Lake Malawi oil drilling: firm opts for onshore studies – Mining & Trade Review (July 2016)

2016-07 Malawi Mining and Trade Review Lake Malawi Oil Drilling

Lake Malawi oil drilling

...Firm opts for onshore studies

…Tanzania border wrangle weighs on prospects

By Marcel Chimwala

Hamra Oil, an expatriate firm prospecting for hydrocarbons in Blocks 2 and 3 in the Lake Malawi area covering parts of Karonga, Nkhatabay and Nkhotakota, says it has come up with an exploration plan to conduct onshore studies in the area focusing on outcrops of offshore oil traps.

Country Director for Hamra Oil, Ali Azuni, told Mining & Trade Review that the onshore works will involve drilling of holes to ascertain the outcrops of hydrocarbon formation.

We have planned to assemble a team that will include geologists from the Malawi Government to conduct the studies whose results will be vital for Hamra as a prospecting firm and the Malawi nation as it pursues its ambitions to start producing oil,

said Azuni.

The seasoned petroleum geologist explained that his company has decided to conduct onshore drilling other than sinking the exploratory drill-hole offshore as expected because the latter is more expensive and does not make economic sense with the current low oil prices on the world market.

Azuni explained that it would cost up to K300-million to drill a hole offshore while the same exercise would be conducted at a cost of around K150-million onshore.

It would not make economic sense to invest up to K300-million drilling for oil off-shore with the current global economic scenario which has seen oil prices declining,

he said.

Azuni also said his company will need to execute a comprehensive feasibility study in order to make an investment decision if sizeable quantities of oil are discovered in Lake Malawi because Malawi is a landlocked country and issues such as transportation of the oil to refineries have to be explored to the fullest.

There are several miles to be covered before we can talk about drilling for oil in Lake Malawi so Malawians have to be patient on the issue for now. Landlocked countries such as Uganda have discovered oil reserves but there are now exploring logistical issues such as construction of a pipeline to a Kenyan seaport [now Tanzania] to move the oil to overseas refineries,

he said.

In a report dubbed “Oil Potential of Malawi,” the Geological Survey Department (GSD) indicates that there is considerable potential for the discovery of hydrocarbons in Lake Malawi and the Lower Shire Valley which is confirmed by data collected by various research institutions and oil exploration companies that previously conducted some studies in the lake.

Detailed seismic studies and, eventually, the sinking of an exploratory drill hole would be required to determine the presence of hydrocarbons under Lake Malawi. Siting the exploratory well offshore would be the most cost-effective way of acquiring this missing information. Of course, the use of other techniques, such as satellite data and microbial anomalies in surface soil samples will also be employed,

says the GSD, which falls under the Ministry of Natural Resources, Energy and Mining, in the report.

Hamra Oil acquired the exploration licence for blocks 2 and 3 from UK’s Surestream Petroleum which completed initial environmental and social impact studies at the site.

Thereafter, Hamra executed an airborne gravity, magnetic and full tensor gravity survey whose results indicate that hydrocarbons may be discovered in the area, which includes Usisya – the deepest part of Lake Malawi.

However, Hamra’s exploration area has been reduced due to the boarder wrangle between Malawi and Tanzania as the later is claiming part of the licence area.

The exercise is dogged by more complications with experts saying if Malawi starts drilling works in the deepest Usisya area, the oil from the side claimed by Tanzania may flow to the Malawi exploration site.

Meanwhile, South Africa’s SacOil which holds exploration rights for Block 1 located onshore in Northern Malawi, has announced an eight month extension of the current licence term with the expiry date of the licence now confirmed as August, 12 2017.

To date, SacOil, as operator, is in the process of finalising the environmental and social impact assessments as well as the evaluation and processing of the countrywide gravity and magnetic data over Block 1. In addition, SacOil is in the process of performing a desktop study on the area, which is yielding encouraging results.

The extension allows SacOil to complete its work program for the licence, which includes the acquisition of infill gravity and magnetic data and completing geological field work over the licence.

Malawi granted all the six exploration blocks to expatriate firms with Block 1 going to Sacoil Holdings, Block 2 and 3 to Hamra Oil, Block 4 and 5 RAKGAS MB45 and Block 6 Pacific Oil and Gas.

***

The piece “Lake Malawi oil drilling: firm opts for onshore studies” featured below was initially published in Malawi’s Mining & Trade Review Issue Number 39  that is circulating this July 2016.

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

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One response to “Lake Malawi oil drilling: firm opts for onshore studies – Mining & Trade Review (July 2016)

  1. Pingback: Link Roundup for Extractive Industries in Malawi: July 2016 | Mining in Malawi·

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