for new companies trying their hand in Africa, for retail investors seeking decent returns, and for governments seeking reliable oil companies.
High oil prices have changed the way investors perceive Africa's prospects. Last year, marginal field operators in Nigeria were struggling to attract partners with cash. This year, some could be fighting off keen suitors. "High oil prices have turned Nigeria's marginal fields into profitable fields," Stephen Brown, president of newcomer Exile Resources, told IPF at the conference, organized by Global Pacific & Partners. They have also changed the way companies regard the continent's frontier countries, like Namibia and Madagascar. "Last year, we had just one exploration license," Namibia's Petroleum Commissioner, Immanuel Mulunga, told IPF. "Now we have awarded nine."
High oil prices have also encouraged more governments, facing elections during the next few years, to spread the oil wealth around. While Nigeria was first off the mark in 2002, Angola's government has passed legislation this year enabling domestic players to secure exploration and development licenses. Well-connected Angolan elites have set up companies like Somoil and others which are expected to secure some of Angola's lowest risk assets in a new licensing round next year, while at the same time courting Western oil companies for their cash and technical expertise.
The newcomers boast a range of strategies -- some, like tiny Madagascar-based Madagascar Oil have a big story to sell -- along with vast tracts of onshore acreage spanning 20,000 square miles across six blocks. The company is focused on a single country where it aims to explore and develop heavy and ultra heavy oil, which could, if the economics are right, prove financially viable in the current oil price environment. It hopes to raise up to $300 million through an initial public offering (IPO) in the coming months, to fund exploration and development of the Tsimiroro field, which has indications of heavy oil, and another ultra-heavy oil play, Bemolanga.
While Madagascar Oil's Chief Executive Sam Malin paints an enticing picture, the company's founder, disgraced Australian financier Alan Bond, remains a cause for concern for some. While Bond is no longer on the list of visible shareholders, he's still thought to be lurking in the background.
Scotland-based Plectrum Petroleum, which listed on London's Alternative Investment Market in October through a reverse takeover of Table Mountain Minerals, is emphasizing new technology that can define geological risk more clearly. The ace up Plectrum's sleeve is its focus on electromagnetic imaging -- a new geophysical technique which uses electromagnetic remote sensing technology to detect and measure hydrocarbon accumulations under the seabed. Up until now, this has tended to be the reserve of deep-pocketed majors and the larger independents.
But Plectrum, which has links with electromagnetic technology suppliers, will exploit the adoption gap in smaller companies. "We'll use the technology as part of our screening process to get opportunities better than the normal risk profile," says the company's chief operating officer, Mike Evans. It will acquire assets through licenses and farm-ins, and build a portfolio of pre-drill prospects. Right now it is focusing on the deepwater, where the technology can best be used in underexplored areas offshore West Africa and Latin America. |
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By :
Tom Jui
Submitted
2011-10-24 00:58:52 |
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