UK oil group Tullow says it expects to find oil in Madagascar when it begins drilling in the south of the Indian Ocean island next year.
Work will begin in the first half of 2014 on a 9,000 square kilometer block in the Morondava basin and an 11,000 square-kilometer block near Berenty in the south of the island.
The blocks were previously surveyed by Amoco and Occidental, but seismic data for the areas has since been reprocessed, raising the possibility of finding oil in the blocks.
“We have a very good ratio of oil discovery, 74 percent,” said Tullow’s head of operations for the region, Marcelle Dane said.
“As oil has been found in Mozambique and Kenya, and Madagascar used to be attached to these countries, there is a big chance it’s here also.”
Explorers have found no commercially viable deposits of light crude in Madagascar since the search for the fuel began in 1909. Madagascar Oil, based in Houston, Texas, estimates the country has 1.7 billion barrels of heavy crude reserves that it plans to extract with the use of steam. Light crude yields more gasoline than heavier types during refining.
Tullow found oil in Uganda in 2006 and made a discovery in Kenya last year. Gas finds in Tanzania and Mozambique, on Africa’s eastern seaboard, have shown the two countries have enough of the fuel to supply the global market for a decade.
So far the company has spent $30million over the last seven years surveying the island.
“We did more seismic surveys than required, because the geologists thought it would be better to have a good overview of the location,” said Dane.
“But of course, you can never really tell until you drill.”
At least 17 oil companies currently are active in Madagascar, including ExxonMobil and Total. The French company and Madagascar Oil surveyed the country’s estimated 2billion of bitumen reserves in the central Bemolanga area before concluding in 2009 that extracting it would not be economically viable, according to the U.S. Energy Information Administration.
Because of the remoteness of the area and a lack of supporting infrastructure, the company has to import 95 percent of its exploration and production tools. Shipments have been hampered by delays at customs, Dane said.
“We can only work five months a year, because of the rainy season in the country, so we need to make sure our goods are cleared quickly,” said Dane.
Tullow is also in talks with the government about a new requirement to pay 20 percent value added tax.
“We are currently discussing the tax problem with the authorities here,” Dane said. “They want us to pay 20 percent VAT, something we never did before 2006 and not required in other countries where oil exploration is undergoing.”