11 June 2013, 14:08 / Business

Lukoil bought a section of the Ivory Coast shelf

Lukoil . has acquired a 65% stake in the exploration, development and production project at offshore block CI-504 in the waters of the Republic of Cote d'Ivoire in the Gulf of Guinea, the company reports

The share in the project was acquired from the private Nigerian company Taleveras Energy, which after the transaction remains 25%, and the remaining 10% belongs to the state company PETROCI Holding. Lukoil Overseas, a 100% subsidiary of Lukoil, will act as the project operator.

Block CI-504 is located in close proximity to the active Baobab field. The area of the block is 399 sq. m. km, water depth varies from 800 m to 2100 m. From the south, CI-504 borders on the CI-205 block owned by Lukoil.

The mandatory exploration program consists of three stages and involves, in the first exploration period, work on the interpretation of data from previously completed 2D and 3D seismic surveys, as well as additional 3D seismic surveys until January 2014. The other two periods, with a total duration of 5 years, provide for the drilling of two exploration wells.

A company representative explained to Vedomosti that the acquisition is part of a strategy to increase reserves in a promising and strategic region such as West Africa. The interlocutor did not disclose information about the block’s resources.

In the waters of the Republic of Côte d'Ivoire, Lukoil is already the operator of offshore geological exploration projects in blocks CI-101 and CI-401 (the company's share is 56.66%), in block CI-205 (63%) and in block CI- 524 (60%).

At the end of April 2013, the French Total discovered an oil field during exploratory drilling in the CI-100 block offshore Côte d'Ivoire. The Ivoire-1X exploration well proved the presence of a hydrodynamic connection between the oil-bearing formations of the CI-100 block and the oil and gas bearing system of the Tano basin with proven oil and gas potential, on the territory of which the Baobab fields are located (offshore of Côte d'Ivoire, recoverable reserves of 200 million barrels of oil, or about 27 million t) and Jubilee (territorial waters of Ghana, recoverable reserves of 370 million barrels of oil, or 50 million tons).

Why does Lukoil need this?

According to Grigory Birg, co-director of the analytical department at Investkafe, Lukoil is carrying out exploration work on blocks CI-101, CI-401, CI-205 and CI-524. The new block, CI-504, is located adjacent to Lukoil's CI-205 block, where a well was drilled in 2011, showing the presence of non-commercial oil reserves, and another well is planned to be drilled before 2014.

In the same year, a productive well was drilled at block CI-401, which confirmed the presence of light oil and gas condensate reserves. In total, as a result of geological exploration in Côte d'Ivoire, Lukoil has already discovered nine promising structures, the potential reserves of which are estimated at 20 billion barrels of oil equivalent.

The Russian company's expenses for geological exploration in West Africa over the next few years will amount to about $500-600 million annually, which implies drilling 2-3 wells annually.

According to Birg, even despite the mixed results of exploration drilling in the region, it can be called promising in terms of increasing production in the future. In the event of additional major discoveries, Lukoil will be able to begin production on the West African shelf fields in 2015-2016. At present, it is too early to talk about future production volumes, but we can assume a production volume of 70,000-80,000 barrels of oil per day if a field comparable to the Jubilee fields in Ghana or Baobab in the region is discovered in the Lukoil areas Cote d'Ivoire.

In addition to the geological risk, Birg notes the geopolitical risk of working in West African countries. Lukoil already had to stop drilling in Côte d'Ivoire in 2011 due to the destabilization of the geopolitical situation in the country, the expert concludes.