Despite growing security concerns in some parts of the region, West Africa’s offshore hydrocarbon potential continues to attract investment on the grand scale. Jennifer Pallanich highlights some of the region’s latest E&P activities and emerging trends.
Joseph Stanislaw, independent senior advisor on energy and resources for Deloitte, believes the opportunity offshore West Africa seems to be growing again. His assessment comes on the heels of the recent Anadarko discovery of Venus offshore Sierra Leone. ‘No one knows at this time if this is big, a giant or a super giant,’ he says. ‘There’s a lot of acreage there . . . it could be very promising.’ Some of the big discoveries making the news, he says, ‘are discoveries for the next decade.’
The ultra deepwater offshore West Africa faces certain issues, he says, such as costs, access to technologies, and the access to infrastructure. Economics is a factor, he notes, both in terms of oil price and risk, and it comes down to balancing these two elements to make a project work.
Being able to answer questions like which plays exist, how long the industry has known about them, and when activity started in that region will show where opportunities exist, Stanislaw notes.
Infield Systems energy analysts see West Africa as an attractive market and forecast that the platform spend will exceed $25 billion over the period through 2013, with IOCs accounting for 77% of the fixed and 80% of the floating platform capex. The company expects steady capex growth in all water depths and forecasts a trend towards deeper waters driven largely by Nigerian, Angolan, Congolese, and Ghanaian reserves in waters exceeding 1000m.
While the traditional regions offshore West Africa continue to retain interest, it appears operators are looking further afield for reserves. Investments seem ‘to be expanding away from the two hubs of West Africa, which are Angola and Nigeria,’ says Howard Wright, analytical services manager for Infield. ‘More diverse countries are attracting investment.’
Perceived value is one reason, he says. Many governments ‘are seeing the success that has been achieved by Angola and Nigeria’ and are encouraging foreign oil & gas investors, he adds. ‘Lots of activity is being driven by the international oil companies.’
It’s not just the IOCs investing in West Africa. The NOCs are as well, Wright says, citing interest from China, India and Korea.
Mohamed Zine, regional manager Africa for IHS-Petroconsultants, notes that given the promise of Ghana’s Jubilee development, other countries in the region seem to be opening up or increasing the pace of activity, including Sierra Leone, Liberia and Cote d’Ivoire. According to Zine: ‘The Upper Cretaceous play of the West African transform margin seems to work.’ He notes this offers a major implication for all countries from Ghana to Sierra Leone, where Anadarko and Tullow are the most active players with up to five exploration wells to be drilled in the play by end-2010.
Other areas seem to be declining, Zine notes, including Nigeria, which has security issues as well as the issue of a new hydrocarbon law that is not ready and unclear commercial terms for gas. This leaves issues with renewing expired production leases, Zine notes, such as 7 billion barrels of reserves from ChevronTexaco, ExxonMobil and Shell ‘hanging in the air’. Despite that, he notes, Nigeria has seen Total’s large Akpo project go onstream this year while work continues on the French supermajor’s Usan development as it marches toward its 2012 onstream target.
The main border dispute of note at the time, according to Zine, is between Cameroon and Equatorial Guinea. Zine notes this dispute is about to be settled and is expected to pave the way for the development of large gas-condensateoil fields of the Douala Basin, where the main players are Noble/Petronas, Bowleven/Vitol and Sterling, which is looking for a partner.
Risky business
For quite some time, attacks on oil installations and people, kidnapping, and piracy in and offshore Nigeria has been on the rise, says Caroline Imig, intelligence analyst for risk specialist company AKE Group. According to AKE, one of the primary causes of the violence has been the lack of employment opportunities and poverty in a region flush with oil wealth. Organized criminal groups engage in oil bunkering as well as kidnapping and pose an ongoing threat to the oil industry in the region. According to Imig, more than 300 foreign oil workers have been kidnapped since 2006 – an average of two per week.
On the piracy front, rebels have been using small ski boats to attack vessels and take crew members hostage or attack the oil facilities (OE July). Most of the targets, Imig says, are within 20-50km of the coast, although some as far off as 100km – Bonga, for example – have been attacked. ‘Such an attack needs a lot of planning and needs to be sophisticated,’ she says, adding not all groups have the level of sophistication needed to carry out an attack that far offshore.
Earlier this year, however, a ceasefire slowed down the rates of attacks. The ceasefire, extended in mid-September through 4 October, centered around an amnesty offer from the government.
‘Nigeria’s main problem is the emergence of MEND (Movement for the Emancipation of the Niger Delta) and other rebel groups,’ Imig says. ‘A lot of rebel groups accepted the amnesty offer and laid down their arms. But MEND has not accepted it’ because they want the government to address the causes of the unrest, she said a few days before the amnesty offer expired. ‘It’s on shaky legs, this amnesty offer,’ she says, noting that some who have laid down their arms have reportedly not received the promised monetary support to begin financing their lives and seeking employment. Imig warns that if the underlying issues are not addressed through reform, the rebels will likely regroup. ‘People need to feel they’re getting a fair share from the oil wells in the Niger Delta,’ she adds.
According to AKE, the amnesty offer expired ‘amid renewed hope for greater peace in the oil-rich region after Government (Ekpemupolo, aka) Tompolo, a leading Delta militant, agreed to surrender his weapons late on 3 October. As the last prominent commander operating in the Delta, the move gave critical last-minute support for the amnesty deal. Although significant for improving security in the region, serious fears of attacks by hard-line MEND factions and criminal groups remain.’
Angola, which was to have elections in August, has delayed polling to 2012 because the ruling party wants to amend the constitution to enable the president to be elected indirectly by parliament. José Eduardo dos Santos has led Angola since 1979, and no presidential elections have been held since 1992. For political and economic stability, Imig suggests, it would be in the nation’s best interest to hold elections sooner rather than later. ‘For now Angola is sort of the darling of a lot of oil & gas companies, especially because they don’t have the same security issues as the Niger Delta,’ Imig says. She does note the Cabinda region, site of less than 1% of wells, is traditionally volatile.
And Gabon, once seen as a stable West African region, became the center of civil unrest earlier this year following an election that declared Ali Ben Bongo, son of the deceased President Omar Bongo, as the country’s new ruler. ‘In West Africa, as soon as a political development happens, it can change quickly,’ Imig says of this rapid shift from stability to unrest in Gabon. While the unrest lasted about three days – and was aimed largely at French civilians – the new president seemed to have support from the court, Imig says. ‘I don’t think Ali Ben Bongo will do anything against oil. He knows oil & gas is important for his country.’
Further, she says, it appears that oil companies, expecting Ali Ben Bongo to continue administering his father’s policies, are happy with the election results. Imig suggests that any further unrest that occurs is unlikely to affect oil & gas operations in a major way. OE
Issue:November 2009
by: Jennifer Pallanich