Despite the challenges of operating in Africa, the region is of increasing importance to BP, according to Jasper Peijs, the company’s vice president of exploration in Africa.

Speaking on BP’s strategy in Africa, Peijis said it’s about finding oil and gas that will create value, which is essentially the same goal as in other parts of the world. But he also explained that the company aims to get to a “position of scale,” gaining relevance on the continent where some countries have seen ups while others have experienced downs in recent years.

BP has operations in Algeria, Angola, Egypt, Mauritania, Mozambique, Senegal and South Africa. Its largest assets are in Angola, where the company produces about 220,000 barrels per day. “Egypt is next, which is right now approaching 100,000 barrels a day oil equivalent, but that’s going to grow to about 350,000 by 2020,” Peijs said.

Peijs shared insight on BP’s African operations during a recent interview.

How important is Africa to BP?

Peijs: It’s important because it’s 16% of our total production and growing, especially Egypt, which is growing from, as I said, 92,000 at the end of 2016 to 350,000 barrels a day, so that’s a huge increase in production. Angola’s staying flat, Algeria’s probably staying flat, and then Mauritania and Senegal, we expect to sanction the first gas development next year. We can see the resource there will be of world-class scale, so I’d expect that to ramp up. We are going to access at least one other region before the end of the year and probably another two to four in the next 12 months after that.

Has the financial situation caused you to delay any FIDs in the region?

Peijs: I’m not sure of the financial situation but everything has to compete because as a company we’ve got a limited budget—the same as everybody else. I would say that we’ve shrunk our budget, but actually the deflation in the markets being slightly more sensible on the type of projects puts a little bit of edge in the system. That’s probably kept us relatively stable in the number of projects that we can do.

But, clearly, when we bring in a new region like a Mauritania/Senegal, that’s not an add-on; somebody else gets squeezed for that to create the space to do that. And I think that’s important for every region for us to know whether it’s Africa or anywhere else. We’re all competing for a finite pot of capital, and if a new project comes about that’s apparently more competitive than something else, then everybody will have to sharpen their pencil and come up with competing options.

What are the biggest challenges of operating in Africa?

Peijs: We’ve got a large acreage position in Libya that we’d like, at some point, to get back to when it’s safe to do so. We’re not going to put our people in harm’s way, nor are we going to make a big deepwater investment without some kind of sense of political stability. I think there are encouraging signs in Libya, but they’ve got a little way still to go before we can get back there.

In Angola, it’s just gone through presidential elections; Senegal has done its own internal reviews, and it’ll be interesting to see how it comes out the back side. Right now what do I say about Angola? I think every basin goes through a lifecycle when the original contracts have been signed. Now, in Angola, you’ve gone through a period where it no longer makes sense to invest because you’re too close to the end of the contract. I think the country has a choice to make. Do they extend the PSEs and then, therefore, reinvigorate investment, or do they want to do this themselves? I think those are choices and, we’d always say the operators would like to be part of the future, but I think that clarity has to come first.

When you look at new plays do you prefer to partner or go it alone?

Peijs: We like to partner with people. A good example is our deal with Kosmos Energy. We signed agreements to acquire a 62% working interest, including operatorship, of its exploration blocks in Mauritania and a 32.49% effective working interest in its Senegal exploration blocks—acreage which holds world-class deepwater gas discoveries and exploration prospectivity across both countries.

Instead of taking over the total operatorship—we’re the big boys and we’ve just bought you out— we actually haven’t done that. They are very, very good explorers and have the best track record, and we’re going to let Kosmos continue to do that and leverage that skill. But they don’t have the capability or the expertise to develop in deep water. So that’s our role—the appraisal and the development of those resources—and that’s going to be the kind of partnership, which I think works really well.

What about deepwater prospects in the region?

Peijs: With the advent of U.S. shale, there are quite a few companies that have pulled out of the deep water and are refocusing on that, especially U.S. companies, because it’s an easier story to the investment market to say we’re doing shale. It’s less risky, and you can dial it up and down, depending on the oil price. But for deepwater these things take billions of dollars to develop and six to 10 years to get them online; then you need about 30 years to recoup your cost and make a profit. But I think because that’s the capability that we have for these very complex projects there’s still a niche for companies like us to play in that space. That is why governments need us to do the big and complex things. They don't necessarily need us to do the smaller, easy stuff.

What are the challenges for deep water in Africa?

Peijs: People have been going out into deeper and deeper water, now up to probably about 3.5 km water depth. We know and understand the technology challenges. There is some extra money needed, and therefore the reservoirs need to be slightly better. Now that the days of $100 to $110 oil are behind us we’re taking advantage of the deflation, but also we are just a little bit more sensible about where we drill.

It is not just the water depth because deep water is easy to drill through. We are also going deeper and deeper below the water bottom and that increases well costs. We just need to make sure that we’re looking in places where the well cost is acceptable. And where we were drilling wells for $300 million before, now I’m limiting it; it’s kind of a self-imposed bit of discipline to go up $50 million net per well.

What have you been able to do to control operational costs?

Peijs: The competitive pricing that the low oil price is causing is one thing. I think the other thing that we’re looking at is instead of trying to right-size something for the field to recover the maximum amount of oil, which can take up to five years. We are looking at industry-ready solutions.. These get you online quicker, as a phase one development, and make sure that countries get resources and revenues quicker. You actually get better quality data from early production than trying to study it for a long time, and then we’ll optimize that for phases two and three and four.