Regional Focus - The Latest in Africa’s Oil & Gas

Africa holds a lot of natural resources, and alongside rare and precious metals, oil and gas resources —both onshore and offshore—have changed the fortunes of many countries in the continent.

After a pause in exploration and final investment decisions during the latest oil price crash and subsequent downturn, Africa returns on the global oil and gas stage with several major projects approved or launched in recent months and with renewed exploration drilling by major companies and smaller Africa-focused firms.

After the oil industry recovered from the downturn, many major companies are looking to Africa’s offshore for the next ‘elephant’ discovery—one that holds more than a billion barrels of crude oil.

Thanks to improved market conditions and lowered costs, oil and gas exploration and production companies plan to boost their exploration drilling all around the world this year, driven mostly by increased investments in South America and Africa, Rystad Energy reckons.

The world’s most exciting wildcats this year include the Central Tano-1 well offshore Ghana, classified as a large prospective resource with an estimated potential of up to 2.3 billion barrels of oil, according to the Norway-based energy research firm.

The Venus prospect off the Namibian coast, where France’s Total aims to drill the deepest well ever drilled in Africa, is also one wildcat to watch, Rystad Energy said.

Total has already made a major gas condensate discovery in Africa this year. In early February, the French supermajor said that it had made a significant gas condensate discovery on the Brulpadda prospect off the southern coast of South Africa.

“With this discovery, Total has opened a new world-class gas and oil play and is well positioned to test several follow-on prospects on the same block,” said Kevin McLachlan, Senior Vice President Exploration at Total.

“Brulpadda was one of Total’s biggest exploration targets this year. The gas-condensate discovery continues the great start for Total’s 2019 exploration campaign, hard on the heels of the North Sea Glengorm find,” Dr Andrew Latham, vice president, global exploration at Wood Mackenzie, said, commenting on the South African find.

“Even though the well isn’t an oil discovery, if Brulpadda proves to be anywhere near as big as the estimates of up to 1 billion barrels of oil equivalent resources, it will still be a game-changer for South Africa,” Latham noted.

Even before Total’s major gas find, WoodMac considered South Africa to be one of this year’s exploration hotspots, together with Guyana, Brazil, Mexico, the US Gulf of Mexico, Cyprus, and the Barents Sea in Norway.

Exploration in Africa will continue to recover in 2019, and WoodMac expects the number of exploration wells in Sub-Saharan Africa to almost double to 40 this year, compared to 24 well completed last year. The oil and gas majors will be the leading explorers in African waters, with Total in South Africa, Namibia, and Angola. Eni is also expected to drill at least one of up to four exploration wells offshore Angola, while the Italian major will also begin exploration offshore Mozambique. ExxonMobil is also set to drill offshore Mozambique, Wood Mackenzie said.

While companies plan more exploration drilling, many of them are proceeding with major oil and gas projects in Africa.

Offshore Nigeria, Total started at the end of December production from the ultra-deepwater Egina oil field, which will produce 200,000 barrels of oil per day, accounting for around 10 percent of Nigeria’s production.

Tullow Oil is progressing with its Kenya oil development plan and it “continues to target a Final Investment Decision (FID) in late 2019 and First Oil in 2022,” the company said in its 2018 results release.

“A maiden lifting of Kenyan crude oil is expected in mid-2019. Tullow has begun to market Kenya’s low sulphur oil ahead of this first lifting with initial market reactions being very positive,” the company said, referring to the Early Oil Pilot Scheme (EOPS) for exporting Kenyan oil.

BP has been very active in many parts of Africa in recent years and is now reaping the results of previous discoveries and investments.

In December 2018, BP agreed to acquire from Eni a 25-percent participating interest in the Nour North Sinai concession area offshore Egypt. BP has invested around US$30 billion in Egypt over the past five decades, which makes it one of the largest foreign investors in the country.

In the last two years, BP has invested more money in Egypt than in any other country in the world, chief executive Bob Dudley said in February.

In the same month, BP announced that it had started gas production from the second stage of Egypt’s West Nile Delta development—the second major upstream project to come on stream for BP in 2019, after the Gulf of Mexico’s Constellation development, in which BP holds a non-operated 66.6-percent stake.

Elsewhere in Africa, BP signed in December 2018 an agreement with Angola’s Sonangol to progress to final investment decision the development of the Platina field in deepwater Block 18 offshore Angola. BP and Sonangol also signed two other memoranda of understanding (MOUs) regarding potential further access and exploration offshore Angola and co-operation in a planned new products and crude terminal and storage facility in Angola.

A few days later, BP announced the FID for Phase 1 of the cross-border Greater Tortue Ahmeyim development in Mauritania and Senegal.

“It represents the beginning of a multi-phase project that is expected to deliver LNG revenues and gas to Africa and beyond for decades to come. We see this as the start of a new chapter for Africa’s energy story and are honoured to work alongside our partners and the governments of Mauritania and Senegal,” said Bernard Looney, BP’s Upstream chief executive.

After the FID, TechnipFMC said in early March that it had been awarded by BP a large contract for the engineering, procurement, construction, installation and commissioning (EPCIC) of the floating production storage and offloading (FPSO) unit to be deployed on the maritime border of Mauritania and Senegal for the Greater Tortue Ahmeyim Development. For TechnipFMC, a “large” contract means a deal whose value is between US$500 million and US$1 billion.

Looking forward to major FIDs specifically in sub-Saharan Africa in 2019, WoodMac expects quality to prevail over quantity. Although the consultancy expects fewer FIDs across the region than in 2018, the FIDs this year will be much larger in scope as associated reserves and capex will increase three-fold, with Mozambique expected to lead the pack.