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Côte d’Ivoire's exploration drive rebooted

Can an overhaul of concessions lure companies to the country's frontier acreage?

The acquisition of four exploration licenses by Tullow Oil in October was a boon for Côte d'Ivoire's energy ministry, which is keen to build on modest oil and gas production by reawakening interest in frontier acreage.

The ministry has just finished a revision of the country's block map covering 87,000 sq km of sedimentary basin, mostly offshore. Some blocks have been redrawn to make them more attractive by amalgamating them with neighbours to increase their size. Ultra-deep-water acreage is now on offer in addition to onshore, shallow-water and deep-water blocks.

The country is allocating blocks not via a bid round, but through direct negotiations—a process which its energy minister, Thierry Tanoh, is keen to stress has been made much more transparent over recent years.

At a roadshow promoting exploration opportunities at October's Africa Oil Week conference in Cape Town, he said the regulatory code governing the industry has been overhauled extensively over the last five years in an effort to make the sector more investor friendly and improve transparency. All block awards are now presented to the cabinet and must be approved by presidential decree, while Côte d'Ivoire is "fully compliant" with the requirements of the Extractive Industries Transparency Initiative, Tanoh said.

Unlike would-be producers in the region, such as Senegal, Côte d'Ivoire can boast a long history of exploration dating back to the decade before its independence from France in 1960—the list of international oil companies still present includes Total, Anadarko, Eni and Ophir, among others. The country already produces around 40,000 barrels a day of oil and 240m cubic feet a day of gas from four blocks.

Return to stability

But investment has been curtailed over the years by bouts of civil war and political in-fighting. So perhaps the country's most important selling point for investors is that Côte d'Ivoire has enjoyed a period of political stability and economic growth, under the leadership of President Alassane Ouattara, since it emerged from its most recent civil war in 2011.

The resolution of a maritime border dispute with Ghana in September should also give companies more confidence to invest in exploration close to that frontier—some blocks lie in the Tano Basin, which has yielded prolific finds, including the Tullow-operated Jubilee field in Ghana.

The combination of the country's well-established, if chequered, exploration and production history, plus relative political and economic stability could prove winning. That's what Tullow, which already has a long-running minority stake in the Espoir producing field, will be hoping.

As the company says on its recent acquisitions: "If commercial discoveries are made, the maturity of Côte d'Ivoire's oil industry suggests a relatively short and low-cost path to production".

Tullow's new blocks (CI-301, CI-302, CI-518 and CI-519) straddle the coastline, mainly to the west of Abidjan, offering the prospect of relatively low-cost exploration in what Tullow regards as a proven petroleum system. The firm points to oil seeps and past production from the Eboinda oil sands. Tullow has taken a 90% stake in the blocks and state energy company Petroci holds the other 10%. The company plans to start a full tensor radiometry survey on the acreage in early 2018, to make an initial assessment of its potential.

Exploration has stagnated over recent years. Anadarko, Ophir and others failied to produce sizeable discoveries. So, the government will want to build on its reputation for offering some of the continent's best fiscal terms to kick-start activity with a view to increasing production. The government takes less than a 50% share of profit oil on a typical production-sharing contract for daily production under 200,000 b/d, according to consultants EY.

But persuading international oil companies to take a serious interest in deep-water and ultra-deep-water blocks may prove a much tougher sell at a time when company budgets remain limited and the development of proven oil and gas reserves elsewhere in Africa—notably Senegal and Mozambique—are likely to be prioritised.

Local gas demand

Failure to do so would be a blow for Côte d'Ivoire. It seeks to fulfil ambitious economic growth targets with increased oil production to generate higher export revenues and more gas production to fuel growing domestic demand.

Côte d'Ivoire is one of the few sub-Saharan African producers that offers the prospect of reliable, bulk gas sales into the domestic market for power generation, potentially removing the need for IOCs to consider costly liquefied natural gas export projects to monetise discoveries. Indeed, a Total-led group is building a 3m-tonnes-a-year regasification terminal to handle LNG imports.

In 2016, Ibrahima Diaby, Petroci's managing director, asserted that the country aimed to double oil and gas production to 200,000 barrels of oil equivalent a day by 2020. Given the figure remained at little more than 100,000 boe/d in late 2017, that target is certain to be missed. But if the oil price rises, deep-water drilling costs continue to fall and the IOCs become more confident in their spending plans beyond their core developments, Côte d'Ivoire could yet reap the benefits.

Source: Petroleum Economist

This article is part of an in-depth series on Africa's upstream. Next article is: Where did it all go right for Senegal?

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