Madagascar announces oil discovery; island nation to start producing crude in 3-4 years
September 30, 2005

Madagascar, the world's fourth largest island, announced the discovery of several oil blocks on land and offshore. The Indian Ocean island nation expects to start producing crude oil for the first time within the next 3-4 years, according to a report from Reuters.

Madagascar, one of the world's poorest nations, currently consumes about 10,000 barrels of oil per day. The newly discovered oil blocks are expected to yield around 60,000 barrels a day at the start of production. With oil currently trading at $67 per barrel, this could generate over one billion dollars a year in revenue for the country and oil developers. In 2003 Madagascar's GDP stood at $5.5 billion, or just $240 per person.

With soaring oil prices, oil giants have become increasingly interested in Madagascar's oil potential. Further, "a promising seismic study conducted in 2004 by privately held U.S. exploration company Vanco Energy has also generated a rush of interest" acccording to the Sep 29, 2005 Reuters article, "Madagascar says to become oil producer in 3-4 years" by Tim Cocks.

The article continues:
    In July, US oil major Exxon Mobil boosted its oil and gas presence in Madagascar by taking a 70 percent interest in two licences held by small UK-listed oil explorer Sterling Energy.

    Razaka said the initial production could change based on factors including world crude prices and the still-unknown extent of the deposits.

    "The rate of production will depend on the petrol companies but probably we will have somewhere near 50,000 barrels a day offshore and another 10,000 onshore, depending on the size of the reserves," he said.

    He said new technology for extracting oil obtained from bituminous shale rock meant Madagascar's onshore deposits were commercially viable at anything over $30 per barrel.

    "Below $30, we lose money because of the energy needed to blast the petrol out of the rock," he said.

    He said in the case of one onshore block: "We are almost certain we have 3 billion barrels."

    Besides Exxon, Norway's Norsk Hydro had already invested in offshore blocks, he said.

    The government was in the process of negotiating concessions with several other oil giants, including Chevron Texaco, Royal Dutch Shell, BP, Total, Norway's Statoil and China's National Petroleum Corporation, he said.

    American explorer firm Nopic is doing a seismic survey off the west coast.

    Razaka said oil could become Madagascar's major foreign currency earner, bigger than any of its mineral projects.

    The impoverished island is being explored by mining companies looking for gold, gemstones, nickel and bauxite.

    In August, Rio Tinto confirmed it would go ahead with a $775 million ilmenite mine in the south.

    "Suppose we can get 100,000 barrels per day at $60 per barrel. That's $6 million dollars a day, much of it going to Madagascar" said Razaka. "Compare that with $20 million per year that government expects from (Rio Tinto's) ilmenite mine."

This article is based on information and quotes from Reuters.

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