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?Due to a reallocation of assets and a redirection of policy, the West African offshore market will diversify more in the next five years than it has ever done before.
?West Africa has long promised to be a key region for future oil and gas supply diversification. Now, with US $108 billion predicted to be invested in new offshore infrastructure in Africa over the next five years, large-scale developments are expected not only among West Africa’s established producers, but also in the region’s emerging countries.
Offshore activity in West Africa will continue to be dominated by Nigeria and Angola, with deepwater projects at the forefront of both exploration and production. However, the new and exciting plays that are being discovered along the West African Transform Margin – which runs from Ghana through Ivory Coast and Liberia to Sierra Leone – are beginning to capture the industry’s attention. It seems probable that Sierra Leone, Liberia, and the Ivory Coast – countries whose oil potential was not long ago considered bleak – will follow their neighbor Ghana into the deepwater offshore market, creating a new and potentially important oil province.
It is tough on top
Nigeria continues to be one of world’s primary oil producers despite the political unrest and logistical problems that have hindered the industry’s development over the last few years. Its prolific deepwater projects continue to deliver opportunities for growth with production being enhanced by brownfield projects, including capturing gas previously flared in shallow-water fields. Between 2011 and 2015, a potential of 1.8 MMboe/d production will come onstream.
One of the latest projects offshore Nigeria is the Ebok field, located in the productive southeastern area, which is being developed by UK-based independent Afren. The company recently announced that from February 2011 it is expecting to produce more than 15,000 b/d from this field and that the reserves are estimated at 116 MMbbl. Further development could follow shortly after on the nearby Okwok field.
The unrest affecting Nigeria’s offshore market is due largely to the Petroleum Industry Bill (PIB). This legislation, which is yet to be passed, would restructure the Nigerian oil industry with the aim of improving the role and efficiency of the national oil company. The delay in doing this so far has meant that potential investment from foreign investors has been put on hold due to uncertainties over the implications and timetable of the proposed legislation. One of the bill’s proposals that has stirred up particular concern among international oil companies (IOCs) is the plan to increase the government take on deep offshore projects, an area that is expected to see a great deal of growth in the coming years.
Although there have been significant delays, the passage of the legislation might have taken a big step toward completion in November 2010. A Joint Senate Committee, which had been considering the bill over the past year, completed its work and presented the bill to the upper house of Parliament, which now can begin voting on the legislation clause by clause. Once the legislation is passed, one can expect a major new licensing round where domestic companies and foreign companies – some new to Nigeria – could be presented with the opportunity to gain a foothold in the Nigerian offshore market. Recently both Chinese and Russian companies have shown great interest in investing in Nigeria.
Total’s Egina field development is one of the latest examples of conflict between IOCs and the Nigerian government. The Egina field, located off the Niger Delta, is scheduled to come onstream in 2014 with reserves estimated at a healthy 550 MMbbl. Unfortunately for Total, development of this project has been restricted by the government, which refuses to budge over the local content it has demanded for the newbuild deepwater floating production, storage, and offloading (FPSO) unit. Technical bids to provide Total with a massive FPSO vessel started in October 2010, but Nigeria is insisting that 17,000 metric tons of the topsides must be built by indigenous companies. Total faced similar problems for its Usan project, which is scheduled to come onstream in 2012, but in this instance the operator was able to negotiate some flexibility into the nature of the local content provisions. It now seems that with the PIB on the horizon, Nigeria could want companies to start facing up to its stringent demands to do more of the actual construction work in local yards.
Over the 2011-2015 period, West Africa is expected to witness a significant increase in the number of offshore fields coming onstream, increasing from 32 fields during the 2005-2010 period, to 181 fields going forward to 2015. Angola will hold a significant share of these new fields with 58 expected to come onstream between 2011 and 2015, representing 32% of West Africa’s total field prospects in this period. These projections are based on the excellent exploration and drilling results that Angola continues to produce.
According to the US Energy Information Administration, Angola production could peak in 2015 at 2.5 to 3 MMbbl/d, but at the moment it must abide by its OPEC quota of less than 2 MMbbl/d.
Last year Eni Angola Exploration continued to produce compelling exploration results from its drilling campaign in offshore Block 15/06. The latest commercial discovery was the Mpungi-1 well, which hit oil pay in October 2010. Block 15/06 discoveries tallied at five last year, and of the eight exploration wells Eni has drilled in this area, seven have been successful. Eni hopes to start exploiting these discoveries from 2013 with plans to use SBM’s Xikomba FPSO when it is released from a nearby field by ExxonMobil.
West Africa’s new oil province
Anadarko Petroleum Corp.’s discovery of the Mercury field at the end of 2011 was yet another event highlighting the true potential of the West African Transform Margin. This is Anadarko’s second discovery offshore Sierra Leone, the first being the Venus field discovered in 2009, which could come onstream from 2015 if all goes well.
Approximately 621 miles (1,000 km) to the east of these discoveries, along the transform fault zone, is Tullow Oil’s renowned Jubilee field, which recently turned Ghana into the world’s latest deepwater oil producer. Tullow’s success relating to this massive geological structure has continued with the uncovering of the Cobalt prospect offshore Liberia. The characteristics of this field have been likened to the Jubilee field, and Tullow has publicly spoken about possible gross contingent reserves of 1.2 Bboe. These discoveries obviously are raising a lot of hope for the countries in this region, and further discoveries in areas adjacent to the transform margin are highly probable. This creates a huge potential to bring prosperity to areas that have long been deprived of it.
Sierra Lione is an extremely poor country that could benefit significantly from the type of revenue achievable from oil production. The country still is recovering from a grueling 11-year civil war, and therefore, the correct handling of the new revenue potential will be essential to bringing sustainable growth and improving the public’s standard of living.
Tullow’s Jubilee project already has raised concerns in Ghana regarding whether the profits will appropriately benefit the public. To help mitigate these anxieties, the Ghanaian government recently received a loan from the World Bank for $38 million to be invested in a new oil and gas capacity project. This program aims to improve public management and to install transparency in the sector, thus helping to develop an efficient regulatory system. With IOCs now looking to invest heavily in West Africa’s latest frontier oil province, it is important that the Ivory Coast, Liberia, and Sierra Leone take similar steps to those that Ghana hopes to take.
One of the companies looking to become a big player in this province is Russia’s Lukoil, which plans to invest $900 million in drilling 11 exploration and appraisal wells offshore Ghana and the Ivory Coast during 2011 and 2012. Of course, the attractiveness of this province in West Africa is amplified at the moment by the political unrest in Nigeria, historically the region’s primary producer.
Deepwater Ghana – The new kid on the block
With the Jubilee field project now in full flow and achieving a production rate of 55,000 b/d during its first phase of development, Ghana finally has arrived as an oil exporting country. It is projected that Ghana could become the third-largest producing country in West Africa over the next four to five years, lagging only behind OPEC members Nigeria and Angola.
Tullow has continued to have great success subsequent to the discovery of the Jubilee field both in exploration and in appraisal drilling. The Greater Tweneboa Area has revealed real prospects for new large oil deposits with the Tweneboa, Ntomme, and Enyenra (Owo) fields.
Tullow recently finished drilling another appraisal well in its deepwater Tweneboa discovery with results indicating excellent quality reservoirs containing a gross potential of 1.4 Bboe. The appraisal well, Tweneboa-3, was drilled by the Transocean drillship Deepwater Millennium to a total depth of 12,815 ft (3,906 m) and has created a real aura of optimism among the companies involved. The rig is remaining on the block to drill the Tweneboa-4 appraisal well before moving to drill an appraisal well on the Enyenra oil discovery.
Tullow exploration director Angus McCoss has been delighted with the results and has expressed the view that Tullow now can move forward with confidence to assess development options in the Greater Tweneboa Area.
Australian independent Tap Oil is one of the latest companies to actively seek new oil along the West African Transform Fault zone. In early January 2011, the company began a 463 sq-mile (1,200 sq-km) 3-D seismic survey over Ghana’s Accra Contract Area using the Polarcus Naila survey vessel. The Offshore Accra contract area lies southeast of Ghana’s capital Accra and covers an area of 772 sq miles (2,000 sq km) with water depths ranging from 165 ft (50 m) to more than 8,200 ft (2,500 m). Tap Oil obviously was very encouraged when it found out the existing original 2-D data for this area had identified similar geological features to the structures found at Tullow’s Jubilee and Tweneboa area discoveries. This caused the company to accelerate evaluation by implementing a 3-D survey, which should provide potential drilling targets for a campaign expected to start next year.
Much to look forward to
While the offshore markets of Nigeria and Angola now are well established, it is the emerging markets that are displaying a real potential for growth. Significant interest has been generated by the offshore prospects being uncovered in countries like Ghana. These are attracting major firms, and both Russian and Chinese companies are looking to capitalize on these new opportunities with huge potential investments being proposed. If Western IOCs want to maintain their positions in the region, they will need to be prepared to work harder in the future than they have in the past.