Bloomberg News

Statoil $1.2 Billion Tanzania Find May Hold Oil in New Play

February 24, 2012

Statoil ASA (STL) and Exxon Mobil Corp. (XOM)’s largest gas discovery off Tanzania may hold crude oil or natural-gas liquids, opening a new “play” in East Africa, Norway’s biggest oil producer said.

The partners have drilled the Zafarani exploration well in Block 2, discovering at least 5 trillion cubic feet of dry gas, Statoil said today in a statement. The discovery could be worth $1.2 billion, said Theepan Jothilingam, an analyst at Nomura Holdings Inc.

“We think it’s a different play, a different age reservoir compared to what’s been proven” in Tanzania and Mozambique so far, Statoil Executive Vice President for Exploration Tim Dodson said in a phone interview. “It’s probably an older reservoir than the other discoveries.” Statoil plans to deepen the well by “several hundred meters” to test if “there could be some liquid potential as well,” Dodson said.

Statoil, based in Stavanger, Norway, plans to focus on exploration off Tanzania and Mozambique, where BG Group Plc (BG/), Eni SpA (ENI) and Anadarko Petroleum Corp. (APC) found more than 70 trillion cubic feet of gas. The Norwegian company is joining the race for gas in East Africa so it can be turned into liquid and shipped to China and India, the world’s fastest-growing major economies.

“The Zafarani discovery should be seen as a play-opening well for Statoil in East Africa,” Jothilingam wrote in an e- mailed report. He based his discovery valuation on Royal Dutch Shell Plc’s $1.6 billion bid this week for Mozambique-focused Cove Energy Plc. (COV) “There is a risk of larger resource numbers” at Zafarani, he said.

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Statoil operates the license on Block 2 on behalf of Tanzania Petroleum Development Corp. (PETD) and has a 65 percent interest. Exxon holds the remaining 35 percent. TPDC has the right to a 10 percent working interest if the project moves to development.

After completing Zafarani, Statoil plans to move the rig to drill the Lavani prospect in Block 2, the company said. It also plans to drill its first well in the Rovuma basin off Mozambique in early 2013.

Lavani has “quite an interesting potential as well, maybe not quite as much as the Zafarani structure, but quite significant volumes there as well,” Dodson said. “East Africa is a hotspot for exploration.”

Statoil plans to invest $3 billion in exploration worldwide this year, he said.

The company’s shares rose 1.4 percent to 157.1 kroner in Oslo.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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