Steadily and quietly over the past decade, Africa has emerged as the world’s leading playground for oil and gas exploration.
Well, maybe not so quietly.
“It’s quite an exceptional exploration record, really. There were 25 giant exploration discoveries over the past 10 years, more than anywhere else in the world. You can’t argue with that,” said Adam Pollard, senior research analyst in Edinburgh for Wood Mackenzie’s sub-Saharan Africa upstream team.
From significant oil and gas discoveries in west Africa to trillion-cubic-feet natural gas plays offshore and onshore east Africa to the huge Zohr gas field find in the Mediterranean north of Egypt, explorers have notched success after success on the continent.
Now it’s clear that the industry considers Africa a premier target for exploration drilling.
According to a recent report from Wood Mackenzie, giant African discoveries – finds of 500 million barrels of oil equivalent or more – are dominated by multi-tcf gas fields in the waters of Mozambique and Tanzania, Atlantic Margin play openers off Senegal and Mauritania, deepwater giants in Nigeria and pre-salt reserves offshore Congo and Angola.
Land of Opportunity
Pollard noted this string of successes points up the continued prospectivity of deepwater sub-Saharan Africa, still strong 40 years after Phillips Petroleum’s first deepwater well offshore Ghana. But success isn’t inevitable, he warned.
Following the industry’s steep downturn, “deepwater Africa is starting to look attractive again” despite a few recent disappointing wells, Pollard said.
“At the end of the day, these are quite frontier basins without the highest chances of success,” he observed.
Many African basins are relatively underexplored, however, and low entry costs in the frontier areas make sub-Saharan Africa an excellent prospect for explorers large and small, he said.
After years of exploration and production activity, industry infrastructure in Africa is good, Pollard noted. Coming out of a downturn, “it’s quite easy to get hold of a rig these days,” he said.
Availability of bid acreage also favors Africa at this point, Pollard noted. Oil majors alone have picked up more than 140,000 square kilometers of African offshore acreage in the past 12 months, according to Wood Mackenzie.
“There’s a continuing acreage reload. And there are still some high-profile wells planned, offshore Namibia, offshore South Africa, off Guinea-Bissau,” Pollard said.
“There seems to be a whole host of acreage coming up in bid rounds. There are 12 countries that have either recently launched a bid round or plan to soon,” he observed.
According to the Angolan press, the country’s minister of natural resources and minerals has announced that Angola expects to issue a new licensing round for onshore and offshore petroleum blocks in 2019, and “Senegal plans to launch a new bid round, with a new petroleum code,” Pollard noted.
Challenges to Monetization
Despite the continent’s record of exploration success, players in Africa have faced an enormous challenge in moving from discovery to production and resource monetization, he said.
“Converting volume into value is undoubtedly sub-Saharan Africa’s Achilles heel,” Pollard said.
“A lot of what they’ve discovered in the past few years has been gas, and that has additional difficulties in terms of monetizing it,” he explained. “It’s typically the lack of a local market and the high cost of export that get in the way.”
Out of the 25 giant field discoveries in Africa during the past 10 years, 14 have not reached commercial status, according to Wood Mackenzie. Pollard said companies have relinquished a number of big gas discoveries in West Africa.
Typically, it takes 10 years or more from a substantial discovery in Africa to beginning of commercial production, he said.
Liquefied natural gas export projects were expected to ease the situation but funding has been tight and progress slow. Eni’s Nene Marine oil and gas discovery in shallow water offshore the Republic of the Congo is a rare exception to the production hold-ups, coming onstream at the end of 2014, according to Wood Mackenzie.
In other areas, Cairn Energy intends to make a final investment decision on its SNE field development project offshore Senegal early in 2019, according to press reports. Also, plans for developing the Tortue fields straddling the offshore waters of Senegal and Mauritania have advanced this year.
“Mozambique’s giant gas fields will underpin multi-billion-dollar projects. Eni and Anadarko have already cashed out US$7 billion from farm-down deals” in Africa, Wood Mackenzie reported.
“Yet, similar fields over the border in Tanzania have made no progress and will likely miss the next LNG window of opportunity,” it noted.
Some of the problems with natural gas monetization in Africa came from concession and lease terms that were not conducive to commercial development, Pollard said.
“In Angola it was okay if you discovered oil, but gas was a non-starter. They’ve since addressed that,” he said.
“The Angolans have done quite a bit of work to make some reforms around fiscal terms. I think we’ll see other countries do the same thing as they begin to realize they have to compete much more for investment,” he predicted.
Total announced initiation of its Angolan Kaombo development in November. Located 260 kilometers offshore the country’s capital of Luanda, Kaombo is the biggest offshore development in Angola.
An initial floating production storage and offloading vessel, Kaombo Norte, came onstream in July with a production capacity of 115,000 barrels of oil per day, Total reported. Start-up of a second FPSO of similar capacity, Kaombo Sul, is expected next year. Associated gas will be exported to an Angola LNG plant.
Explorers hope for attractive emerging plays in more than a half-dozen basin areas of Africa, including the Kwanza basin off Angola, the offshore Senegal and Sierra-Leone basins, the Rovuma basin off Mozambique, and onshore areas in Kenya, Uganda and Niger.
“In east Africa it’s more of a development picture. Eni and Exxon have picked up acreage offshore Mozambique, south of where the big gas discoveries are,” Pollard said.
For recent development efforts in Mozambique “trying to secure funding and gas sales there has taken several years,” he noted. Given that picture, an exploration strategy seeking additional major gas discoveries might be questionable, he added.
In north Africa, “Total and Eni are in talks to explore offshore Algeria, which is something new. The geology in the north of Algeria is quite different from the south,” Pollard noted.
Algeria’s state oil company, Sonatrach, signed two agreements with the companies in October that include an exclusive partnership for offshore exploration in the country.
“What they’re likely to find offshore in the Med may be more similar to what’s been found offshore Libya,” Pollard said.
And Egypt also shows continued promise, following the giant Zohr gas field discovery offshore and attractive Nile Delta prospects, he noted.
As the oil and gas industry has emerged from the financial constraints of its recent downturn, companies have increasingly sought exploration opportunities in Africa, Pollard observed.
No matter what happens in the next 10 years, “sub-Saharan Africa will remain at the center of global exploration,” he said.