While majors hunt the elephants, independents are having a bonanza chasing smaller trophies.

As big oil companies get bigger, so must the fields they find and produce. Most recently they've been elephant hunting in West Africa, seeking not the large gray beasts that roam onshore but the huge oil fields buried beneath miles of seawater and sediment offshore.
Independents traditionally have been slow to join the hunt. In the US Gulf of Mexico, for example, the majors always led the chase, with independents timidly following in their well-worn footsteps while picking at the carcasses left over in shallower water.
But the waters offshore West Africa are not controlled by the US Minerals Management Service; they're controlled by a host of small nations that are just now learning how to deal with foreign investors. And often those nations prefer to work with smaller, more flexible companies that will use their top management to negotiate with the countries' top ministers.
And while the US Gulf served up mostly smallish fields to the also-rans and wannabes, West Africa has been dishing out fields that, while perhaps small potatoes to the majors, are company-makers for their smaller counterparts.
"Outside of the real hot spots, it is the independents who are there in the greatest numbers and hold the greatest acreage positions," said Andrew Latham, principal consultant for African energy with Wood Mackenzie.
Of the recent newsmakers, Triton Energy no doubt has hit the biggest jackpot. Its Ceiba field offshore Equatorial Guinea could contain as much as 300 million bbl of recoverable reserves. The company was attracted to the area because of the huge deepwater successes boasted by the majors offshore Nigeria and Angola. But the entry cost to those plays proved to be prohibitive. Triton's geoscientists used their knowledge of Angolan and Nigerian geology to evaluate the countries between them, including Congo, Gabon, Cameroon and Equatorial Guinea. The last of these had a virtually untapped sedimentary basin with geology similar to that of Gabon, a 2 billion-bbl oil province.
Though the company was attempting to divest itself of an overabundance of projects at the time, the Equatorial Guinea acreage was top-ranked because it met several of Triton's growth criteria - a high working interest, operatorship, significant exploration prospectivity and good commercial terms. The discovery well was spudded Aug. 19, 1999, and the rest is history.
Countless other companies extol the virtues of West Africa for similar reasons. And unlike other regions of the world in which independents have followed in the footsteps of the majors and been stuck with undesirable "leftovers," the leftovers in many West African countries are tantalizing prospects. Many onshore and shelf properties were explored in the 1970s and 1980s. Then the majors left. The reasons vary, and perceived prospect size, commodity prices, consolidation and better opportunities in deep water all may have played a part. Left behind was a bit of seismic data, a few wells here and there, some well log data and a local government hungry for the revenue that a developed oil field could provide. Not bad pickings for a smaller company looking for new opportunities.
United Meridian Corp. (UMC) - now Ocean Energy - was one such US independent. In 1992 Joe Bruso, now president of Sovereign Oil & Gas Co., was one of two people in UMC's international division. Charged with establishing an oil and gas division in the international sector, Bruso and his colleague quickly settled on West Africa.
"What we noticed in the early '90s was that West Africa had been fairly intensely explored by the majors in the '70s and '80s," he said. "Actually billions of dollars had been invested in seismic and drilling, so there was a database available.
"But the oil price collapse of '86 resulted in the withdrawal of the majors from some of the less promising countries along the West African margin. The countries were very interested in seeing new investors come in, and generally there was a very favorable investment climate."
UMC chose Cote d'Ivoire for its first prospect due to a good fiscal regime, a stable government and a database that indicated significant potential for a company its size. At least half a dozen undeveloped discoveries had been logged and tested by the majors. UMC licensed a block that had two wells, each of which had tested at more than 5,000 b/d, and a 3-D survey. UMC'S first two wells discovered two fields, Panthere and Lion. Although production peaked at only 30,000 boe/d, this was enough to make Cote d'Ivoire energy-independent and establish UMC as an international operator.
Encouraged by these results, UMC turned its attention to Equatorial Guinea. Purchasing an idea presented by an independent geologist, the company approached the government to obtain 2-D seismic data, only to discover that the government had lost track of the data. It later surfaced in a basement in Geneva, Switzerland. The geology was identical to that of neighboring Nigeria, but UMC was able to get two licenses for about US $1 million while major companies were paying $40 million per license in bonuses and work commitments next door.
UMC ultimately partnered with Mobil, and in 1995 they discovered the giant Zafiro field, testing at rates of 10,000 b/d in three of the first four wells. Unwilling to pay its full 35% of the development plan, UMC sold 10% of its share to Mobil to fund the remaining 25%. "The field came on production at 35,000 b/d in August 1996," Bruso said. "UMC at that point had effectively zero dollars invested with a 25% share in the production and the reserves. Today Zafiro is producing 165,000 b/d and has recoverable reserves exceeding 700 million bbl."
While this may seem like a pleasant trip down memory lane, these types of opportunities are still being chased, and found, by a variety of independents. Woodside's Chinguetti-1 discovery has demonstrated the existence of a fully functioning petroleum system in Mauritania; Vaalco is having success offshore Gabon in the Etame field; Ranger Oil has confirmed a discovery near its Espoir field offshore Cote d'Ivoire; and Heritage Oil believes its M Boundi discovery in Congo-Brazzaville could have reserves of 100 million bbl of oil. Countless other projects are under way.
The model UMC and Mobil fashioned is still used, with larger companies buying a percentage of the project or, in the case of Triton and Amerada Hess, simply buying the independent that made the discovery. "I see the role of the independent as doing the initial resource exploration," said Pierre Benichou, president of Africa, the Middle East and the Far East for TGS-Nopec. "They then look to the majors as the bankers to come in and help them. And the majors are effectively using the independents as their exploration departments."
Of course there are a few notable dry holes - wildcatting is never as easy as shooting fish in a barrel, after all. But for those who do their homework, there are rewards to be gleaned. And many companies have taken advantage of the region's potential so quickly that competitors are scratching their heads wondering how they missed such an obvious opportunity.
"There is no reason for a small independent to be able to pull off this type of a coup," said Vanco Energy President Gene Van Dyke of his company's 20 million acres offshore West Africa. "But we didn't have any competition."
Added Brad Fischer, president and chief executive officer of CMS Energy Oil & Gas, "It takes a lot of preparation. You can go to West Africa and spend money foolishly and come home sadder and wiser, or at least sadder. But you can also go there and do well if you invest in the planning and the people, and do it right from the beginning."
CMS is a case in point. Once one of the largest players in the Niagaran Reef play in Michigan, the company has evolved to the point where it no longer even has acreage in that state. It came by its West African acreage through a farm-in - 16% of Walter International's Alba field offshore Equatorial Guinea, followed by the purchase of Walter in 1995. Since then it has expanded into several countries in the region.
CMS took an unusual approach by focusing on stranded gas assets. Since many West African countries lack the infrastructure to use gas as a power-generating source, much of the gas discovered in the area is flared. Again, the majors had effectively walked away from several such discoveries, including Alba.
Fischer said his company approached the stranded gas play as a long-term play, and meanwhile it needed a short-term approach to make some money. So it focused on large condensate accumulations, which it can sell into the world market. After Walter purchased Alba, it stripped the liquids and flared the gas. CMS expanded the field considerably, installing a methanol plant to monetize the gas rather than flare it. In other fields the gas is reinjected into the formation for production when the economics are more suitable.
Fischer said CMS likes the shelf area of West Africa for a variety of reasons. "It's possible to get acreage, and it's also possible to work the shelf areas in relatively protected waters," he said. "These are fairly benign environments from a technical perspective. You don't have the huge up-front capital costs to invest like you do in deep water, and you don't have the harsh environments that you might have in the North Sea."
But some independents like the deepwater play. Vanco, for instance, has deepwater acreage offshore Gabon, Cote d'Ivoire, Namibia, Equatorial Guinea, Morocco, Madagascar and Senegal. Van Dyke has used his geology background to examine the world's most prospective acreage, and he remains convinced it's in deepwater provinces, particularly off West Africa.
It's partly because of those calm waters. "You can take a floating production, storage and offloading vessel (FPSO) and spread-moor it," he said. "You don't have to have the turret up front, so the cost of the FPSO is greatly reduced."
Despite the well-publicized deepwater finds offshore Angola and Nigeria, Van Dyke considers most of the rest of West Africa's deepwater province to be ripe for the picking. "When we got in there, there had not been one off-the-shelf well drilled between Nigeria and Gibraltar," he said. "The whole deepwater area was completely untouched. Now there have been five or six wells drilled. And there are five or six discoveries. They're all coming up discoveries."
While CMS and Vanco prefer to tackle less explored countries, Bruso is finding plenty of opportunities for a very small company to get a foothold in Nigeria, typically thought of as a majors' play. "It's mostly because of the geology," he said. "It's the oiliest place in the region, and there's a lot of oil coming out of the ground. That speaks to the industry's ability to produce in a region that's perceived to be fairly troubled. Nigeria has had its share of problems over the last 30 years. But the oil keeps flowing."
The standard mode of entry into deepwater Nigeria is through a bid round and hugely expensive work commitments and signature bonuses. But Bruso feels independents with technical and financial capability can team with one of Nigeria's established indigenous companies. Nigeria also has a marginal fields program and is proactive in making these smaller fields available to its indigenous industry. "There's an open door and a real opportunity for foreign companies to team with these established indigenous companies," he said.
From a political risk angle, none of the companies interviewed reported a single instance of governments going back on their word or employees encountering dangerous situations. In fact, most said the local governments are easy to work with and embrace smaller companies with open arms. "Most of these countries are run by strong individuals, and they like to have access to and talk to people who make the decisions," Van Dyke said. "They relate well to strong people who run these companies because they run their countries that way."
Added Latham, "People who don't really know Africa at all need to be aware that it's a huge area with 20-odd countries, and local conditions vary widely from country to country. So does the geology."
For companies eyeing West Africa, there may still be Ceiba-sized fields awaiting discovery by those who take a studied approach. "Everything is very cyclical in this business," said Bob Olson, vice president of exploration for CMS. "People commit capital, they waste it, they exit, and somebody else comes in with a new idea. That's what drives the process."
"I would expect to see the smaller companies playing a greater and greater part," added Latham. "Once the big companies have finished their elephant hunting, the ones that have been successful will develop their elephants, and those that haven't will withdraw. In their wake will be a wealth of opportunities that are attractive in their own right but simply not material enough for the big players.
"I think it's a great place for independents to be taking a position.