Lining up for Exploration: NOC's and IOC's

Some interesting news came across the Dow Jones Newswire and can be found on Rigzone about some offshore blocks off of Columbia.

The Libyan's are also have bidders line up for some blocks as well. The MMS just recently completed some bids for blocks over the past few months for the Gulf of Mexico (GOM).


As more and more National Oil Companies (NOC's) move further away from their homelands, they are treading into the waters of the Independent Oil Companies (IOC's) and gradually reshaping the way oil is being found.


New partnerships are being formed and as we are seeing what is being done in Venezuela and Russia (the nationalization of resource companies), these NOC's are now being seen as new powerhouses.

In the past, Norsk Hydro (or Hydro) of Norway, was one of the few NOC's that explored abroad, outside their own boundaries. Even in the Gulf States, Dubai, for example, has recently purchased some heavy oil land and companies in Canada.

So how does that affect us? National Oil Companies do not strictly operate on market principles alone. Because of their close relationship to their respective government, they may have other objectives, such as wealth distribution (Venezuela - PDVSA), job creation, economic development, and energy security. Whereas the IOC's are concerned with market values and returning a good share price for their investors.

Two different motivations.

In 2006, five of the top ten companies could be considered state-owned and operated. That seems to be a decent ratio of private to state - 50%.

An interesting paper was published by the Federation of American Scientists concerning this very topic.

Looking at it another way, based on reserves in 2006, the top ten producing companies would all be state-owned and includes the following:

1. Saudi Aramco
2. NIOC
3. INOC
4. KPC
5. PDVSA
6. Adnoc
7. Libya NOC
8. NNPC
9. Lukoil
10. QP

As with every company involved in E&P, their ability to be profitable for either their shareholders or the state-motivations, depends greatly on technology and where they are exploring.

In the article on Rigzone concerning the exploration bids for Offshore Columbia Blocks, one notices that several of the companies involved are state-owned and now working with the major independent's, such as BP.

By working with the independent for-profit companies and through production sharing-agreements (PSA's), it allows the state-owned oil companies to access new technology.

It will be interesting to see how the next few years plays out and the courtship between NOC's and IOC's continues.

Kenya: Lundin Petroleum building on the Anza Basin

When people think of Africa and oil and gas, they most often think of the oil producing nations of Angola and Nigeria, along with the gas producers of Algeria and Tunisia. East Africa is not often thought about as a producer.

Kenya’s Petroleum potential is best depicted by the four large sized sedimentary basins that straddle the Country (I've attached maps from the National Oil Company of Kenya - NOCK). The four basins are the Lamu, Anza, Mandera, and Tertiary Rift basins.

On October 4th, 2007, in Nairobi, Lundin Kenya B.V., a wholly owned subsidiary of Lundin Petroleum, signed a PSC (Production Sharing Contract) with the Honourable Minister of Energy of the Republic of Kenya. Block 10A covers an area of 14,748 square kilometers and is located in the onshore Anza Basin, an extension of the prolific Muglad Basin of Sudan.

From the NOCK website: "The Anza Basin is one in a series of Cretaceous-Tertiary failed rifts that trend across the Central African Craton from the Benue trough in Nigeria through Chad and the Central African Republic, the Sudan and Kenya. The right lateral movement on the Central Africa rift system is interpreted to have translated to Northeast-Southwest extension in Sudan and Kenya beginning by Barremian-Neocomian (Lower Cretaceous) time, resulting in basins with an overall northwest - southeast trend that is nearly perpendicular to the shear zone. Rifting continued into the Tertiary. Muglad, Melut and Blue Nile Basins of Sudan strike in the same direction as the Anza Basin. The Anza Basin is thought to correlate with the Mugland Rift Basin of South Sudan where profilic oil discoveries have been made The Anza Basin extends towards Lake Turkana and is separated from Mandera and Lamu Basins by the NW-SE trending Lagh Bogal fault and ENE-WSW trending Garissa-Walmerer basement high inferred fault respectively. The total surface area of the Anza Basin is about 94, 220 sq. km. The deepest well drilled in this basin to date reached a total depth of 4,392m."

In many cases, it is the small or mid-size independent oil and gas companies that do the major exploration, only to be gobbled up (thinking of Canadian Thanksgiving and turkeys!) by the Majors who are looking at bringing on proven reserves, without having to do all the hard exploration work. First Calgary Petroleum in Calgary is another small company that is working exclusively in Algeria. The logistics of working in Africa or any area where there is a lack of infrastructure (roads, pipelines, etc.) makes these challenging, yet exciting ventures to be involved in if one is fortunate enough.

Often in oil and gas, we only see the Majors (the ExxonMobils, Total, BP, Eni, etc.) and we tend to forget about the small companies that forge the way, through exploration and aquisition.

The good news is that exploration is continuing and there are opportunities out there for small and large companies to participate in this. Lundin and First Calgary are showing that Africa is not the great unknown and by willing to go into countries and take a chance, there may be successes. There may also be failures, but that comes with the business of exploration

Look out for these juniors!