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West Africa on the up

Oil production will grow again in 2016, despite the downturn in prices

STRUGGLING for cash, Nigeria wants to boost oil production. Emmanuel Ibe Kachikwu, head of state oil firm Nigerian National Petroleum Corporation (NNPC), said in December that the country aimed to raise oil by 300,000 barrels a day in 2016. It’s not clear how this will happen – the government already says it is producing 2.1m b/d, conveniently almost 300,000 b/d above the number offered by secondary sources.

President Muhammadu Buhari, elected last April, is trying to reform NNPC and improve the regulatory framework for oil and gas projects.

From March, NNPC will replace crude oil swap agreements with direct crude sales to refiners and the purchase of refined products directly – an effort to remove middlemen from the process. In December, it issued a list of crude terms contracts for 2016 to just 21 firms – around half the previous year’s number – and cut out a number of firms whose presence created opacity in trades. The emphasis is now on direct sales to well-known internationals, such as ExxonMobil and Royal Dutch Shell, as well as to trading houses and local downstream players.

These changes will take time to make any difference. At best, Nigerian output, which was 1.8m b/d in December 2015, will be 1.8m b/d in mid-2016 and end the year at 1.9m b/d.

Angola’s campaign to draw investors into its deep offshore developments over recent years means production from projects already under way will bring an output increase.

The latest project to come on stream is the Eni-operated deep-water Mpungi field in the West Hub Development Project. Production started in January and is expected to build to 100,000 b/d during Q1 2016. This follows earlier developments in West Hub: the Sangos field, where production started in November 2014 and the Cinguvu field, which started in April 2015. The Eni-operated East Hub Development Project is under development and is scheduled to start producing in 2017.

However, international oil companies say Angola will struggle to draw investment to fresh exploration in already expensive-to-drill offshore locations unless soaring costs, exacerbated by the country’s regulatory regime, are reined in. National oil company Sonangol controls the award of contracts, which some critics say means the most-qualified firms are not always selected. Jean-Michel Lavergne, general manager for Total E&P Angola, which has the largest presence in the Angolan offshore, said last September that without major cost reductions, investment could stop unless oil prices were above $60 a barrel. Output was 1.75m b/d in December 2015, and we expect it will rise to 1.78 m b/d in mid-2016 and 1.8 m/d at the end of the year.

Ghana’s output, 100,000 b/d at the end of 2015, came almost entirely from the Tullow Oil-operated offshore Jubilee field. But production from the Tweneboa, Enyenra, and Ntomme (Ten) project, is set to come on stream around mid-2016, adding some 80,000 b/d when it peaks. How long that takes will depend on a long-running border dispute between Ghana and Cote d’Ivoire. Our view is that production from Ten will average around 23,000 b/d in the second half of 2016.

Approval for Tullow’s Jubilee expansion could come in the first half of 2016, boosting output. In total, Ghanaian output by mid-year should be little changed at 102,000 b/d but rise to 125,000 b/d by year-end.

Production from Gabon’s and the Republic of Congo’s maturing fields has declined recently. While that will continue in Gabon, in Congo an initial phase of the Total-operated offshore Moho project came on stream at 40,000 b/d in December. The Chevron-operated Lianzi field, which straddles the Congo/Angola maritime border, started producing in November 2015. The Lianzi produces 40,000 b/d at full capacity. In 2016, we see Congolese output rising from around 265,000 b/d in December 2015 to around 310,000 b/d in mid-year and 315,000 b/d at the end of the year.

This article is part of an in-depth series on regional production forecasts. Next article: The storm nears in the North Sea.

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