Oil Majors Are Eyeing Big Payouts In Africa

 Oil Majors Are Eyeing Big Payouts In Africa

The optimistic response to a recent discovery in the Ivory Coast by Italian oil giant Eni, the first big find in the country in two decades, suggests that many African states are not yet ready to give up on fossil fuels and make the shift to renewables. 

In September, Côte d’Ivoire announced a major offshore oil and gas discovery, following initial exploration success in 2014. The positive outlook led several international oil firms to battle over the country’s oil reserves. A 2019 licensing round saw the government sell exploration blocks for a total of $185 million, with Italy’s Eni taking a major stake, with two exploration blocks- CI-501 and CI-504, as well as France’s Total taking on exploration and production activities in the country. Britain’s Tullow Oil had previously won licenses in the region in 2017. 

Oil major Eni stated last month that it had discovered up to 2 billion barrels of oil and an additional 2.4 trillion cubic feet of associated gas from the Baleine well, located about 60km off the coast. The well offers the first deepwater commercial discovery in over 20 years. 

The discovery adds to the Ivory Coast’s proven reserves, which previously stood at around just 100 million barrels. Eni shares the newfound reserves with the state government, which holds a 10 percent stake. While the country’s output is significantly lower than Africa’s biggest oil producers, at just 50,000 bpd, the discovery offers optimism around potential new finds in unexplored areas. 

Several major international players have shown interest in the West African region, hoping to develop the region’s oil industry before the global demand for oil decreases. West Africa’s upstream oil and gas market is expected to achieve a CAGR of around 6.7 percent between 2020 and 2025. Underexplored oilfields and low production costs are two of the main drivers for oil firms investing in the region.

It’s not just the Ivory Coast that we’re seeing develop its oil and gas industry, as several countries across the continent are going full steam ahead with oil projects this year, attempting to strike while the iron is still hot. 

Another West African country looking to luck out on recent discoveries in Senegal. Between 2014 and 2017, several major oil and gas finds were made in region, with discoveries of 1 billion barrels of oil and over 40,000 billion cubic feet of gas.  

Within the same region, BP is expected to commence drilling operations in the Mauritania, Senegal, The Gambia, Guinea-Bissau, and Guinea-Conakry (MSGBC) basin at the beginning of 2022. BP hopes to develop its Greater Tortue Ahmeyim LNG gas project, expecting to produce 2.5 million tonnes of LNG annually. Australian firm Woodside Energy will commence output of both oil and gas in the region’s Sangomar oilfield by 2023. 

This month, Norwegian firm BW Energy also announced ventures in West Africa, gaining two blocks near its Dussafu asset in Gabon’s 12th licensing round, which has been repeatedly delayed since 2019 due to the pandemic. BW will work in partnership with Vaalco Energy and Panoro Energy as the operator of the G12-13 and H12-13 blocks for an exploration period of eight years. At present, Gabon is thought to have 2 billion barrels of proven oil reserves, but once again, there is significant potential in the exploration of underdeveloped oilfields. 

Beyond West Africa, Tanzania in the east of the continent is racing to develop its natural gas reserves. Following the halting of talks with international companies in 2019, President Samia Suluhu Hassan aims to start development on the country’s LNG industry by 2023. With an estimated 57 trillion cubic feet of gas reserves, Tanzania is eager to commence operations before the global demand for oil and gas begins to wane as the energy transition picks up momentum. 

Not forgetting the East African state of Uganda’s modern success story, with its first commercially viable oil discoveries in the Lake Albert Rift Basin taking place in 2006 and 2009, the country has gradually developed its national oil and gas industry. It is now expecting to boast a major oil pipeline, the East African Crude Oil Pipeline (EACOP), which will be capable of transporting 210,000 bpd from two national oilfields, operated by TotalEnergies and CNOOC, to the Tanga port in Tanzania for export. Despite several hold-ups, Uganda hopes the EACOP will be operational by 2025 

While many African countries need to attract the investment of international oil majors to develop their burgeoning oil sectors, these emerging economies will nevertheless reap the rewards of a newly developed oil and gas industry, at a time when many western states are turning their backs on fossil fuels and where demand is still high. The untapped oil and gas potential of several African oil regions and the low-cost production prospective is winning the favor of several major international players, who are shifting their focus to Africa and the Caribbean.

By Felicity Bradstock for Oilprice.com

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