Plenty of optimism in West Africa
Nigeria remains West Africa's largest producer by far, but if you want an exciting exploration prospect then Senegal and Mauritania are the places to be
Nigeria continues to dominate West African oil production, but plays second fiddle to other parts of the region in terms of exploration potential.
The government in Abuja has made tangible efforts to reform the once notoriously corrupt administration of the industry and introduce a new framework to encourage investors to return to a sector that remains heavily reliant on mature fields. Total's FPSO in the Egina field is the only sizeable new project scheduled to start producing in the next year—though it is a big one, potentially adding up to 200,000 barrels a day to Nigerian output. Exploration remains limited, as oil companies wait to see how effective industry reforms prove to be.
A rise in Nigerian oil output over recent months can be attributed to a decline in violent unrest in the Niger Delta region, reflecting some success in talks between rebel groups and the government over efforts to direct more oil money to develop the local economy. Crude production that had crashed to below 1.4m b/d in mid-2016, due to attacks on pipelines and hydrocarbons facilities, had recovered to around 1.8m b/d by late 2017, according to the government. The country also produces up to 400,000 b/d of condensates. However, this merely represents a return to levels seen in the past and it is difficult to see where much extra output will come from in the foreseeable future.
One needs to look further west for one of the world's most exciting frontier exploration zones, which covers offshore Senegal and southern Mauritania.
These are really at least two plays in one region. To the southwest of the Senegalese capital Dakar lies the oil-prone Rufisque-Sangomar-Sangomar Deep (RSSD) acreage where wells drilled by operator Cairn Energy, now backed by partner Woodside Energy, have rarely failed to find commercial amounts of oil. To the north of Dakar, in an area extending across the border into Mauritania is the more gas-prone Greater Tortue acreage, which has yielded enough gas reserves for Kosmos Energy and new partner BP to make preparations for liquefied natural gas exports, initially by using a floating facility.
Speedy development has been helped by good relations between the oil companies and the Senegalese government, headed by former hydrocarbons geophysicist Macky Sall. He has so far managed to convince investors that Senegal is a good place to do business, despite the country's limited experience of major projects.
Like the Mozambican government on the other side of the continent, Sall seems to have accepted that, while offshore production via the planned FLNG or FPSO facilities may not bring as many local jobs and infrastructure projects as onshore developments, they are worth sanctioning if they get oil and gas production established more rapidly. In terms of exploiting the gas reserves straddling the Senegal/Mauritania border, using FLNG also solves the political problem of where to site an onshore LNG plant, given both countries would be keen to host it.
But the biggest incentive for the explorers are the reserves on offer, the estimated size of which has been growing with new finds. UK-based Cairn Energy recently announced it had increased its estimate of recoverable resources from its SNE field within the RSSD acreage to 0.563bn barrels from 473m. A final investment decision should come in late 2018, with first production planned for the early 2020s.
Meanwhile, the Greater Tortue project is based on gross reserves estimated at more than 25 trillion cf of gas, with the companies saying there could turn out to be twice that much in the complex-potentially enough for 30-50 years of production.
A 2.5m-tonnes-a-year FLNG facility is envisaged beginning operations in around 2021-22, assuming a positive FID is taken in 2018 or 2019. There is also talk of a second FLNG project later, with a future onshore plant also possible.
Total entered Senegal's offshore earlier this year, taking acreage close to the RSSD, and pledging to explore in deeper offshore waters that have yet to be fully investigated. Senegal's hydrocarbons adventure may only be just starting.
Other countries that have pushed upstream projects forward include Equatorial Guinea and Cameroon, where FLNG projects are planned to exploit medium-sized gas discoveries, and Ghana, where Tullow Oil plans to expand drilling in its Ten complex of fields, adjacent to the maritime border between Ghana and Côte d'Ivoire, if a dispute between the two states over the path of the border can be resolved.
Tullow's FPSO atop Ten is capable of producing 80,000 b/d but can't hit peak output without the extra wells. The company's Jubilee field already produces around 100,000 b/d. Ghana's total oil production is likely to average around 200,000 b/d in 2017, boosted by 45,000 b/d from Eni's new Sankofa field development.
This article is part of a report series on Top 10 upstream bright spots. Next article is: US—revival in the north