SacOil Exploring Congo Oil Field and Expect from Nigeria

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SacOil oil and gas company has raised R48m to finance oil exploration in the Democratic Republic of Congo. SacOil Holdings Ltd., the South African company searching for oil elsewhere on the continent, said it may start oil production “in the short term” after entering a joint venture in Nigeria.

The search for oil in the Congo is an important step in the JSE-listed company’s quest to become a major player in the African upstream oil market. Sacoil said yesterday that it has begun exploration work on Block 3 of the Albertine basin, Lake Albert, in the Congo.

The company has already raised R48m through a general issue of shares for cash from Stanlib Asset Management and Metropolitan Asset Managers.

Sacoil has appointed Glen Penfield as its senior exploration adviser in the block. Mr Penfield said the company was confident about the presence of oil in the area, “given the establishment of the existence of a petroleum system in the area. We believe the reservoir risks ascribed by the independent economic models of contingent resources within Block 3 were too great and the resource base may be significantly greater than previously estimated.”

Sacoil said its approach to exploration in the area will be quicker and cheaper than the norm.

It said it would use low-cost airborne geophysics and remote sensing technologies. “Sacoil believes its approach will result in shorter time lines and better decisions from the outset,” the company said.

The unincorporated 50:50 joint venture with Energy Equity Resources will initially give SacOil access to onshore recoverable resources of about 100 million barrels of oil equivalent in Nigeria’s oil-rich Niger Delta, Robin Vela, chief executive officer of Johannesburg-based SacOil, told reporters in the city today. The venture could eventually produce about 30,000 barrels a day, he said.

SacOil was formed two years ago to take advantage of Africa’s growing presence as an oil producer. Africa is expected to surpass North America in 2011 to become the third-largest producing area after the Middle East and Central/Eastern Europe, PricewaterhouseCoopers said on Sept. 15. The continent is set to experience a “flurry of exploration activity,” it said.

Shares in SacOil have jumped more than fivefold in Johannesburg since June 25 when the company announced it had been awarded a concession for Block 3 in the Democratic Republic of Congo. The stock fell 1.1 percent to 87 cents at the 5 p.m. close of trading in Johannesburg.

SacOil will invest its half of a $12.5 million exploration program in the Block 3 Congo concession over the next two years, Vela said. SacOil is searching for oil at the concession on the border with Uganda together with Divine Inspiration Group Ltd., he said.

SacOil, encouraged by Tullow Oil Plc’s finds on the Ugandan side of Lake Albert, hopes to find oil and gas in Block 3, located on the Congolese side of the lake.

Together with Divine, SacOil is in talks with Congo to “amicably” settle a dispute over rights to Block 1, also on the Ugandan border, Vela said. SacOil has a production sharing agreement there, he said.

The South African company won’t rule out foreign listings when it needs to raise capital, given limited understanding of oil assets by investors on the stock exchange in Johannesburg, Vela said.

Encha Capital, a venture between the Moseneke family of South Africa and Investec, is SacOil’s largest shareholder. Metropolitan Asset Management, Stanlib and Investec are also shareholders, he said.