Midstream company GAIL (India) Ltd. is seeking Ophir Energy’s remaining 20% stake in three offshore blocks in Tanzania, while ONGC Videsh Ltd. (OVL) is preparing to bid for some of eight offshore blocks offered by Tanzania Petroleum Development Corp. (TPDC) in the ongoing fourth licensing round.

“We are in negotiations with Ophir Energy for a stake. They have sold 20% but still have a 20% stake in three blocks,” Prabhat Singh, GAIL’s director of marketing, said.

Ophir Energy, which counts India’s LN Mittal Group among its investors, last month sold half of its 40% interest in three gas-rich offshore blocks in Tanzania – blocks 1, 3, and 4 – to Pavilion Energy (a subsidiary of Singapore’s sovereign wealth fund Temasek Holdings) for US $1.33 billion. These three offshore blocks are part of the offshore Rovuma basin, where the operator BG has discovered total gas reserves of about 425 Bcm (15 Tcf) so far.

OVL, which acquired a 20% stake in the offshore Area-1 block in Mozambique for about $5 billion, also is looking to acquire a stake in the existing assets and participate in development of new blocks offered in the fourth round of bidding. During the India-Tanzania Joint Trade Committee meeting held in Dar es Salaam recently, OVL stated it would place bids for some of the blocks offered in the fourth round of bidding, particularly the offshore blocks in the Rovuma basin.

During the meeting, India’s junior minister for commerce and industry, D. Prandeshwari, asked Tanzanian authorities to consider OVL’s participation in two offshore blocks reserved for the state-owned TPDC – Block 4-1/B and Block 4/1C.

TPDC is seeking bids for seven deepwater blocks and one shallow-water block from the global companies as part of the fourth round of bidding. Seven deepwater blocks (blocks 4/2A, 4/3A, 4/3B, 4/4A, 4/4B, 4/5A, and 4/5B) are located in water depths ranging from 2,000 m to 3,000 m (6,562 ft to 9,843 ft) in the Indian Ocean, and the shallow-water block (North Lake Tanganyika) is located offshore the western arm of the East African Rift System.

They are located on the eastern side of offshore blocks 1, 3, and 4 and are considered to be part of the Rovuma basin. The latest round of bidding closes on May 15, 2014.

Huge oil, gas resources

The huge discoveries in the Rovuma basin by BG Group and Statoil, along with plans to develop a mega gas liquefaction facility along the Tanzanian coast, have tempted India’s state-owned companies.

On Dec. 10, BG announced an increase in total recoverable resources for the Mzia discovery and across blocks 1, 3, and 4 offshore southern Tanzania after a successful drilling campaign. The campaign confirmed Mzia in Block 1 as the second largest gas discovery, after Jodari, with 133 Bcm (4.7 Tcf) of total gross recoverable resources.

“The Mzia-3 appraisal well, drilled approximately 6 km [3.7 miles] north of the original Mzia-1 discovery in 1,780 m [5,840 ft] of water, has been cored and logged. Results confirm the reservoir sands are extensive and of similar quality to those found in the Mzia-1 and Mzia-2 wells. In addition, the gas-down-to level proven in Mzia-3 is around 100 m [328 ft] deeper than that of Mzia-2,” BG said after the appraisal tests.

Further north, detailed technical analysis of the Block 4 discoveries Chewa, Ngisi, and Pweza – which also were appraised and tested in the campaign – was positive with total gross recoverable resources in the block now estimated to be around 142 Bcm (5 Tcf). This means the exploration and appraisal campaign of 14 wells that was started in 2010 offshore Tanzania has had a 100% success rate.

BG estimates that the total gross recoverable resources across blocks 1, 3, and 4 are now estimated to be around 425 Bcm, with further exploration upside.

Last week, Statoil and its partner ExxonMobil announced the discovery of an additional 57 Bcm to 85 Bcm (2 Tcf to 3 Tcf) of natural gas in place in the Mronge-1 well in Block-2, which brings the blocks’ total of in-place volumes up to 481 Bcm to 566 Bcm (17 Tcf to 20 Tcf).

Enthused by the success, BG and Statoil are looking at developing a gas liquefaction facility on the Tanzanian coast. “We have sufficient resources for a two-train LNG project in Tanzania. The aim of our appraisal program now is to optimize the future development plan and place the most economic gas into the proposed project first to extract the most value across the chain,” Chris Finlayson, BG Group’s CEO, said.

“Onshore, BG Group and its partner Ophir Energy, together with the partners in Block 2 – Statoil and ExxonMobil – are continuing to make good progress in the assessment of a multitrain LNG project. We look forward to the Tanzanian government’s announcement of a decision on the location of an onshore site for an export facility,” he added.

The Tanzanian authorities have indeed favored export of part gas resources in the absence of developed oil gas industries within the country and neighboring countries. They want to tap markets like India, China, and Japan before the start of supplies from the new discoveries in Mozambique, Kenya, Uganda, and South Sudan.

The country’s deputy minister for energy and minerals, George Simbachawene, told those at an industry meeting in Singapore last month that his government is looking at developing a huge gas liquefaction facility similar to those developed by Qatar in the southern part of Lindi state, which is close to offshore Block-1.

Close to markets

Like Mozambique, Tanzania presents an exciting opportunity to be a potential gas supplier, with an unexplored region that has significant upside potential, geographical proximity, and a stable political system for energy-deficient India. It is strategically located to supply LNG to the markets in the Asia-Pacific region.

India and Tanzania are located on opposite sides of the Indian Ocean. The geographical distance between India’s west coast and the Tanzanian shore is just 2,432 nautical miles, which means the LNG import terminals located on the India’s west coast could import liquid gas from the East African state for less shipping costs compared to that from Australia, the US, and Nigeria.

The East African states offer LNG supplies through seal routes that are free from political conflicts. The supply lines do not have conflict zones like the Strait of Hormuz that could threaten to stall supplies and escalate global prices. The shipping routes between East Africa and Asian economies across the Indian Ocean are unlikely to be affected by military conflicts, and even threats from pirates are decreasing after intense patrolling by the naval forces of littoral countries.

The acquisition of oil and gas assets abroad is crucial for India, considering the limited nature of India’s domestic energy sources and dependence on oil and gas imports. India – the fourth largest oil consumer in the world – currently imports more than 75% of its crude oil and gas requirements.

The demand for gas in India continues to outstrip supplies in the absence of major gas discoveries and transnational gas pipelines. Gas supplies, according to the country’s planning commission, totaled 143.22 MMcm/d (5 Bcf/d) in fiscal year 2012 to 2013, whereas demand totaled 286 MMcm/d (10 Bcf/d). The commission estimates that the demand for gas is expected to reach 466 MMcm/d (16 Bcf/d) by March 2017 in comparison to an estimated supply of 231.74 MMcm/d (8 Bcf/d).

The gas shortage needs to be bridged through LNG imports. Petroleum and natural gas minister Veerappa Moily said that efforts are on to increase the country’s LNG regasification more than 50 million tons per annum by fiscal year 2016 to 2017 from about 14 million tons at present.