UPDATE: East Africa Gas Potential Grows With New Anadarko Discovery

The potential for East Africa to become a significant new natural gas producer grew Monday as Anadarko Petroleum Corp. (APC) said it had made the fourth major deepwater discovery off Mozambique's coast.

The latest find follows other large discoveries in Mozambique's Rovuma basin by Anadarko and its partners and similar finds in the same geological structure offshore Tanzania by BG Group PLC (BG.LN).

"The discovery at the Tubarao prospect opens an entirely new play style, which has additional opportunities in Mozambique's Offshore Area 1," said Bob Daniels, Anadarko's senior vice president of worldwide exploration. "This is our fourth significant discovery in the offshore Rovuma Basin and further strengthens our confidence in our geologic and geophysical models of the basin."

Anadarko said in November that its discoveries off the coast of Mozambique have given it confidence that reserves are big enough to justify a liquefied natural gas project. Industry analysts say gas discoveries off Africa's east coast would be ideally placed to supply Asian natural gas markets by the middle of the decade, when the current surplus of LNG cargoes is expected to have been absorbed by increased demand.

Anadarko has not given a reserve estimate for the discoveries.

Bill Herbert, an analyst with Houston-based energy investment bank Simmons & Co., estimated the first three discoveries will likely yield between 6 trillion and 8 trillion cubic feet of gas. Reserves of four trillion cubic feet of natural gas are typically required to justify investment in a single-train LNG facility.

The Tubarao well was drilled to a total depth of approximately 13,900 feet in water depths of 2,950 feet, around 18 miles offshore. It encountered more than 110 net feet of natural gas pay and no water in a high-quality Eocene-age reservoir that is separate and distinct from the hydrocarbon accumulations in Anadarko's three previous discoveries, the company said in a statement.

Anadarko's partners in the well are Mitsui Corp. Ltd. (MITSY), Bharat Petroleum Corp. Ltd. (500547.BY), Videocon Industries Ltd. (511389.BY), Cove Energy PLC (COV.LN) and Empresa Nacional de Hidrocarbonetos, Mozambique's national oil company.

Evolution Securities analyst Richard Griffith said the latest discovery raises the likelihood that other undrilled potential reservoirs in the area also contain gas. He raised his target price for Cove Energy to 140 pence a share, from 155 pence a share, following the announcement.

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com

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