TRAINING

Pretty soon, the world’s fourth-largest island off the southeastern coast of Africa will be known more for heavy oil than it is known for the ring-tailed lemur. Experts estimate that out of the 600,000 square miles that make up Madagascar, half of the island is covered by the heavy oil-rich sedimentary basins of Morondava, Majunga and Ambilobe.

Heavy oil abounds in western Madagascar. First discovered in 1842, "more than 500 core holes and 13 exploration wells have been drilled over the past century," revealed Alex Archila, CEO of Madagascar Oil Ltd. "Due to the lack of infrastructure in the country and the resulting economics for producing the oil, most projects were abandoned. With the improvements in oil extraction technology and the surge in the price of oil, current efforts look positive."

A private oil and gas company, Madagascar Oil holds the largest amount of onshore exploration and production licenses in the country and boasts 100% interest in two significant heavy oil fields in northwest Madagascar.

Experts point to the rifting of Gondawanaland and the separation of Madagascar and India from Africa as the start in the long process of heavy-oil formation in the region. Rifting, deposition, subsidence, uplift and seaward tilt all played an important role in developing the country’s reserves.

"It is this prolonged period of subsidence, uplift and erosion which resulted in the migration and entrapment of the Tsimiroro and Bemolanga oil and the subsequent biodegration which led to the current Tsimiroro heavy oil and Bemolanga bitumen deposits found in a near-surface setting today," said Archila.

Weighing the Possibilities
According to independent studies, Madagascar Oil’s discovery at the Bemolanga deposit holds 16.6 billion barrels of oil in place and recoverable probable and possible reserves of 9.9 billion barrels. The company plans to move forward with a mine plan and a preliminary project development engineering study to produce about 1.2 billion barrels.

"The anticipated development of the Bemolanga deposit follows closely the commercial projects in the Athabasca Oil Sands [in Alberta, Canada]," said Archila. "The three major components of the project will include a conventional surface mine, an extraction facility that removes the bitumen from the sandstone and a froth treatment plant capable of removing practically all the water and solids in the extracted
bitumen emulsion."

Although it is not as well delineated as the Bemolanga deposit, Tsimiroro is expected to hold up to 200 million barrels of potential oil in place. Further drilling is currently under way to determine the area’s potential. Tsimiroro is undergoing a steam injection pilot with vertical wells, and depending on the results, a similar pilot will be conducted with horizontal wells. First production from the field is expected in the first quarter
of 2008.

The Tsimiroro pilot will help the company more clearly define the achievable production rates, as well as identify the appropriate development method for the field.

Marketable Resources
Because Madagascar only consumes about 15,000 barrels of oil equivalent a day (compared to the U.S.’s more than 20 million), the primary market for these discoveries is external. Madagascar Oil commissioned a global study of marketing options for its heavy oil products, such as diluted oil and various qualities of upgraded synthetic oil. Results point to Asian markets as the best target importer of Madagascar’s heavy-oil production.

Madagascar Oil holds interest in five other exploration blocks in the country, for which it has conducted extensive seismic work. "Through the years there have been several oil and gas discoveries in those blocks, including the West Manambolo gas discovery by PetroCanada in Block 3105 and Shell’s light-oil test in the Manandaza well in Block 3107," Archila concluded. "We have conducted a regional basin analysis which is guiding our activities into the future."

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