Geologists are eager to discover the next big field and place a notch on their belt; governments are anxious to join the burgeoning list of global oil and gas successes. That's why both groups are observing drilling activity offshore Africa, from the Ivory Coast to the Niger Delta and south to the rich plays offshore Congo and Angola, with keen interest.

Surely, they muse, there must be hydrocarbons in the middle of this great swath, offshore Equatorial Guinea. The small nation lies between Cameroon and Gabon, countries with an established oil and gas industry of their own.

West Africa will be the world's E&P hot spot for several years to come, garnering a larger share of deepwater drilling and development spending. Throughout the region, companies are building, or in the planning stage for, world-class methanol and power plants, liquified natural gas (LNG) plants and pipelines. If already announced plans are realized, current expenditures of $2 billion per year could grow fivefold by 2005, according to The Offshore West Africa Report, published by Douglas-Westwood Ltd. in Canterbury, U.K.

"Within the foreseeable future, capital investment could eclipse that in established regions such as the North Sea and Gulf of Mexico...The 176 fields expected onstream over the period to 2005 could boost regional liquids production by almost 3 million barrels per day," the firm says. Enough oil has been found in Angola alone that it will soon join the elite ranks of countries that produce 1 million barrels per day.

"People talk about all this new African production coming onstream, but you have to include all the development time that is required. That production could come on slower than people think," Triton Energy Ltd. president and chief executive officer James C. Musselman cautions.

The Dallas company already is producing, however, at the rate of about 45,000 barrels per day from four wells in its recently dedicated Ceiba Field off Equatorial Guinea. "We're absolutely thrilled with where we are," Musselman says. Last year Triton and its partners booked 113 million barrels of proved oil reserves (gross) at the deepwater field, with 75 million net to Triton.

Triton is one of a handful of independents that have enabled Equatorial Guinea to join West Africa's production party. Since 1995, the republic's oil output has been approaching one barrel per day per citizen-but there are only about 480,000 people in this former Spanish colony, which obtained independence in 1968.

One hopes that the government will deploy the revenues wisely for the benefit of its people. Indeed, in the capital, Malabo, construction cranes currently tower over a new two-story airport terminal that will replace a run-down older building. Expatriate oilmen who live in Malabo say they see tremendous progress already as more secondary roads have been paved, a few new office buildings go up and colonial-era hotels are renovated. The opening of a new Exxon Mobil service station was cause for ceremony a few months ago. And in a recent speech, President Teodoro Obiang Mbasogo vowed to spend growing oil revenues on various other infrastructure needs.

At year-end 2000, Equatorial Guinea ranked sixth among the top 15 countries outside North America in exploration efficiency (oil reserves added per new-field wildcat drilled from 1995-99), according to IHS Energy Group . It ranked 14th in the raw number of oil reserves added by new-field wildcat drilling.

Ceiba Field

The most recent production to come onstream is Triton Energy's Ceiba Field. It is named after the imposing national tree that grows up to more than 150 feet above the jungle, with a far-reaching canopy of leaves. The field lies in 2,400 feet of water, about 22 miles offshore Rio Muni in Block G. Following first production in late November 2000, the field was dedicated this past February by President Obiang.

Four subsea wells are producing a total of 45,000 barrels per day through flowlines tied back to the Sendje Berge, an offshore floating, production, storage and offloading vessel moored about four miles away, in 300 feet of water on the continental shelf. Triton does not yet know the limits of the field. At press time, it announced Ceiba #8 and #9, development wells that have extended the field to the west and northwest. They encountered a new, deeper pool and increased estimated field reserves.

"The Ceiba 8 and 9 have shown us that our acreage...clearly holds sizable upside surprises, so we are reevaluating it based on these encouraging results," said Musselman.

Including capital outlays on tap this year, Triton and its South African partner, Energy Africa Ltd. , will have spent about $600 million to date. By early 2002, 14 wells will have been completed-10 producers and four water injectors, when production should increase dramatically. Triton's PSC covers about 1 million acres on this block and neighboring Block F to the north.

Production at Ceiba began just 11 days after the FPSO, a revamped Norwegian very large crude carrier (VLCC), arrived on site-and only 14 months after the discovery was announced, a world deepwater record.

Shortly after Triton discovered the field with the Ceiba #1, it shifted into high gear with its suppliers and vendors.

An international team would fast-track development for early cash flow. The ministry of mines and energy approved the development early on, also keen to see production as quickly as possible. (See the sidebar.)

Ceiba's cash flow comes not a moment too soon, at a crucial time in Triton's history. For one thing, although the company has long been known as a world-class explorer with three giant fields under its belt in a decade, it is now demonstrating it can operate and produce.

More important, production from its famous Cusiana-Cupiagua complex in Colombia is down to an average 315,000 barrels per day, gross-impressive, but on a steeper decline than partner and operator BP had expected. Meanwhile, Triton's multitrillion-cubic-foot gas find in the Gulf of Thailand will not be producing until late 2002. The company is waiting on Thai environmental approvals, but more than 50% of the platforms' design and construction is complete.

Finally, Ceiba's success follows a rough patch for Triton when oil prices crashed in 1998. The former chairman and chief executive resigned, the stock fell to new lows and investors were not happy.

Dallas investment firm Hicks, Muse, Tate & Furst rode to the rescue in 1998 with a cash infusion, buying $350 million of convertible preferred stock. (The company owns 39% of Triton today.) And, Triton sold a portion of its Thai assets to Arco (now BP ) for $150 million. In October 1998, board member and interim chief executive officer James C. Musselman was named president and CEO.

"This investment essentially fixed our balance sheet and gave us the latitude to grow the company again," recalls Musselman. "We spent 1999 looking for acquisitions...but all the while, our heart and soul was in exploration. You can make more money for your shareholders if you explore."

In 1997 Triton had acquired a production sharing contract and some 2-D seismic data in Equatorial Guinea, and had later shot some additional 2-D. By 1999, it was ready to drill and was even prepared to do so heads-up (taking the full 100% working interest). At the 11th hour, Energy Africa took 15% of its first well. The discovery was announced that October. Initial reservoir pressure was 3,500 psi.

Like the Tertiary fan plays in the Niger Delta off Nigeria and the Congo Basin off Angola, Ceiba Field involves deepwater turbidite reservoirs. However, in the Rio Muni Basin where the field is located, these are Cretaceous in age, says senior vice president of exploration Brian Maxted.

"Ceiba was a nice, obvious prospect, but there is a lot of serendipity in this business. We tried to farm out a portion of Ceiba, but in 1999 the industry was in total disarray. Everybody's budgets were down," says Musselman. "It turned out to be fortuitous timing for us though, because rigs, subsea trees, installation vessels and so on were available at a good price. They were happy to be able to work with us."

As prolific as Ceiba's first wells are, recent appraisal and development wells confirm that the field appears to be getting larger. Tests of the first five wells suggest Ceiba is a great reservoir: porosity ranges from 20% to 30%, permeability is as much as several darcies, and oil saturation ranges up to 70%.

That's not to say that there haven't been disappointments-after all, the Rio Muni is an underexplored basin. Four exploration wells drilled since the Ceiba discovery were noncommercial. The G-4 on Block G was temporarily abandoned in January after a sustained oil flow rate was not achieved. Two other wildcats were drilled on the block last year.

"The permeabilities here are as good as they get anywhere. It's a bit frustrating, but this learning exercise is not unusual for a frontier basin," says Maxted. "We just need to combine these world-class source rocks and reservoirs with an effective trap for success. This is not a simple task, given the trap types are predominantly stratigraphic. We have appraised the infield; that is under development now. We have not yet fully delineated the outfield." Meanwhile, Triton did relinquish some acreage closer to the beach.

At press time, the company reported problems with Ceiba 1. After being tied into the FPSO in February, it was flowing about 11,800 barrels per day against an expected 15,000 a day. Apparently a packer failed, and the company has recovered less than half the fluid that was lost.

"The important thing is, this is not a reservoir issue. It's mechanical," says Musselman.

Recently, Triton fell short when it drilled a dry hole on adjacent Block F about 30 miles north of Ceiba. The rank wildcat, F-1, was attempting to find pay in a large structure at 10,180 feet. Although it found a good oil column, the sand was wet, so it was plugged and abandoned. The rig has returned to Block G, where it is drilling development and water injection wells at Ceiba. Triton plans to drill two more wells on the block this year. Dry-hole costs are about $6 million in the area, a fraction of costs in other deepwater basins such as the Gulf of Mexico.

"The encouraging thing is, we do see a good source-kitchen on the block in front of the shelf. It's just going to take us a minute to refine our geological interpretation," Musselman says.

"Unfortunately, seismic is not a perfect tool. We are disappointed by the four dry holes we have drilled but our enthusiasm for these blocks is still high. Longer-term, prospectivity is going to be in deeper water. This is a 'hump year' for us. By this time next year our cash flow will be kicking in from Ceiba and most of the capex will be behind us, so we can be more aggressive in drilling."

Methanol

Already maximizing production this year-but in natural gas rather than oil-is Houston-based CMS Oil & Gas . The company operates and holds a 52.38% interest in Alba Field, located about 18 miles northwest of Bioko Island. Its partners are Noble Affiliates ' Samedan subsidiary with 33.75%, Globex International , a private Dallas independent with 10.87%, and the government with 3%.

The original prospect in the area was drilled by Spanish firm Repsol in the 1980s, but at that time, a gas find offshore Africa wasn't considered worth much, so the acreage was relinquished. Later, Walter International of Houston took up the block after Mobil found Alba. CMS acquired Walter in 1995.

World energy dynamics have certainly changed. This year, Alba will be producing 250 million cubic feet of gas, 18,000 barrels of condensate and 2,300 barrels of gas liquids per day. Gas will feed the new methanol plant on Bioko Island at the rate of 125 million cubic feet per day, with the balance reinjected into the field.

"Equatorial Guinea represents about 30% of our total liquids production worldwide," says CMS Oil & Gas CEO Bradley Fischer. "It is an important part of our international asset base. This year we are evaluating further expansion of the field for condensate production, and we want to reinject more gas."

For tiny Globex, Alba is equally important. "At the time we got in, Africa wasn't on the radar, so it made it easier for a start-up like us, with a solely international focus, to get involved in a cost-effective manner," says Globex president Gene Kornegay. "This was the first country we entered and the first cash flow for us." Globex has no interest in the new methanol plant, but does have an interest in the liquefied petroleum plant that's part of the vast complex, which began operation this year.

Alba, in about 300 feet of water, may have 1.3 trillion cubic feet of gas, according to Noble Affiliates. It taps into an altogether different play than Ceiba, being closer to the Niger Delta. Volcanic subsea ridges, some of which led to the formation of Bioko Island, separate this play from the geology found offshore Cameroon, or to the south at Ceiba. Alba is an anticlinal trap that was formed by the uplift associated with a toe thrust, initiated by sediments on the Niger Delta immediately north, explains Ken Keag, head of CMS' Africa division, based in Malabo. Production is from Late Miocene Isongo sandstones.

The average well costs $7.5- to $8.5 million to drill and complete. In March a rig moved onto location to begin the Alba #9 in the southwestern part of the field. The #8 well was completed last fall. It tested 27.5 million cubic feet of gas and 2,040 barrels of condensate per day at a pressure of 3,000 psi-somewhat of a slacker compared with the #7, which tested 53 million a day. These wells are part of a plan to hike the field's capacity from 90 million cubic feet a day to 250 million.

CMS also recently drilled the Los Loros #1 farm-in to earn a 50% interest and operatorship in Ocean Energy Inc.'s Block D, immediately west of Alba.

Unlike many places in Africa with burgeoning gas production that is flared, there is a market for Alba's gas at the nearby methanol plant, and under long-term contracts at that.

For three years now, gas has been flared at the methanol plant while it was under construction adjacent to Malabo's airport. Travelers landing at night, or in the severe haze often present during the day, were greeted by a spectacular flare that was used as a beacon for many miles. Pilots of oilfield helicopters based in the city joke that once the flare disappears as the gas goes into the new plant, how will they ever find the runway?

Some 125 million cubic feet per day of Alba gas will feed the massive new plant, built and operated by Ampco ( Atlantic Methanol Production Co. ), which in turn is owned by CMS Energy (the oil company's Detroit utility parent), and Noble, each with 45%. The government owns the remaining share. The balance of the gas will be reinjected into Alba Field for pressure maintenance.

Plant capacity is about 19,800 barrels of methanol per day. After 13 to 14 days of production, there is enough to offload into tankers anchored in Malabo Harbor, which take the product to Europe or Houston. CMS and Noble say the plant's delivered cost of 19 cents per gallon bests the average 32 cents per gallon cost of producing methanol in the U.S.

With cash margins projected at 41 cents per gallon, net of production and marketing costs, the annualized net cash flow to CMS and Noble will be about $50 million each.

CMS is not done in the prolific waters west of Bioko Island. It recently hit pay dirt at the Estrella #1 about five miles from the Alba platform. This well tested 47.3 million cubic feet of gas and 6,780 barrels of condensate per day from two intervals between 6,950 and 7,200 feet, under high pressures of more than 4,000 psi.

"We are very gratified by this discovery and we intend to develop it quickly, but prudently," Fischer says. Globex and Samedan are also partners in this well. They will produce it via a tieback to Alba and they are considering drilling a second well this year to further delineate the find.

The reservoir is older than that found at Alba, but is in the Isongo formation as well. The field is sealed by Pliocene-age shale above, Keag says.

Zafiro

Field Ocean Energy Inc. is another independent that is making West Africa a cornerstone of its international growth strategy. The Houston firm holds significant acreage off Cote D'Ivoire, where it has been active for about a decade, Equatorial Guinea and Angola's Kwanza Basin.

Today it holds 1.7 million gross acres in four production-sharing contracts in Equatorial Guinea. Ocean and its 71% farm-in partner, Exxon Mobil, are the largest producers in Equatorial Guinea, with their successful Zafiro Field northwest of Bioko Island on Block B. An Ocean predecessor, United Meridian, discovered the field in 1995 and later brought in Mobil to operate.

"Zafiro is our legacy asset, the biggest in our international portfolio," says Ocean's Earl Reynolds, senior vice president, international operations. "This is about 30,000 barrels a day net to us, so it is a very material project. In fact in 2001, most of Ocean's production growth will come from this field."

Former chairman John Brock recalls that after the company came across an opportunity to look at some old records and seismic data, it jumped at the chance. Soon after, he heard whoops of excitement from the geologists when he was walking down a hallway at United Meridian's Houston office. He poked his head into the room to see what was causing the excitement. "I knew they had come across something good," he says, once he looked at the data too.

Indeed. By 1999, Zafiro was producing an average 96,000 barrels per day, gross, and at press time, it was up to about 145,000 a day, gross, out of 19 wells. Peak rates should be achieved in 2002. Water injection and gas lift are increasing production.

Pay is in Miocene channel sands. "The reservoirs are fairly unconsolidated, so they have been drilled in long-reach or extended-reach, up to 12,000 feet displacement from the wellbore," Reynolds says. "We are using 3-D to understand the complexity, and gravel-pack completions for sand control."Last year the partners reached a milestone when they installed the Jade platform, currently the largest fixed structure offshore Africa, in 550 feet of water. The $560-million, 40-slot platform has the capacity to produce 60,000 barrels a day of Zafiro's total. It also has an integrated rig that allows the company to drill more wells. Extended-reach drilling is being used to develop satellite fields in the eastern portion of the multipay structure. Production is stored in a nearby FPSO and exported by tankers through a single-point mooring buoy.

Eleven development wells are scheduled this year to be drilled from Jade-seven producers and four water injectors. A series of redrills also will boost production. Currently some 55- to 60 million cubic feet per day of associated gas is flared, but the partners will drill their first gas injection well later this year off Jade.

Exxon Mobil has estimated that Zafiro has ultimate recoverable reserves of about 400 million barrels of oil. The field is a key component of its Gulf of Guinea asset mix, which also includes significant fields offshore Nigeria and Angola, as well as onshore Chad.

Recently, a well for which Ocean had high hopes turned up dry, showing once again that Mother Nature always has the last word. On nearby Block C, where Ocean and Exxon Mobil each had 37.6% interest, they drilled the Oreja Marina.

At the Howard Weil energy conference in New Orleans in late March, Ocean Energy CEO James Hackett revealed that the wildcat found hydrocarbons in the Isongo formation, but not in commercial quantities. Exxon Mobil confirmed the disappointing results.

Now it is back to square one for further study.

The Zafiro Field lies on the border between Nigeria and Equatorial Guinea. Exxon Mobil also has rights to explore 22 blocks in neighboring Sao Tome and Principe, the tiny island nation just to the west. Late last year, that country, Nigeria and Equatorial Guinea settled some long-standing disputes about their offshore borders where the three nations meet.

In addition to exploring, most of the companies active in Equatorial Guinea have sponsored projects to help the local people and build good community relations. Exxon Mobil and Ocean Energy have installed clean water lines or drilled water wells in some remote villages on the mainland, and helped with school books and clothing. Ocean also sponsors a local soccer team.

Globex is organizing a group that this summer will take pre-cut school desks to be assembled in the country, as well as playground equipment.

CMS Oil & Gas cosponsors the Bioko Biodiversity Protection Program with Beaver College of Glenside, Pennsylvania. Their objective is to protect the wildlife found on the southern part of Bioko Island, where a rare troop of mandrills (one of only three such primate groups in the world) and four species of sea turtles reside.

This proactive stance, along with rising oil and gas revenues, gives Equatorial Guinea a chance to prosper in coming years and catch up with other countries in the new century.