“Currently we have a first strike plan to de-bottleneck the production facility to generate quick revenue and cash flow,” said chairman Al Njoo.
But in his latest venture, he sees the greatest potential.
“Well, we have a big resource; it’s a big field. So, the development will take a multi-phase incremental production approach,” Njoo told Proactive’s Katie Pilbeam in an interview.
“Currently we have a first strike plan to de-bottleneck the production facility to generate quick revenue and cash flow.
Historically heavy oil has often been associated with high sulphur, a pollutant. However, Al Njoo points out: “Ours is a premium crude. It’s not your typical heavy oil, which is more dirty.”
When refined heavy oil yields high levels of residual fuel oil which is used by the shipping industry as fuel for ships. Since January 2020 ships have been required by the International Maritime Organisation to use low sulphur fuel oil. This has precipitated a high demand for low sulphur heavy oils such as Madagascar Oil’s.
“What differentiates it is a very clean crude at 0.3% sulphur; it’s very high quality, we blend (low cost, no refinery process required) to be able to meet the IMO 2020 specifications which is the clean bunker fuel specification,” said Al Njoo, who pointed out Madagascar oil is expected to sell at a premium to the benchmark Brent crude, in line with prices achieved by similar types of crude oil.
Before the IMO2020 new standards, marine fuel had over 2.5% to 5% sulphur content. “Morgan Stanley pointed out 1 cruise ship generate as much sulphur oxide pollution as 350 million cars.”
In the shorter term, the company is pushing forward simultaneously with plans to make local sales and also accessing the regional export markets.
Domestic prices in Madagascar are high by international standards as the country currently import 100% of their fuel oil needs.
In developing Block 3014, also known as Tsimiroro, Al Njoo and his team will be hoping it will become integral to the economic success of Madagascar and its people.
The company is now embarking on the first phase of development of an oil deposit that has been estimated at 1.7bn barrels in resource and significant reserve.
In doing so, Tsimiroro will contribute greatly to the economic development of the country and prosperity of its people.
“We expect first sales to materialise early next year, first quarter next year,” said Njoo.
“We would be selling our crude from inventory from our tanks. So, we will have immediate cash flow at the same time with our quick approach to the de-bottlenecking we’ll increase production relatively quickly”
“So, we’ll be generating revenue at a rate of about US$40mln-US$50mln a year, which is a good start.”
The development of the Tsimiroro oilfield will be done in as environmentally sensitive manner as possible, leaning heavily on solar power for its energy requirements.
“This will create a sustainable development as well as lowering our costs and increasing our margins,” said the Madagascar chairman, who also heads up the company’s main shareholder, Benchmark Group.
In the interview Al Njoo said Madagascar had appointed Carlingford, part of GFI Securities, to assist in arranging financing for the roll out of the development of the Tsimiroro oil field.
So, these are exciting times for the group.
Read More: Madagascar Oil set for quick cash flows as it advances a ‘big field with big potential’