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Chief executive officers for E&P companies shed light on their companies’ strategy during the Oil Council North America Assembly in Houston.
For Kosmos Energy, strategy doesn’t involve a follow-the-leader approach.
When industry focus was on Africa’s deepwater Tertiary Delta system, the company turned to an overlooked area – the Upper Cretaceous play along the Transform Margin of Africa. The result was the Jubilee discovery offshore Ghana, which opened the Tano basin, in 2007. The discovery turned out to be the largest oil find offshore West Africa that decade. The field has total gross resources of between 600 MMboe and 1 Bboe.
The example was one used by Brian Maxted, founding partner and CEO of Kosmos Energy, to illustrate how the company’s strategy has paid off. The company’s focus is simple: Create focus and a competitive advantage, he said.
“For us, strategy is not static,” Maxted said during a presentation on international E&P strategies at the Oil Council North America Assembly on Oct. 9 in Houston. “We focus from a business standpoint. We don’t explore just anywhere.” With a concentration on frontier emerging petroleum systems, Maxted said Kosmos focuses geographically, then thematically or technically. “We don’t explore just any ‘ole play.”
But key to driving value and finding opportunities to build an attractive portfolio is getting into basins before others. Being first gives companies a competitive advantage. In doing so, companies can get their choice of acreage, great contractual terms, operatorship, low or no-cost entry, and flexible commitments, Maxted said, adding, “All of these drive value.”
About five years after the Jubilee discovery, Kosmos finds itself trying to diversify in hopes of replicating past successes. But times have changed, Maxted explained, noting there’s a lot more competition. Now, the company bumps into supermajors like Chevron, Shell, and ExxonMobil as other independents also tweak their strategies. Local companies operating in areas eyed by Kosmos also crowds the playing field.
“The trick is to keep ahead of the industry with new exploration ideas,” Maxted said, later explaining how the company looked for an area where it could combine great commercial terms with presalt play. It found hope in Morocco, a region that shows evidence of a working hydrocarbon system.
The company aims to build a portfolio with three or four potential basin wells every year. “We’ve already significantly shifted the size of the portfolio to 1 MM to 25 MM gross acres,” Maxted said.
The strategy for Mart Resources, which has had success in acquiring proven resources and exploration wins in Nigeria, involves targeting proven fields.
“They’re going after the elephants,” Wade Cherwayko, CEO of Mart Resources, said of Kosmos. “What we’re going after is the low-hanging fruit – proven, undeveloped fields. If you get it right, … you can bring a lot of these proven, undeveloped reserves into production.”
The majors have come into Nigeria to explore and develop 200 MMbbl to 400 MMbbl fields, some much larger, but there is no requirement for them to develop every field they discovered, Cherwayko said. So they would focus on the big stuff, leaving the small fields. There are 130 fields identified as proven and undeveloped in Nigeria, Cherwayko said, and an estimated 2 Bbbls of oil that has been discovered but not developed. “That is why we focus on this region.”
Mart Resources’ Umusadege field in Nigeria has a production of more than 10,000 b/d, and the field has more than six wells in production.
Cherwayko believes the company can triple its reserve base in Nigeria. The figure currently stands at about 17.8 MMbbl.
Although he called the country a stable environment to work in, it is not without challenges. These include dealing with bureaucracy involving the regulatory framework and approval processes, which can take years. When funding challenges emerged, Mart Resources worked with local Nigerian banks. Another big challenge was coping with disruption of export pipelines, which prompted the company to negotiate export capacity and look at alternative routes.
Also crucial to Mart Resources’ strategy are forming joint operating teams and strong partnerships with local companies, as well as hiring locals. The company was among the first to create ventures with local Nigerian companies as part of the indigenous and marginal field programs. The move has given the company a strategic advantage.
Contact the author, Velda Addison, at email@example.com.