Despite oil and gas company SacOil announcing on Thursday that it had incurred a loss of R277-million for the current financial year compared with the R9.5-million profit it achieved in 2014, CEO Dr Thabo Kgogo remained upbeat about the company’s long-term prospects.
He told Engineering News Online that the losses incurred by the company were almost entirely attributable to the restructuring it had undertaken in the past year.
“In 2014, we had a number of unfunded exploration assets as part of our portfolio, such as our joint venture project with Nigeria’s Nigdel United Oil Company and liabilities of in excess of R650-million. There was, in fact, a period where there was material uncertainty about the companies going concern status.”
Kgogo added that, notwithstanding these losses, SacOil had a cash balance of R229.4-million and would soon be receiving about $12-million in a refund from Nigdel for the outlay on the project, which would support the company’s plan to pursue more opportunities in Africa.
However, SacOil had devised a strategy whereby it would no longer focus solely on exploration activities as it needed cash flow. This resulted in the company buying a 100% stake in the onshore Lagia oil field in Sinai, Egypt, in October 2014, which became operational in January.
SacOil was now the owner and operator of the Lagia oil field.
“Egypt has become increasingly more politically stable in recent months and Lagia is a low-cost producer. The acquisition cost was $2.8/bl, which is significantly lower than the $5/bl to $10/bl cost that is the average throughout the industry,” Kgogo pointed out.
SacOil executive director Bradley Cerff noted that the company’s Egypt asset had an estimated lifespan of 25 to 30 years, which was based on the company’s aim of averaging 1 000 bbl/d.
He said Lagia was currently producing on average about 200 bbl/d.
However, Cerff highlighted that SacOil was preparing to start the second phase of the project, which would entail field development and production optimisation by June this year.
This second phase included the installation of steam facilities for a thermal-recovery process on the existing production wells and the drilling of five additional thermal wells at Lagia, with the intent of further enhancing production and the recovery of oil at the oil field to 1 000 bbl/d.
SacOil and Mozambique State-owned investment portfolio manager Instituto De Gestão Das Participações Do Estado had secured a memorandum of understanding to build a gas-processing plant in Mozambique and a pipleline that would transport fuel about 2 600 km to South Africa.
“This project is critical for energy demand issues in South Africa and Southern Africa broadly. We expect this project to take about five years to develop at a cost of about R6-billion,” stated Kgogo.
The project would require anchor client contracts of at least 20 years in South Africa, Mozambique and potentially other neighbouring countries in Southern Africa to ensure its financial feasibility and long-term sustainability.
However, Kgogo noted that this was standard practice in other parts of the world, such as in the European Union and Russia.