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Oil & Gas Journal

Jim Stott
Special Correspondent-Calgary

There is only one way to take a smaller North American independent and turn it into an expanding producer in Africa with good growth prospects.
Slowly, with a great deal of due diligence and more than a pinch of North American entrepreneurship, says David Lyons, president and CEO of Pan-Ocean Energy Corp. Ltd.

The former small Alberta producer, once known as Ocelot Energy Inc., is now headquartered in the tax haven of Jersey, Channel Islands. Lyons is based in Winchester, near London.

In its operations in Gabon, the company has focused on development of low-cost, long-life light oil reserves. Pan-Ocean is now an established producer of light crude oil, both onshore and off Gabon. The company is producing more than 8,500 b/d of light crude and expects to increase that to 12,000 b/d by yearend, based on its current exploration, appraisal, and development drilling program.
Lyons says there is a real prospect of going to a production level of 20,000 b/d in the next 2 years. That points to the rationale for the company moving from Canada: declining Western Canadian oil reserves and the fact that many smaller companies hit "a glass ceiling" on production growth at about 10,000 b/d.

Meanwhile, the company also has participated in the Songo Songo natural gas development, pipeline, and gas-fired power project in Tanzania (OGJ Online, Oct. 23, 2001). It disclosed in February that its board approved a restructuring of Pan-Ocean assets that would lead to the company distributing its Tanzanian assets to Pan-Ocean shareholders as equity in a new, separately managed public company. "The rationale for the restructuring is to allow the two companies to focus on their respective core businesses and to enhance access to capital for the new company that will hold the Tanzanian assets," the company said at the time.

Gabon choice
Lyons said he visited more than half the countries in sub-Saharan Africa before choosing Gabon as the ideal place for a small producer to set up shop. He says the same cautious approach should apply to any country in West Africa, and stresses that each one is different.

The Pan-Ocean CEO says any company considering a similar move should be prepared for a long haul and a slower development process than in a North American setting.
"I don't think there is such a thing as an overnight international success story. It just doesn't exist. It's an oxymoron," Lyons says.

He says the prospecting criteria for a good location was a long-term project involving large volumes of data. These included: the various grades of countries' crude oils, the presence of other foreign companies, infrastructure in place, the ability to raise finances, and political stability.
"You have to be very careful. It's a lot like the real estate game. The best projects do have the best fundamentals and the best location. We essentially settled on Gabon as the best place in sub-Saharan Africa to find oil."