This time it’s different for Madagascar Oil
Explorers have come and gone from Madagascar over the years, drawn by the opportunities offered by the heavy oil deposits.
No one has yet succeeded in solving the enigma of the commercial development of this resource.
Madagascar Oil hopes to have the answer. Al Njoo, founder of Nations Energy and developer of heavy oil assets in Kazakhstan, Azerbaijan and California, leads the management team. Njoo is the principal of Benchmark Group, the majority shareholder of Madagascar Oil.
“It’s a huge reserve in Madagascar. We have 3P reserves of 1.7 billion barrels at Tsimiroro, but this is based on only 10% of our total area. The area is big and the potential is bigger,” Njoo told Energy Voice.
The crude is heavy but low in sulphur, at only 0.3%, which leads the executive to describe it as “one of the cleanest in the world”. Production could be blended, he said, to meet IMO 2020 shipping specifications. As such, production would sell at a higher price than Brent. “It’s a very valuable development.”
COVID-19 has slowed progress in Madagascar. Activity began to pick up in late 2021, however. The company appointed a new CEO, Scott Reid, and Carlingford of GFI Securities to complete the financing in December.
“We should be in the market in February or March and it will be a 90-day process,” Njoo said of the funding plans. Carlingford will aim to raise funds for the first phase of development.
In the short term, the company is aiming for production of 2,000 to 3,000 barrels per day. It will then aim to increase it to 10,000 bpd.
This first phase will involve exporting oil by truck to the west coast. The second phase will involve an export pipeline of approximately 150 km. Peak production could reach more than 100,000 bpd, Njoo said.
The plans will arrive soon. Madagascar Oil expects to sign a sales contract in February and conclude an agreement with a terminal for exports in March.
“The wells are shallow and quick to produce,” Njoo said. In order to move the crude, the company will use steam injection techniques using a technique known as “huff and puff”.
Solar power will boost steam production, with the executive drawing a comparison to Shell’s work in Oman.
Oil prices are higher today than they have been for several years. Despite this, Njoo said there were “no plans to register. We are quite happy with the expected cash flows, they should be self-sustaining. »
Njoo has seen the ins and outs of the stock market. Madagascar Oil listed in London in 2010 and delisted in 2016.
There have been challenges with local government. Total joined the Bemolanga block in 2008, but the French company could not progress and pulled out in 2016.
In 2021, Madagascar Oil was embroiled in allegations swirling around a coup. A French adviser, Paul Rafanoharana, reportedly emailed company executives with a request for 10 million euros ($11 million) to finance the coup.
The plot against President Andry Rajoelina failed with law enforcement arresting a number of officials. Given the accusations, Madagascar Oil issued a statement acknowledging that it had received an email request for money, but claiming that it had not responded.
The company and Benchmark have “strongly condemned” any action aimed at undermining democracy, they said.
Njoo acknowledged the challenges but said they were “typical of emerging markets. We weren’t involved. The court has rendered a decision and life goes on. This is not a problem with the government, we have excellent relations with the ministries.
There is a drive to advance the island state’s oil reserves. “The project is of national importance” in Madagascar, Njoo said. “We are in agreement with the government.
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