Experts: Oil discovery remains distant dream

Experts: Oil discovery remains distant dream
ALVAR MWAKYUSA Dar es Salaam SEVERAL months after Canada’s Artumas Group and the state-run Tanzania Petroleum Development Corporation (TPDC) publicly announced a significant discovery of high quality crude oil at Mnazi Bay area in Mtwara Region, there remains a mystery on whether or not actual commercial oil drilling will begin in the country. Artumas last year announced the discovery of hydrocarbons at Mnazi Bay, where it had drilled about 50 barrels for testing. According to exploration geologists, hydrocarbons are a good sign of the existence of oil. What is more, laboratory test results of the liquid hydrocarbons extracted by the company in the area last year established that there was high-quality crude oil in the area. The company said in a statement earlier this year that substantial crude oil potential has been observed in the Ruvuma basin lying midway between Tanzania and Mozambique. According to the announcement by Artumas Group Energy & Power, the Canadian-based parent company of Artumas Tanzania Limited, 50 barrels of liquid hydrocarbons from Mtwara Region had been sent abroad for evaluation. ’’In November (last year), Artumas successfully completed a $170m (over 170.025bn/-) financing enabling the next stage of exploration and development over the upcoming two years, with a proposed capital spending of $124m (approx. 124.018bn/-) on its upstream work programme for both Mozambique and Tanzania,’’ the company said. Artumas Tanzania Managing Director, Salvator Ntomola, told THISDAY in Dar es Salaam yesterday that his company was still carrying analysis by conducting seismic surveys of the area by drilling more wells to establish the amount of oil deposits. ’’The amount we discovered was of small quantities...the hydrocarbons are by-products of gas which is drilled at the area. Drilling oil is not like mining gold...there is heavy investment needed to drill the wells where it costs an average of $15m for a single well,’’ he said. Yet, Commissioner for Energy and Petroleum Affairs in the Ministry of Energy and Minerals, Eng. Bashir Mrindoko, made it clear yesterday that there are no traces of oil at the area so far. ’’There isn’t any discovery of oil for commercial value at present but more wells are still being drilled,’’ he told THISDAY in an interview. TPDC Managing Director, Yona Killagane, said during a news conference held at the Ministry of Energy and Minerals offices in Dar es Salaam late March, this year, that Artumas was studying whether there were enough reserves to warrant commercial exploitation. He was supported by the firm’s Chief Exploration Geologist, Herry Kajato, who said the company was still drilling more wells in the area to determine whether the oil deposits justify large investments required to commercially extract the commodity. ’’Hydrocarbons results from wells number 2, 3 and 4, which are licensed to Artumas, have showed positive results. However, in order to determine if the project is viable for commercial purposes, the company is currently undertaking further surveys and assessments,’’ said Kajato. He stated that after two months of assessment, the viability of the project for commercial purposes will be known. However, almost seven months after the announcement, the company is still said to be carrying analysis to establish commercial feasibility of the project. Artumas Group Chief Executive Officer, Stephen Mason, was quoted last year as saying that the 25,000-square kilometre land position that the company is operating in the Ruvuma basin is recognized as a ’highly potential deltaic basin’ and gives Artumas substantial room to run in growing its resource base. Artumas has also announced significant progress in power sales from its 12-megawatt Mtwara energy project increasing by 8.7 per cent over the second quarter average this year. An ’arranger agreement’ with Dutch FMO was completed to facilitate the financing of Artumas planned 300MW integrated power project also in Mtwara Region. FMO will act as arranger for two structured finance facilities for the power generation plant and the high-voltage transmission interconnect to the Tanzania grid, estimated at $225m and $400m respectively. Other Tanzanians, however, say it is perhaps a blessing in disguise that commercial oil drilling has not started in the country because of the fear of the so-called ’oil curse.’