Discovering new resources is essential for oil firms to grow and to offset natural decline of fields. But deepwater exploration requires money, time, expertise and luck. Bolstered by the current glut of low-cost E&P assets, many operators are eyeing offshore Africa with renewed interest.

Currently ExxonMobil, BP, Chevron, Shell and Total are among the biggest players in the region; however, a rising crop of independents are emerging.

“Over the past decade much of the focus in West Africa has been on the turbidite system along the region from Morocco to the Transfer Margin,” said Oryx Petroleum CEO Vance Querio. “This play has been less successful in West Africa than on the other side of the Atlantic Ocean. The recent discoveries in Senegal, including the SNE discovery in Sangomar, have opened a new play type in the Albian clastic system.

“The AGC Central Block is located 200 km [124 miles] south of this discovery in an analogous environment. The 3-D seismic data recently acquired over the AGC Central license area have confirmed that we have the same play type as well as additional potential in deeper zones.”

Phil Loader, executive vice president of global exploration for Woodside Petroleum in Australia, pointed to the continued evolution in digital technologies as central to cost-effective recovery of assets in deepwater plays in Africa.

“With the ever-evolving deepwater technologies available to industry and at Woodside, we believe deepwater exploration, development and production will continue to play a significant role in the future economies of many African countries,” he said. “There are many challenges in both finding and developing resources. We are applying more subsurface predrill de-risking technologies than ever before we decide to drill or not. Ultimately, we obviously need the alignment between identifying where we might find excellent quality hydrocarbon-bearing reservoirs of attractive scale and the fiscal terms that both attract investment for both oil and gas outcomes.

“Many of the technologies are aligned to subsurface workflows that allow enhanced visualization of
the subsurface and derisking pre‐drill. We are using full waveform inversion on a more regular
basis in this regard,” Loader added. “The evolution of technologies is continuing to evolve in industry and in Woodside that addresses the commercialization of resources quicker and cheaper than in the past.”

Technically there are issues related to reservoir complexity and continuity that will require application of the latest technologies to ensure efficient field development.

“In the past decade, the industry has made a significant push to explore in progressively deeper waters,” Querio added. “As a result, a number of new technologies have been developed and implemented specific to deepwater and ultradeep water. We expect to benefit from this surge in activity by utilizing relatively new technologies that are now considered proven and routine within deepwater operations. In general, these technologies attempt to reduce non-productive time, improve safety and lower the uncertainties associated with drilling in these environments.”

Querio pointed out several examples:

  • Advancements in mechanical earth models, shallow hazard identification;
  • The latest in LWD and wireline logging technology, including seismic-while-drilling, to assist in refining the pre-drill models in real time; and
  • Several modern sixth- and seventh-generation drilling units.

“This coupled with the advancements in deepwater testing technology should allow us to meet our exploration objectives while at the same time reducing well cost and duration,” Querio said.

As far new technologies go, Jubril Tinubu, group chief executive for Oando Energy Resources, explained that continuous innovation is a key requirement to continue deepwater E&P in Africa.

“We are seeing deepwater players investing heavily in technology to lower exploration risk and optimize cost efficiency,” he said. “Technological advances such as the amplitude vs. offset techniques not only improve detection of hydrocarbon reservoirs on already identified structural traps, but more excitingly, help scientists/geophysicists effectively determine thickness, porosity, density, velocity, lithology and fluid content of rocks. The industry must accelerate the pace of development and adoption of these technologies through adequate and sustained capital commitment.”

Funding Deepwater Development

Financially, as is the case everywhere in the world, developing deepwater resources will require significant capex and long lead times before production is brought online. The economics of such developments therefore need to be extremely robust.

“Financing exploration, appraisal and development of discoveries offshore Africa is currently very challenging,” Querio explained. “The main options for financing exploration and appraisal are public and private-equity markets and the farm-in market.

“There is currently limited appetite for funding exploration and limited appetite for financing appraisal activities in both the public and private-equity markets. Long-cycle deepwater projects are out of favor with these investors who are currently focused on unconventional, manufacturing like plays in North America and are currently unwilling to take a longer-term view on oil prices. A belief in higher oil prices over the medium to longer term is required to make investment in longer cycle projects attractive.

“Fortunately, IOCs and NOCs are ahead of the investment community in this regard and are seeking to replenish their inventories for projects where first production is not expected until after 2020. Farm-ins are being completed, albeit on a selective basis and not on terms as attractive as before the oil price crash in 2014. We are confident, however, that we have very high-quality assets and will be able to secure the funding needed.”

Developing deepwater fields is a cost-intensive process.

Tinubu lists transportation, services, qualifications, permitting, infrastructure and capex costs that are much higher than for onshore developments as the key challenges that must be overcome. Similarly, operating in Africa, the risk although low, comes with high safety costs, thereby bringing a much higher opex than for onshore developments.

“Environmental factors have seen water depth double from 4,000 ft to 8,000 ft [1,219 m to 2,438 m]; subsea tieback distances increase; and some challenging reservoirs with increased uncertainty, higher temperatures and pressure,” he added. “This has resulted in the allocation of more capital to research and development. Still, these factors alone do not justify the escalation of capex and opex to the high level that the industry now faces.”

Looking Farther East

Michael Blaha, executive chairman of Discover Exploration, U.K., believes that this period of low oil prices means there is a lot of good acreage to be acquired for low entry prices.

“Exploration has not been the flavor of the month since the oil price crash in 2014,” he said. “But we are using this very much as an opportunity to build a strong portfolio and be ready to drill somewhere between 2019 and 2020.

“Deepwater only started in the 1980s with the Shell discoveries in the Gulf of Mexico. Before that the technology was not there, and we never really looked at turbidites, which are typical features that you’re looking for; so there’s a lot of underexplored territory there. And the good thing about deep water is it’s very often remote from the continent, undisturbed, and you find big features there— so big fields.”

Previously their focus was on Mozambique but now their gaze has turned farther east to the Comoros territorial waters in between Mozambique and the Comoros Islands.

“We’ve got a huge acreage, which is positioned over the Rovuma Delta where we made our big discoveries,” Blaha said.

As for the mounting momentum, the biggest threat would appear to be low oil prices. “We need to have oil prices somewhere above $50; however, we’ve seen enormous strengthening of the business over the last four years with the downturn,” Blaha concluded. “Our well, 3-D seismic and development costs have been slashed in such a way that even at $40 many projects can be profitable now. Africa is a country of possibilities, and if you are in deep water, you are quite independent of issues on the land. Although that’s not a reason to go for deep water, it gives you a lot of freedom.”

—Mark Venables