A brighter year for Africa
Senegal's and Mozambique's projects gained momentum, Nigeria's production started to rise again
The forces acting on the hydrocarbons sector in sub-Saharan Africa are as varied and sizeable as the continent itself. But 2017 was largely positive. Projects moved ahead on both sides of the continent.
Nigeria and Angola remain Africa's hydrocarbons kingpins, but developments in up-and-coming producers, like Senegal and Mozambique, continued to impress. Senegal's speed in developing a new oil and gas province has been impressive, showing what can be done when oil companies and governments see eye-to-eye—and if the oil and gas discoveries keep racking up.
Operator Cairn Energy increased its estimate of recoverable oil resources in its deep-water SNE field, around 100km offshore the Senegalese capital Dakar, to 0.6bn barrels in August, as its exploration campaign met with continued success. The UK firm and partners, including Australia's Woodside, plan to make a final investment decision on the project in 2018. They would like to produce oil via a floating production storage and offloading facility starting in the early 2020s.
In Mozambique, Eni gave the green light in mid-2017 to an $8bn project to develop its Coral South gas reserves, estimated at around 16 trillion cubic feet, in the Rovuma Basin in the country's northern offshore. Crucial to the positive decision was prime minister Felipe Nyusi's willingness to let Eni use floating liquefied natural gas for the project and export all of the output, rather than forcing the Italian firm to build onshore plant and send gas first to local buyers. Exports from the 3.4m tonnes-a-year facility are scheduled to start in 2022.
Getting Coral South off the ground was a feather in the cap for the Mozambican government, which had struggled to make international debt payments in the months before the agreement. With Coral South on the move, more investment may follow.
$8bn—cost of Eni's Mozambique project
In neighbouring Tanzania, which shares the Rovuma Basin's reserves, things went slowly. The government wants to see initial investments made onshore and more money going into the domestic economy. A consortium including ExxonMobil, Statoil, Ophir and Shell was created to build an LNG plant in Lindi, close to the Mozambique border, but as the end of the year approached, progress looked glacial.
In Uganda and Kenya, oil rather than gas remained the focus. In May, Uganda and Tanzania signed a framework agreement for a $3.55bn, 1,450km-long crude-export pipeline to take oil from landlocked Uganda's Albertine Basin to the Tanzanian coast. Uganda's recoverable reserves, estimated at up to 1.7bn barrels, are being developed by Total, China National Offshore Oil Corporation and Tullow Oil. The oil could be flowing through the pipeline, now under construction, by 2020.
Kenya's story was different. Its efforts to develop oil reserves discovered by Tullow and its partners in the Lokichar Basin near Lake Turkana, in the country's north, were delayed when local communities demanded a greater share of revenues and disrupted some activity.
Nigeria and Angola continued to top the continent's oil-output league, albeit still suffering the fiscal impact of the oil-price slump. Nigeria picked up some lost ground. The Niger Delta enjoyed a relatively peaceful year. Fewer attacks on energy infrastructure allowed for output to stabilise and then start rising—it had reached 1.7m barrels a day in September, compared with lows of 1.4m b/d in 2016. Much of the credit went to Yemi Osinbajo, the country's Vice President, who oversaw negotiations with Delta leaders while President Muhammadu Buhari spent lengthy spells in a London hospital with an undisclosed illness. Otherwise, despite efforts to reform the oil sector, allegations of corruption hardly disappeared, and there was little sign of a hoped-for revival in foreign investment in hydrocarbons in 2017.
In Angola, production was running at around 1.6m-1.7m b/d in mid-2017, slightly below capacity, held in check by its Opec quota commitment. The country's long-time leader Jose Eduardo dos Santos stepped down as president in September, but his daughter Isabel Dos Santos remained head of state energy firm Sonangol. She promised to restructure the cash-strapped company.
This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here