SacOil aims to diversify via new projects

SacOil Holdings wants to diversify its assets by building a natural gas pipeline in Mozambique and developing Egyptian oil wells, according to CEO Thabo Kgogo.

“We are in discussions with a couple of international engineering companies that would like to participate” in a project to build a gas processing plant in Mozambique and a line that would bring the fuel 600km to SA, Dr Kgogo, head of oil and gas company, said in a telephone interview on Wednesday. SacOil hopes to start feasibility studies in the first quarter of next year.

The Johannesburg-based company this year started a programme to broaden assets outside of exploration blocks it holds in Malawi, Botswana and Democratic Republic of Congo. It acquired the Lagia oil field on Egypt’s Sinai peninsula.

Along with SA’s Public Investment Corporation and Mozambique’s Instituto De Gestão Das Participações Do Estado, SacOil also entered into a memorandum of understanding over the gas pipeline and plant.

The waters off Mozambique are the site of the world’s largest natural-gas discovery in a decade.

SacOil may first finish the processing plant to service the domestic market as the pipeline is under construction, according to Dr Kgogo.

“We used to have a lot of exploration opportunities or blocks, so we are re-balancing that portfolio by acquiring development-to-production assets,” he said. “Then you can generate cash to fund your exploration assets.”

SacOil bought the Egypt assets on September 9 from Mena International Petroleum Company in a deal including $10m in shares and settling as much as $4.1m of liabilities.

The company can start hydraulic fracturing on current wells this year and drilling additional wells in early 2015 “with the intention of ramping up production to about 1,000 barrels a day” of oil, said Dr Kgogo, who expects the oil price to stabilise at $90 a barrel.

The price of Brent crude has decreased 29% this year. On Wednesday’s January settlement was little changed at $78.47 a barrel on the London-based ICE Futures Europe exchange.

West Texas Intermediate crude fell on Wednesday after a government report showed that US inventories unexpectedly increased last week.

Stockpiles rose 2.61-million barrels to 381.1-million at end of last week, the Energy Information Administration said. A 1.5-million barrel supply decline was projected, according to the median forecast in a Bloomberg survey.

Source: Business Day