business review

Sasol Petroleum International
strategic business unit

Business review  Sasol Petroleum International (SPI) continued its successful growth in developing its promising exploration and production portfolios in West Africa and Southern Africa. SPI’s greatest highlight was its establishment of additional natural gas reserves in Mozambique. The enlarged reserve base will enable the company to move forward with development of the Temane and Pande gas fields and commence gas production in late 2003.

Further breakthroughs in Mozambique  The signing of a petroleum production agreement in October 2000 with the Government of Mozambique for the commercial development of the Temane and Pande gas fields was a significant advance for the Group. Sasol also signed a pipeline agreement with that government to transport natural gas to customers in Mozambique and South Africa.

The Temane and Pande fields will be developed in a 70:30 production-sharing partnership with CMH, a subsidiary of Mozambique’s national oil company, Empresa Nacional de Hidrocarbonetos de Moçambique.

Following successful fieldwork over the last three years, SPI is starting to deliver substantially on its potential to become a key player in helping Southern Africa to harness natural gas reserves. On the strength of SPI’s Mozambican successes, Sasol has formalised a coherent natural gas development and marketing strategy. A multidisciplinary Sasol project team is now co-ordinating and implementing the practical facets of this new strategy.

All applicable agreements with the governments of Mozambique and South Africa and Sasol’s gas partners for the final production, distribution and marketing of natural gas are likely to be finalised before the end of 2001 (see natural gas project report on page 67).

During the year SPI acquired sole ownership of the gas exploration and production rights in the onshore exploration acreage adjacent to the Pande and Temane gas fields. The company also retained its 90% share in the offshore Sofala Bay block in partnership with Zarara Petroleum Resources (10%).

Two Sofala Bay exploration wells were drilled in September and October 2000. Unfortunately, while one of these had substantial gas shows, neither well was considered worthy of testing. The wells were plugged and abandoned. SPI now needs to fully interpret these drilling results before determining its future action. There will be no further drilling in this area in the year ahead.

West African opportunities increase  Over the last decade, offshore West Africa has emerged as one of the world’s most promising regions for establishing major new reserves of oil and gas. SPI has thus intensified its efforts in Gabon, the People’s Republic of the Congo (the Congo) and Equatorial Guinea. Nigeria, Angola and other countries are also under review as future exploration regions.

SPI is expanding its activities in Gabon where it is well placed to further develop competitive advantage. Its Gabonese interests are expected to generate a vital future stream of international revenue for the Group.

SPI increased its share from 10% to 30% in Gabon’s promising offshore Etame oilfield. This move followed the withdrawal of the major shareholder, Baker Hughes Incorporated. Baker Hughes, a major oil and gas service company, withdrew because it considers its equity participation in exploration and production to be in conflict with its core business of providing services to this industry.

Promising results had been indicated through state-of-the-art three-dimensional seismic modelling technology. SPI and its partners, Vaalco Gabon (Etame) (30,35%, operator), PanAfrican Energy (32,5%), PetroEnergy Resources (4,525%) and Nissho Iwai Corporation (2,625%), subsequently drilled a successful third well in the Etame field in February 2001. This was followed by the drilling of an even more successful well, Etame 4V, which was completed in June. The exploration partners are confident that commercial development of the Etame oilfield can commence in the year ahead.

SPI (22%), BHP Petroleum (40%, operator) and Triton (38%) retained their interests in Gabon’s deep-water Tolo and Otiti blocks. Drilling of an exploration well in this region, using a new-generation drill ship, is planned for September 2001.

To the south in offshore Congo, SPI (13%) continued to produce small volumes of crude oil with its partners, Agip Recherches Congo (52%) and Société Nationale des Pétroles du Congo (35%), in the Marine VI block. In view of the declining production in this area, SPI opted to exit from this permit at financial year-end. An exploration well in Congo Marine X is planned for the third quarter of 2001.

SPI also became a partner in another promising area, marine Block L, off the coast of Equatorial Guinea. Exploration is progressing well with seismic data already being acquired. An exploration well is likely to be drilled during 2002. SPI (10%) is working in partnership with Chevron Equatorial Guinea (65%) and Triton Equatorial Guinea (25%).

South African focus shifts westwards  Following disappointing drilling results, SPI withdrew from its exploration partnership in Blocks 17/18 off South Africa’s east coast. The region is considered to offer less potential than the west coast. The company is now concentrating its South African exploration in Block 3A/4A off the west coast. The one-year technical co-operation agreement announced last year has since been converted into a prospecting lease with the Petroleum Agency of South Africa.

SPI will be searching for natural gas in what has become an exciting and emergent gas province. Formal gathering of seismic data from this block will commence during 2002. Should the acquired data show promise, exploration drilling could commence in 2003.

Prospects  On the strength of its skilled and motivated people, as well as the encouraging advances achieved during the year, SPI remains superbly positioned to achieve further successes in Africa. With the commercial production of oil from Gabon’s Etame field scheduled for 2002 and Mozambican natural gas scheduled to start in the 2004 financial year, SPI is expected to start contributing to Group profits in the future.

SPI will continue to concentrate most of its exploration and production interests in Gabon, Equatorial Guinea, Mozambique, South Africa and the Congo in the year ahead. SPI will also remain alert to other exciting opportunities as they appear.