By Adam Currie — Exclusive to Gas Investing News
Although natural gas prices are trading at record lows, many within the ind u s try ar e taking the opportunity to explore for potential reserves prior to what many feel coul d be a significa nt market rally.
Earlier this year, Norwegian oil and gas firm Statoil ASA (NYSE: STO) announced that it had discovered natural gas offshore of Tanzania, marking the latest discovery to highlight the region as a key natural gas hub on the doorstep of Asia's rapidly expanding markets. A region of opportunity The Norwegian major and its partner Exxon Mobil Corp. (NYSE: XOM) discovered the Zafarani field, which both companies hope will prove to be larger than initial estimates suggest. It is close to the region off the coast of Mozambique where even larger-scale deposits are being developed by Anadarko Petroleum Corp. (NYSE: APC) and Eni (NYSE: E). In February, Eni confirmed that its deposit has a potential capacity of 212.5 billion cubic meters (bcm). "This is the biggest discovery made outside Norway by Statoil ever," Statoil Vice President Tim Dodson told the BBC. Healthy competition is also emerging in the form of international companies vying to enter East Africa's energy sector. African-focused Ophir Energy plc (LSE: OPHR) and BG Group plc (LSE: BG), the largest supplier of liquefied natural gas (LNG) to the United States, recently made significant finds off Tanzania. Meshack Kagya, a geologist with state-run Tanzania Petroleum Development Corp., confirmed that the country's reserves now stand at ten trillion cubic feet (tcf) and are expected to grow. Further down the coast, Mozambique, the fastest growing energy player in the region, has estimated that energy firms are likely to spend $50 billion over the next decade in developing the country's LNG industry. “A major gas hub” Magnus Smistad, an analyst at Fondsfinans, underlined this potential by stating, "East Africa will soon become a major gas hub if you look at all the big discoveries made in Mozambique, and the demand side also looks great considering how close India with its rapidly growing demand is." Hoping to cash in on this interest, Kenya has marked out new offshore exploration blocks that it feels will attract the interest of global players. The country currently has 16 open oil and gas blocks and has already received expressions of interest for nine vacant blocks from companies including Camac Energy Inc. (AMEX: CAK) and Total (NYSE: TOT). East Africa's market potential was brought to the fore when Royal Dutch Shell plc (LSE: RDSA) recently lodged a $1.6 billion bid for Cove Energy plc (LSE: COV), the owner of an 8.5 percent stake in the Rovuma Area 1 offshore block that is operated by Anadarko and estimated to hold as much as 30 tcf of gas. “East Africa is a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years,” read the press release in which Shell formalized its bid. Despite critics labelling the area as high risk on the back of tax rates, piracy, unpredictable political regimes, and company nationalization, the appeal of a region that has yielded a series of large-scale discoveries over a relatively short period of time cannot be ignored.