Africa is back on the deep-water agenda
Drillers are starting to renew interest in African projects deemed too costly and risky
Confidence in the sub-Saharan African offshore sector has been boosted by the increasing availability of relatively low-cost floating production, storage and offloading (FPSO) and floating liquefied natural gas (FLNG) facilities. While the industry's successful efforts to cut operating costs during the recent downturn have also helped make African deep-water look a more attractive option.
Both Nigeria and Angola, Africa's largest oil producers, are now having at least a modicum of success in revitalising the hydrocarbons sector after several lean years. Shell said in late July it hoped to finalise talks with Nigeria soon on a framework to expand its Bonga deep-water oil field, preparing the way for a final investment decision on the $10bn Bonga Southwest project, which could produce up to 175,000 barrels a day.
Meanwhile, Total is considering expanding the Egina deep-water project, with its FPSO facility scheduled to start operations in the fourth quarter. Egina is set to produce 200,000 b/d of oil from the Egina Main field, which has estimated reserves of 570m barrels. But Total could also tie back its nearby Preowei discovery to the Egina FPSO—a successful third appraisal well was drilled there in late 2017.
The Nigerian government hopes that a long-awaited revamp of its hydrocarbons sector legislation and investment framework, now under way, will encourage further E&P investment.
The cash-strapped economy badly needs the increased revenues. But the task remains a tough one, after years in which international oil companies have been noted more for divesting from, rather than investing in Nigeria due to legal and financial uncertainties.
Angola, meanwhile, needs to find and produce more oil to offset declines in its maturing fields. Some succour has come from the start-up of production on the Total-operated Kaombo development on Block 32, some 260km (161 miles) off the country's northern coast. The Kaombo Norte FPSO started producing in July, while the Kaombo Sul facility is scheduled to start up in 2019. Overall production from the development is forecast to peak at around 230,000 b/d.
The African oil story isn't all about the established producing nations though. FID on Senegal's SNE deep-water development, located around 100km offshore from the capital, Dakar, was pencilled in for around the end of 2018. However, the need to resolve a legal objection by minority shareholder Far into the acquisition of a stake by Australia's Woodside could delay FID until well into 2019. Woodside was set to take over operatorship for the $2bn production phase of the development from current operator Cairn Energy, but is unlikely to do so until the dispute is settled.
Cairn estimates SNE has 2C oil resources of over 550m barrels and is targeting first oil in 2021-23 via an FPSO.
FLNG becomes reality
While Africa's offshore oil riches have long been a focus for the IOCs, the search for gas to export to energy-hungry Asian markets is now just as important a driver for investment.
The race to develop Mozambique's huge Rovuma Basin reserves—which could total more than 150 trillion cubic feet—provides the most obvious example. Eni signed off on its $7bn Coral South FLNG project in mid-2017. The vessel is now under construction in South Korea, and Eni hopes to start exports from the 3m-tonnes-a-year facility in 2022. But that's just the start, with both ExxonMobil and Anadarko planning to build separate onshore LNG plants on the coast in Cabo Delgado province in northern Mozambique.
Neither project has yet reached FID and it remains to be seen whether both projects will materialise. Exxon said in July it was planning to build two 7.5m-t/y trains to be operational around 2024. Eni, which passed control of the onshore project to Exxon in 2017, had originally envisaged two 5m-t/y trains. The expansion reduces the unit cost of the LNG produced and reflects Exxon's confidence that it can find both investors and buyers.
On the other side of the continent, Cameroon is playing host to only the world's second operational facility, Golar LNG's 1.2m-t/y Hilli Episeyo, which exported its first cargo-to China-in May. Golar hopes the facility's modular and relatively cheap design will serve future FLNG projects in West Africa.
The withdrawal of Schlumberger from the OneLNG venture with Golar to provide an FLNG facility for Ophir Energy's Fortuna project in Equatorial Guinea has thrown that venture into doubt. Golar has also been in talks to provide an FLNG vessel for BP's planned development based on more than 20 trillion cf of reserves straddling the Senegal-Mauritania border.