Eni to Invest US$3B in Republic of Congo; Focus on Tar Sands and Palm Biodiesel

20 May 2008

Italy-based oil and gas major Eni will invest US$3 billion in the Republic of Congo over the next four years, generating an expected equity production of 150 million barrels of oil equivalent from tar sands and biodiesel production.

Eni reached an agreement with the government for the exploration and exploitation of non-conventional oil in tar sands in Tchikatanga and Tchikatanga-Makola, two areas covering a total of 1,790 square km. According to preliminary studies undertaken on a 100 square km area, recoverable reserves are estimated at between 2.5 billion barrels unrisked and 500 million barrels risked.

Eni will carry out an exploration phase that will include geological and geophysical studies, prospecting and laboratory tests aimed at defining the technical feasibility of the industrial development of the areas.

The exploration phase, which will last three years and may be renewed for an additional four years, involves geological and geophysical studies, high resolution 2D seismic studies and the drilling of three wells.

A second, commercial phase envisages sending the extracted tar sands to the Commercial Demonstration Plant of the Eni refinery in Taranto (CDP EST) to carry out a test lasting 3-4 months relating to the extraction of the tar from the sands, its storage, dilution, transformation into a commercial product and its shipment. The Republic of Congo would be the first country in Africa where large amount of tar sands have been discovered and valorized.

The third phase involves marketing on an industrial scale, assessing the installation of an Eni Slurry Technology (EST) plant at the refinery in Pointe Noire, fueled by gas from the M’Boundi field. (Earlier post.)

The project, which Eni calls “of great strategic value,” will allow the company to develop and consolidate specific skills in tar sands, taking advantage of proprietary Eni Slurry Technology (EST) for the treatment and improvement of the quality of heavy oils, opening up a new field of research in Africa.

The project will also benefit from synergies resulting from the close proximity of the M’Boundi oilfield. Gas associated with oil production in this area can also be used to supply the EST plant and enrich the heavy oil, while achieving the goal of reducing atmospheric emissions under the Kyoto protocol.

A Memorandum of Understanding on a Food Plus Biodiesel project outlines a framework for collaboration in the use of vegetable oils from palm tree cultivation on approximately 70,000 unfarmed hectares in the Niari region, in the North West of the Country. This land is expected to produce approximately 340 thousand tons/year of crude palm oil, enough to cover domestic demand for food uses and produce 250,000 tons/year of biodiesel.

Crude vegetable oil that will not be used for food will be destined to biodiesel production using Eni’s proprietary Ultra-Bio-Diesel technology. After a first pilot phase, the feasibility of building a bio-refinery in the Congo will be considered.

As part of a larger umbrella cooperation agreement with the Republic of Congo, Eni will build a 300 MW open cycle power station, which can be expanded to a 450 MW combined cycle station by installing steam turbines. The power station is due to be completed by the end of 2009 and will supply important industrial customers who currently have to generate their own electricity because of frequent interruptions in the electricity supply.

The power plant, which will cover more than 80% of the national electrical requirement, will be owned by a new joint stock company of which the shareholders are Eni Congo 8 (20%) and the Republic of Congo (80%). The new plant will be fueled by natural gas associated with the M’Boundi oilfields and at a later date by the offshore discoveries of Marine Permit XII, assigned to Eni in April 2007.