Exploring the earth’s palm in Namibia

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Exploring the earth’s palm in Namibia
ANE CEO Stephen Larkin

Looking for the Earth’s palm in Namibia

By Anthony Robinson

If Stephen Larkin, CEO of a small but highly innovative oil and gas exploration company called African New Energies (ANE), is correct, Southern Africa could well have world scale oil and gas deposits in South Eastern Namibia, bordering Botswana and the Kalahari Desert.

A study on the ground late last year appears to confirm a satellite surveillance process that significant but as yet unquantified oil and gas deposits exist in the Gobabis area in abundance, taking the find from speculative to possible.

If oil and gas do exist in Namibia, it could transform the region’s energy supply and provide a powerful boost to growth in Southern Africa. But how realistic is this prospect, and over what potential time scale? The chances are not great. Stewart Dalby , CEO of Oilbarrel , which helps companies raise cash for exploration on London’s Alternative Investment Market (similar to SA’s AltX on the JSE) or through private placements, says: “It’s a risky business and even before the collapse in oil prices, only 24 percent of oil exploration and development companies quoted on London’s junior AIM market were above water.

“It has got a lot worse since then but some companies, like Cairn, which cashed out of a big find in India and has just discovered oil again off Senegal, can keep going.” But ANE does have a compelling story.

Fifty years ago a handful of international oil companies, including BP, Shell, Total, Mobil and more recently the Croatian oil company INA, drilled a few exploratory wells to check out what their geologists told them were geologically plausible prospects in the ancient, late pre-Cambrian rocks of the Nama basin. These are linked to the nearby Karoo system. Similar geology, and the fault lines capable of trapping oil, extend north to the Great Rift Valley, site of several exciting finds in recent years, all the way up to Southern Sudan.

But, after spending several million dollars in the 1960s, big oil packed up and moved off to greener pastures. “They didn’t find anything because they were looking in the wrong place and didn’t do their homework properly,” says Larkin, who has little time for the costly but often unimaginative methods of the deep-pocketed oil majors.

A South African-born chartered accountant, with a penchant for sophisticated algorithms, Larkin has put together an impressive multifaceted team, including innovative software designer Brendon Raw, BP’s former Africa geologist Peter Hutchison, and former BP Russia country manager and legal director Richard Jones.

These veterans are backed up by a team of young Namibian professionals employing the sophisticated electronics and ground level soil and plant analysis techniques pioneered by Russian geologists in Siberia.

I met Larkin at an investors’ conference in London organised by Oilbarrel. He was pitching for £3m to finance the next stage of prospecting from small and medium investors. Just before Christmas I accompanied him and his crew as we drove up and down the 22 000 km²of bush farmland, acacias and red earth which cover the surface of the twin block exploration licence granted by the Namibian government two years ago. It extends from just outside the small town of Gobabis to within 10 km of the Botswana border, along the edge of the Kalahari Desert, with options to double the acreage.

Every now and then the peaceful drive was interrupted by whoops of triumph from the crowded back seat as specially developed ANE computer software registered sudden spikes or troughs of minute traces of uranium, potassium and thorium molecules.

For Larkin, flanked by IT experts Katjimuina Tjozongoro and Otneil Koujo and geologist Immanuel Ambata, the spikes were particularly significant. They appeared to confirm potential oil traps already shown by the initial satellite surveillance. This indicated the potential presence of an estimated 1,63bn barrels of oil equivalent in the top seven of the 32 prospective anomalies revealed.

During the trip, Larkin and the crew talked to farmers, herders and local officials, took water samples from cattle troughs, climbed into water tanks and spoke to local people who indicated places where, for example, sheens of paraffin lightly cover salt pans after rain.

For Larkin, who originally came to Namibia to advise the government on the feasibility of generating solar energy in one of the world’s sunniest countries, the ability to tap local knowledge and secure support from the mainly Herero local population is a key element both in the search for oil, and the wider intention to ensure that if found, it is used to benefit both the local community and Namibia as a whole.

Which could sound like just the usual pious hope, were it not for the fact that minute observation of changes to flora and earth texture is an essential element in ANE’s hydrocarbon lead indicator (HLI) surface exploration methodology. Herero land is one of the least populated and poorest regions of Namibia. Involving the local community in the project is not only good politics but an essential feature of the HLI strategy, which promises to triple the probability of discovery for as little as 10%-30% of the conventional cost.

The Soviet experience is relevant here. Poking around at ground level helped Soviet geologists, plagued by mosquitoes, camping for months in the wilderness and using only basic tools, to pinpoint vast underground deposits while scouring the vastness of Siberia. Updating those proven techniques for locating surface indicators of minute upward migration of hydrocarbon molecules is a key element in HLI’s tool box.

Satellite surveillance is the first step. It is very cheap and provides the basic template, followed by an aerial survey of the most promising area to indicate the depth of the potential resource. But the clincher could be ANE’s home-made radiometric survey techniques, which involve bone-jarring bundu-bashing at ground level, followed by seismic sounding from small, cheap drones flown low over the terrain.

The sophisticated algorithms and computer wizardry help to delineate possible field edges. Computer data is reinforced by data from geochemical sampling of the ground at the satellite-indicated locations of deep oil traps. These are usually the result of ancient fault lines blocking oil-bearing strata with non-permeable plugs.

The basic idea behind such minute measuring is that, no matter how tight the trap, there will always be some leakage, possibly only at a molecular level, which seeps to the surface and affects both the flora and the earth — turning normally red clays, for example, into a sort of grey cement, visible from the air, and checkable on the ground.

Only after exhaustive research from the sky and on the ground will the final decision be taken, sometime next year, to drill three slim-hole exploratory wells in the most promising areas, of which two out of three, the ANE team believe, have an 80% chance of success. When global oil prices sank to around US$10/barrel in the mid-1980s, one of the unexpected outcomes was Moscow’s decision to remove from Angola a 50 000-strong Cuban army it could no longer afford — paving the way for Namibian independence and the end of apartheid. Continuing low oil prices contributed to the disintegration of the Soviet Union itself a few years later.

That history is a reminder that oil prices exert powerful forces — especially if you allow your economy to become too dependent on manna from heaven — as the Soviets did for 30 years after the discovery of huge deposits in western Siberia, or as Vladimir Putin is now finding out.

Fast forward to 2015 and Cuba is again in the news for a Vatican-brokered rapprochement with Washington after a 50-year stand-off with the US. All honour to Pope Francis, but Cuba’s decision had at least as much to do with the fact that the near bankrupt petro-state Venezuela can no longer afford to supply Havana with the subsidised oil which Havana used to get from the Soviet Union in the good old days.

But where does the halving of global oil prices over the past six months leave SA, a country which spends roughly as much importing oil and gas as it earns from the exports of its entire mining industry, from coal to platinum? The answer is “broadly neutral” as lower prices for imported oil are offset by lower mineral export income. Mineral prices have declined sharply, especially coal and iron ore, due mainly to slower growth in China and other emerging markets, including Brazil and SA itself, and a stagnant Europe.

Lower oil and gas prices, also influenced on the supply side by the US fracking revolution, will do nothing to solve S A’s shortage of functioning power stations. But they could influence Pretoria’s eventual choice between inflexible and expensive nuclear power and cheaper and quicker-to-build gas-fired plant, given the proximity of huge gas fields in neighbouring Mozambique in particular.

The writer is an oil industry consultant and former Financial Times Correspondent

This article first appeared in the Financial Mail www,finanancialmail.co.za

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