The Mtwara Energy Project (MEP) is an integrated gas-to-power project that will provide reliable, accessible and affordable electricity to end users in the Mtwara and Lindi regions, an area covering 24,000 square kilometers and home to approximately two million inhabitants. Artumas is leading this multi-faceted project from energy exploration and production through to electricity distribution and market development: quite literally, from the well head to the light bulb. Artumas holds an 80% ownership position in the MEP, with the Netherlands Development Financial Institution (FMO) holding the remaining 20% equity position.
First electricity was generated at the AG&P Power generation facility in Mtwara on December 24, 2006. AG&P Power received its Generation License from the Energy and Water Utilities Regulatory Authority (EWURA) in Tanzania on February 26, 2007, and the Commissioning phase for the project was completed on March 5, 2007. The development focus in 2007 will be on extension and strengthening of the transmission infrastructure to connect Lindi, Masasi and surrounding towns to the Mtwara generation facility, and building out the distribution system throughout the region.
MEP Phase I & II: Well Re-Entry, Build Out and Drill Program
Through its Tanzanian subsidiary AG&P Gas Ltd., Artumas commenced operations on Phase I of the Mtwara Energy Project in December 2004 with the re-entry and completion of the Mnazi Bay #1 (MB-1) well and the acquisition of 440 kilometres of 2D seismic. The well re-entry and testing of Mnazi Bay #1 was completed in May 2005 and successfully tested significant gas reserves. Studies on the Mnazi Bay #1 well test conducted by APA indicate that the sands are very prolific. Over the nine-day extended drawdown period, the interval was producing gas at 10.5 million standard cubic feet per day (MMscf/d).
Phase II encompassed the simultaneous construction of gas gathering lines, processing facilities, marine and land pipelines, gas receiving facilities, an initial 12 MW power plant, and the completion of a three well drill program.
Mnazi Bay #2 (MB-2) was drilled in the summer of 2006, targeting five separate sandstone horizons. The logging and testing results of these horizons exceeded expectations derived from the MB-1 well results and original geological and geophysical interpretations of seismic. MB-2 encountered a total of 103 feet of effective net pay in four sandstone horizons between 5576 and 6340 feet measured depth. Reserve calculations for the MB-2 well drainage area indicated 84 billion cubic feet (Bcf) of natural gas in place and 58 Bcf of recoverable reserves based on 640 acre spacing. The testing of MB-2 indicates high productivity gas reservoirs with amounts of condensate. Absolute Open Flows for the sands range from 37 MMscf/d to 280 MMscf/d. Long term production testing will commence in Q1 2007.
Mnazi Bay #3 (MB-3) was spudded in mid-November 2006 approximately 1.3 km east of the MB-2 site. The well was drilled to total depth of 8,365 feet, reached in January 2007. The completion of this well has allowed Artumas to extend the north-eastern edge of the Mnazi Bay Gas Field, adding both large gas reserves and additional well deliverability. Reserve calculations for the MB-3 well drainage area indicate 102 Bcf of natural gas in place and 71 Bcf of recoverable reserves based on 640 acre spacing. The testing of MB-3 indicates high productivity gas reservoirs with amounts of condensate. Absolute Open Flows for the sands range from 124 MMscf/d to 276 MMscf/d.
Commissioning of the 10 MMcf/d gas processing facilities at Msimbati Peninsula, the 27-km terrestrial and marine pipeline linking Mnazi Bay to Mtwara town, the 12 MW reciprocating engine power plant, and connection to the existing Mtwara transmission and distribution infrastructure, was completed March 5, 2007. Electricity was supplied to the Municipality of Mtwara under test conditions prior to full commissioning. Transmission system upgrades in 2007 will tie in Mtwara, Lindi and Masasi areas to the Mtwara generation plant.
Connecting to the East Africa Regional Power Grid
Tanzania, and East Africa, has experienced a prolonged power crisis brought on by extensive drought conditions and other natural catastrophes. Extended periods of interrupted power supply have negatively affected residential and commercial customers and industrial sectors throughout the region. To address this situation, the East Africa governments have been pursuing plans to augment the region’s predominantly hydroelectric power dependence with thermal power generation, using both natural gas and coal.
As a partial solution to this regional energy challenge, Artumas is in discussions with the Government of Tanzania, TANESCO, TPDC, mining interests, and private sector financial capital sources in Tanzania, regarding the construction of a large-scale, 300 MW generation facility at Mtwara and associated high-voltage interconnection to the Tanzania power grid. This proposed generation plant would be fuelled by natural gas from Mnazi Bay, and would link Mnazi Bay/Mtwara to the East Africa integrated power grid, encompassing Tanzania, Kenya and Uganda. Artumas has completed a preliminary study of high-voltage transmission interconnection options from Mtwara to the Tanzania grid, and in 1Q:2007 will commission Pre-FEED analysis to identify the least-cost interconnection option. The positive results from the Phase I and II drilling programs discussed above have greatly expanded the Mnazi Bay gas resource, providing the necessary deliverability and recoverable gas volumes to support this large-scale generation initiative.
Exploration Activity: Expanding the Horizons
Beyond these important project development and commercialization initiatives, Artumas continues to test the geological potential of the Mnazi Bay Concession.
On February 26, 2007, Artumas spudded the Msimbati-1X (MS-1X) exploration well, targeting total well depth of 6600 feet. The MS-1X exploration well will test the Middle Miocene “K” sands and appraise the edge of the Miocene/Oligocene sands previously tested in the Mnazi Bay Gas Field. If the MS-1X well is successful in encountering hydrocarbon resource in the “K” sands, this will open up a new field within the Mnazi Bay concession area. The so-called Msimbati Field has modeled potential resource of some 67 MMboe. In addition, should MS-1X encounter the deeper “I” through “C” sands—the classic Mnazi Bay gas charged sands—this would significantly extend the aerial extent and resource of the Mnazi Bay Gas Field.
Looking beyond the MS-1X exploration well, the Rovuma basin—extending from southern Tanzania through Northern Mozambique—represents one of the last undrilled Tertiary deltaic systems in the world with a proven petroleum system. Within the basin, the commercial gas, light oil and condensate discovery at Mnazi Bay and the gas and oil shows from the Mocimboa well in northern Mozambique, together with numerous oil seeps along the coastal plain, provide very encouraging indicators for oil prospectivity in the Basin.
The Rovuma Delta is characterized by a similar structural geometry to several other prolific shelf extensional and basinward toe thrust systems, including the oil and gas rich Niger, Markham and Krishna Godavari Deltas. Geochemical studies of the light oil recovered from MB-1 well indicate the oil may have been generated from the Upper Cretaceous oil prone source, which is also anticipated to be the primary source rock for the Rovuma Basin. The gas is thermogenic in origin and may be sourced from deeper Jurassic oil prone source and/or Lower Cretaceous deltaic source.
Seismic data covering the Mnazi Bay Concession has revealed Cretaceous and Eocene exploration leads that have deep seated faults into the potential oil source rocks. These faults act as potential pathways for oil and gas resource to migrate into, and trap within, the reservoir sands of these formations.
To test this geological model, Artumas has high-graded the Mwambo Lead to a prospect, and will acquire additional seismic starting in Q2 2007. Given supporting interpretation of this new seismic, Artumas will look to drill an exploration well, the Mwambo-1X (MW-1X), anticipated to commence in Q3 2007. This exploration well will target the deeper Eocene and Cretaceous turbidities and fan deltaic sands. A secondary target is the shallower Tertiary sands which are currently being produced from the Mnazi Bay Field.