Independent building major position in African deepwater play

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The West African deepwater has usually been associated with names like Elf, Exxon, Texaco, or Chevron. And this is rightly so. In terms of activity, these four players have garnered a vast number of world-class fields in the region. But in terms of actual deepwater acreage position, these giant producers are being pushed by a company that has yet to spud its first well - Vanco Energy Company.

Vanco holds over 16 million net acres in the deepwater territories offshore West Africa. This is nearly double the acreage of any other operator in deepwater West Africa. The company holds interests in seven blocks along the coastline in countries including Gabon, Morocco, Côte d'Ivoire, and Senegal.

Vanco originally began in the early 1950s under the name Van Dyke Oil and Van Dyke Energy. The company focused primarily on Texas and the US Gulf Coast, and later moved to the North Sea.

Due to the approaching maturity of the North Sea, Vanco in 1996 turned its attention to deepwater, where it saw the future of the industry. After evaluating other regions of the world, the company settled on deepwater West Africa. The company said that it chose this region for a number of reasons:

Exploration was in the early stages
There were large structures and major reserves
Deepwater sands were thicker and more productive
Governments there were ready to do business
There was existing speculative seismic.

In order to isolate regions within the area on which to concentrate, the company undertook extensive studies of the regional geology, available seismic, and political risks of each nation - from Tangier (Morocco) to Cape Town (South Africa). "Our main criteria for evaluating the countries are initially the known salt basins. Then, we looked for large structures and the presence of reservoir rock and source rock," explained Dr. Bill St. John, Manager of New Ventures for Vanco. Following this evaluation, the company settled initially on the Lower Congo Basin offshore Gabon.

Gabon

Vanco struck its first West African deal with the government of Gabon in February of 1997 and its second a few months later in May. The company signed on for the 1.6 million-acre Anton Marin Permit in February and the 1.5 million-acre Astrid Marin Permit in May. Both were awarded outside of an official licensing round.

Anton Marin lies in water depths ranging from 800 meters to almost 3,000 meters. The block is in the northwestern continuance of the Middle Cretaceous "raft structure" trend that stretches through Angola, Cabinda, and The Congo. The block is on trend with the major Sendji Raft oil discoveries at Kitina, N'Kossa, and Moho in the Congo. The focus of the play will be the Middle and Lower Madiela reservoirs.
Astrid Marin lies in water depths averaging 3,000 meters and is Gabon's first ultra-deepwater license. The play consists of Tertiary sandstones of the ancestral Congo River fan, similar to those in the Kuito, Landana, Girassol, and Block 15 in Angola.

In order to explore and develop these permits, Vanco began promoting the blocks to prospective partners in early 1998. By November, it had organized, with four participants, the Vanco Gabon Group: TotalFina/Elf (operator - 28%), Unocal (25%), Vanco (22%), Kerr-McGee (14%), and Reading & Bates (11%). The group is managed by an operating committee, chaired by Vanco President Gene Van Dyke, and consisting of a member from each company.

The terms of the contract with Gabon call for four wells on either permit by 2003. The group began activity by conducting two seismic programs. Vanco contracted Geco-Prakla for a 3,300-km 2D survey over both permits in December of 1997. In March of last year, TotalFina, as operator for the group, again contracted Geco for the largest 3D deepwater survey ever in West Africa. Geco shot a 4,436 sq km program which covered most of Astrid and parts of Anton.

In April, the group will hold a technical committee meeting and an operating committee meeting to begin evaluating which prospects to drill. Initial drilling is expected to commence in the fourth quarter of this year.

Morocco

"Following Gabon, Morocco will most likely be the next country we promote," said Robert Banks, Operations Manager. "Morocco has the most play concepts and the most number of wells of any of our acreage," he added.

In September of 1998, Vanco was granted an Exclusive Reconnaissance Permit for the Safi Haute Mer permit from the Minister of Energy and the state oil company ONAREP. A year later, the company acquired additional acreage by entering into a farm-in agreement with Lasmo for 60% of the neighboring Ras Tafelney Permit.

Safi Haute Mer covers 4.6 million acres in water depths, ranging from the shoreline out to 3,000 meters. Vanco has identified three plays within the permit. The primary play consists of deepwater Cretaceous sands associated with active salt structures. The secondary plays are on the shelf and are Hercynian structures involving Paleozoic sediments similar to those in Algeria, and Jurassic reef plays.
Ras Tafelney covers almost 3 million acres in water depths between 100 meters out to 2,500 meters. Vanco has identified similar Cretaceous sandstone plays within the Essaouira Basin associated with salt structures.

Morocco has not been well known for its hydrocarbon prospectivity. But Vanco said that the initial attraction for the country came during the evaluation. Bill St. John said that the deepwater off Morocco shares geologic similarities to that of Nova Scotia. This is due to the countries being once joined and separated during the continental drift eons ago.

To date, the company has identified over 50 possible leads for drilling and over 35 different prospects in the two blocks. In late 1998, Vanco contracted Geco for a 1,850-km 2D survey over Safi Haute Mer, and contracted Fugro-Geo Team for a 1,500-km 2D infill seismic survey in Ras Tafelney and 2,000 km in Safi Haute Mer in October of last year.

The activity terms for both blocks call for 2D surveys between September 1999 and September 2000. Lasmo is currently the operator of Ras Tafelney with a 40% interest. However, in the fourth quarter of 2000, the licenseholders may convert both blocks into exploration permits, at which time Vanco will become operator of both permits. The company plans to begin promoting the Moroccon concessions soon, and has preliminarily planned to drill in either the second quarter of 2002 or the first quarter of 2003 using a deepwater drillship.

Côte d'Ivoire

According to Banks, following Gabon, the next country the company expects to drill will be Côte d'Ivoire. In April of last year, Vanco signed production sharing contracts with the country's ministry of energy and state-run Petroci for deepwater Block CI-109 and CI-112. Under the contract, Vanco operates and holds 90% in CI-109, with Petroci holding 10%, and 76.5% in CI-112, with Xpronet holding 13.5% and Petroci holding 10%.

The blocks cover 2.3 million acres (1.15 million acres each) in water depths between 200 meters and 3,000 meters. The company has recognized two plays:

An older structural play that includes late Albian sandstones with postulated excellent reservoir characteristics based on the presence of an onshore granitic provenance
A deepwater fan play formed from the same sand source during the Late Cretaceous.

Vanco is committed to both 2D and 3D seismic over the blocks. Over 4,000 km of existing reconnaissance 2D seismic is being interpreted to select areas for the 3D acquisition. Following the seismic, Vanco has the option to turn the contract into a one-well exploration permit. Possible drilling has been estimated by the fourth quarter of 2001 or the first quarter of the following year.

Senegal

The company also signed a production sharing agreement with the Ministry of Mines and Energy and Petrosen, the state oil company of Senegal, for the Dakar Offshore Profond deepwater block, Senegal's largest offshore concession to date and its first deepwater concession. The block covers 7.9 million acres in water depths between 200 meters and 3,000 meters.

Vanco will operate with a 90% interest. Petrosen holds the remaining 10%. The contract requires 2D seismic acquisition by 2002, and 2D and 3D seismic through 2003. The company has committed to a 2,200 km 2D program for this year. In December, Veritas' New Venture acquired 528 km of 2D seismic over the northern portion of the block.

Expanding operations

Beyond West Africa, the company is doing some field development work. Vanco is in the process of evaluating their return to the North Sea for the development of two marginal fields. In addition, the company is also pursuing development of the Kupe gas field offshore New Zealand.

"We can develop these marginal fields economically because of our size. What is economic for us is probably not economic for someone like Shell," Banks said. Until that time, the company plans to form similar groups to that of the Vanco Gabon Group for other operating areas and would like to maintain operator status.

Vanco has already established the first phase of their goals by being the largest deepwater acreage holder in West Africa. The next step is to see if the acreage pays off. "Being privately held allows us to be a risk-taker," Banks said. "It is going to take resources to explore and develop these properties, but we're not afraid to spend money."