West Africa: The continued story of the “Haves” and the “Have-nots”

Jeremy Berry examines the trend occurring off West Africa where exploration success continues to be confined to those countries that already have significant production.

Fig. 1: West Africa production and active offshore rigs (Jan 2004 – July 2014) showing increased rig count responding to production decline. Source: EIA and Baker Hughes.

West Africa, from Morocco in the north to Namibia in the south, produces about 6% of the world’s oil (averaging 5.2MMbo/d in April 2014; EIA’s International Energy Statistics).

West African production grew through the 2000s, reaching 5.5MMbo/d in 2010, but since then has shown an 8% decline to today’s volumes. However, the region as a whole is responding, with 14% of the current global offshore rig count active in Africa, up from 7% in 2004. The number of rigs active offshore Africa doubled in 2010, and has continued to climb through to the current day (Fig. 1).

Considering the news flow, one might assume that this increase in rigs could be driven by activity in new exploration areas, such as Namibia, Morocco, Mauritania, or Liberia. However, these frontier basins tend to share rigs (to minimize mobilization costs) and their contribution to the overall rig count is minimal, and will remain so until more positive results needing aggressive appraisal drilling materialize. The reality is that by far and away the most active areas are where the petroleum systems have been proved to work and production, infrastructure and local support services are readily available (see table 1).

The activity levels seen in Table 1 are reflected in the number of developments approved and coming on stream in the more active countries. Amongst key examples are:

• In June 2014, the CLOV development in Total-operated Block 17, deepwater Angola, started production. With a production capacity of 160,000bo/d, this is the fourth FPSO on the block.

• Fig. 2: Rig count in Nigeria and West African pre-salt play countries showing recent divergence in numbers of rigs. Source: Baker Hughes Rig Count.

  Eni’s West Hub development in Angola Block 15/06 is expected to start-up in 2014, producing up to 80,000bo/d. The final investment decision (FID) on the neighboring East Hub was made in November 2013.
• In February 2013, FID was announced on Mafumeira Sul in Chevron-operated Block 0, offshore Angola. Production of 100,000bo/d is expected to start in 2015.
• In July 2012, FID was announced on the Lianzi field operated by Chevron in a unitized area between Congo and Angola. Production of up to 46,000bo/d is expected in 2015.
• The Egina field in Nigeria was approved for development by the Nigerian authorities in 2009, with production of up to 200,000bo/d due to start in late 2017.
• In April 2014, FID was announced by Total for Kaombo in Angola ultra-deepwater Block 32. Production is due to start in 2017 at up to 230,000bo/d.
• In May 2013, the Ghanaian authorities approved the Plan of Development for the TEN (Tweneboa, Enyenra, Ntomme) fields. First oil is scheduled for 2016, with a maximum production capacity of 80,000bo/d.
• Equally significant is the scale of success of exploration drilling as illustrated by the number and size of discoveries announced in the already proven basins, against a backdrop of continued disappointment on the frontier margins:
• In June 2013, Maersk completed Cubal-1 in Angolan Block 16 as a discovery encountering oil in four zones, appraising shortly thereafter. Cubal-1 is reported to have discovered resources of 300MMbo (Sonangol Annual report 2013).
• In August 2013, Total completed the Diaman-1 deepwater pre-salt exploration well offshore Gabon. The well encountered 160-180ft of net pay containing gas and condensate.
• In November 2013, Afren completed the Ogo-1 exploration well in OPL 310, offshore Nigeria, encountering 216ft of net pay containing light oil and condensate rich gas. Estimated (P50) recoverable resources are quoted as 774MMboe.
• In February 2014, Eni completed appraisal well Nene Marine-3, offshore Congo, testing a pre-salt clastic reservoir containing wet gas/light oil which flowed 5000bo/d on test, with the operator estimating in place volumes of 1.2 billion barrels of oil and 1Tcf of gas.
• In April 2014, Total completed the Saphir-1x well in Cote d’Ivoire and announced an oil discovery having encountered some 125ft of net pay containing light oil.
• In July 2014, Eni announced that the Nyonie Deep-1 well in Gabon was a significant gas and condensate discovery with initial estimates of in place volumes stated as 500MMboe.

Fig. 3: Kwanza Basin activity. Source: Deloitte Petroview.

The most significant current trend in the whole of West Africa is the dramatic increase in the number of wells targeting the pre-salt in Angola, Congo and Gabon, driven by the success of the play in the conjugate margin in Brazil. Figure 2 shows the number of rigs increasing threefold in the pre-salt play countries, in the last 18 months, this being offset by a proportional reduction in the number of rigs in Nigeria over the same period.

Although Maersk was the first company to make a pre-salt discovery in the Kwanza basin with Azul-1 in Block 23 in 2011, it was not long before Cobalt began their intensive drilling campaign with seven successful wells completed in Blocks 21 and 20 to date (Cameia-1, -2, -3, Buciar-1, Mavinga-1, Lontra-1 and Orca-1). Operators in other Kwanza Basin blocks awarded in 2011 have now also started drilling, with wells completed or underway by Eni, Repsol, ConocoPhillips and Statoil (see Fig. 3) and a further 5-6 exploration wells planned this year.

Notwithstanding the fields currently being developed in the Congo Basin, the potential and expectation of the pre-salt play in the Kwanza Basin could not come at a better time for Angola as production stubbornly remains below 1.8MMbo/d, down from highs of 2+MMbo/d in recent years. A similar story is emerging to the north, in Gabon, there is an effort to encourage activity to turnaround their production decline. A recent license round has seen the entry of a number of new players (including Marathon, Repsol, Petronas, Noble, Woodside, and Impact) and exploration drilling is beginning to bear fruit with Diaman-1 and Nyone Deep-1 discovering considerable hydrocarbon resources.

West Africa is therefore a story of the “Haves” and “Have-nots.” Exploration success, for the time being at least, continues to be confined to those countries that already have significant production. Despite ease of access and encouraging fiscal terms, the frontier countries are struggling to find the reservoirs that will move them from the “Have-nots.”

The only possible concern with many of the West African pre-salt discoveries to date, is the preponderance of gas and condensate being found. In Gabon, significantly more gas and condensate would need to be found to commercially justify any development; while in Angola the current production sharing agreement terms do not grant international companies any rights to the gas. Given the costs involved with these deepwater wells, it is unlikely that operators would maintain their enthusiasm for the play under the current terms if gas/condensate continues to dominate the hydrocarbon mix.

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Jeremy Berry serves as global business development director at Gaffney, Cline & Associates. His primary technical strength is in the geosciences. Berry has an in-depth understanding of sub-Saharan Africa.