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Côte d'Ivoire's deep ambitions

It's got the fiscal terms and even the domestic power market. Now Côte d'Ivoire just needs a major hydrocarbon find

Côte d'Ivoire has failed to match the lustre of neighbouring Ghana in terms of interest in oil and gas exploration. Much of the country's most promising acreage is in deep or ultra-deep water, which as nations across West Africa have found out in recent years, is viewed as too expensive for the international oil companies with the skills and clout needed to develop them, given their drained financial resources and the cheaper prospects on offer elsewhere.

The assertion made in mid-2016 by Ibrahima Diaby, managing director of state oil firm Petroci, that the country aimed to double oil and gas production by 2020 always looked ambitious. Diaby's target of some 200,000 barrels of oil equivalent a day now seems impossible.

"We do expect oil and gas production to increase, but not to the point at which it could double within the next three years," says Jean-Baptiste Bouzard, an upstream analyst at Wood Mackenzie.

Liquids production is only expected to average around 46,000 b/d this year, down slightly from 2016, according to the consultancy. Gas production is forecast to be little changed at 235m cubic feet a day, or about 40,500 boe/d.

Fresh developments on the deep-water Baobab and Espoir fields, in adjacent offshore blocks operated by Canada's CNR International, are helping to nudge production higher. But much of the planned work there is now done and Côte d'Ivoire's oil production is unlikely to exceed 60,000 b/d by 2020, Wood Mackenzie estimates.

The country offers some of the best fiscal terms in West Africa for exploration, as a government mindful of the weakened state of the global oil industry seeks to keep its acreage competitive. An offshore licensing round mooted for coming months will—if it happens—provide a good indication of whether the investor interest is there.

A number of high-profile names already hold acreage in the country's waters in the Gulf of Guinea, while not having done much with it so far. So, their appetite to take on new blocks may remain muted for the time being.

In 2014, ExxonMobil signed production-sharing agreements for two ultra-deep-water blocks, CI-602 and CI-603, covering depths of 3,000-4,000 metres. In March this year, Eni added to its CI-100 block, acquired in 2015, by taking 90% stakes in two further blocks, CI-101 and CI-205, in depths ranging from 200 metres to 2,700 metres in the Tano Basin, which has produced large discoveries across the border in Ghana.

Anadarko has drilled several promising exploratory wells in the past couple of years on its blocks, CI-103, CI-527 and CI-528, which are contiguous, discovering light oil and gas, and finding evidence of reservoir connectivity. But the last two wells it drilled, Paon-6 on Ci-103 and Colibri-1X on CI-527 failed to find commercial quantities of hydrocarbons. The company, which has pared down its exploration portfolio during the recent global downturn for the sector, is now evaluating what to do next.

Ophir Energy's Ayamé-1X exploration well on its block CI-513, drilled in May, also failed to find significant quantities of hydrocarbons.

Domestic boost

The perennial concern for explorers of finding small-to-mid size stranded gas reserves rather than more easily monetisable oil is less troubling in Côte d'Ivoire than it would be in many other countries. There is a large and growing local market for gas and, just as importantly, a relatively attractive domestic gas price, as the government seeks to boost gas-fired power generation.

Operators have been able to strike deals to sell gas into the country at up to around $10 per 1,000 cubic feet in the past—a healthy price on the continent. Given the lower global hydrocarbons prices of today the government may well want to offer less to producers now, but Wood Mackenzie's Bouzard says that even a price of around $6-8/'000 cf could make gas-based production projects viable.

Much of the acreage being explored is within 100km of the coast, with some much nearer, making underwater pipeline supply a feasible proposition. In the case of Anadarko's CI-103, it is also close to the economic capital of Abidjan, where much of the country's power demand lies.

The gas-to-power market is already well developed, funded by public-private partnerships in which the World Bank Group institutions have been closely involved. The government's economic plan calls for $20bn of investment in the sector by 2030, while the energy ministry has said around 150 megawatts of new capacity needs to be added to the grid every year at present to keep pace with demand, which is rising at about 10% a year.

Côte d'Ivoire's installed electrical generation capacity now stands at around 2,000MW, mainly split between hydropower and gas.

The growing thirst for gas that domestic production could help sate is illustrated by the decision to build a $140m 3m-tonnes-a-year liquefied natural gas regasification terminal near Abidjan, with a consortium led by Total due to start construction later this year. The West African Gas Pipeline could add to supplies. In early August, the Nigerian National Petroleum Corporation announced plans to extend the pipe beyond Ghana to Cote d' Ivoire.

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