Recent oil drilling success offshore West Africa has led to increased interest by outside investors looking to explore even more sites. Of particular interest are the “new frontier countries” beyond sub-Saharan West Africa, with the coastal waters of East Africa and South Africa getting in on the boom.
It’s a development that is important to some of the members of the American Petroleum Institute, Eric Wohlschlegel, American Petroleum Institutes’ Communications Director told AFKInsider.
“This is something that we are monitoring,” Wohlschlegel said.
Along with dreams of fortune are issues of concern about the impact on the environment and how more locals without requisite job skills can be included in the growing workforce needs.
Sunny Oputa, CEO of Houston-based Energy & Corporate Africa told AFKInsider he agrees that the new offshore oil finds are of interest to American companies. Oputa has been CEO since 2006 of of Energy & Corporate Africa, a company that offers training to deal with the African oil industry and is sponsor of the upcoming Seventh Annual Sub-Saharan Africa Oil & Gas Conference, scheduled in Houston in May.
But according to Oputa, there are changes coming in how Africa deals with international oil companies.
“You want local content when you talk about where people want to see the adequate utilization of the local level in current oil and gas operations,” Oputa told AFKInsider.
Ever since oil worth developing was first discovered in the Gulf of Guinea, the offshore area of West Africa has been eyed by both local and foreign oil production companies.
Nigeria has become the region’s major oil producer. However, international development has slowed due to threats of violence, theft, corruption and Nigeria petroleum industry rules that have remained in legislative limbo for six years.
With the oil production development slowdown in Nigeria, Angola has recently emerged as an equally significant country for oil exploration and threatens to dethrone Nigeria as Africa’s leading oil producer. In fact, more than one-third of all discoveries made over the last three years in the region have occurred offshore of Angola.
Ghana has seen a similar wave of discoveries in recent years, accounting for 13 of the 52 offshore oil and gas discoveries made. Much of that happened since 2007 when Tullow Oil discovered the Jubilee oil field in Ghana – one of the largest recent discoveries with an estimated potential of 5 billion barrels of oil.
In July 2013, Singapore’s International Enterprise, which leads Singapore’s external economic connections, opened a new investment office in Accra, Ghana, to extend the Asian country’s investment in Ghana and West Africa. It’s a first of its kind in sub-Saharan Africa, according to IE Singapore.
Business between Ghana and Singapore — estimated to be around $1 billion — is expected to increase. The collaboration between the two governments will center on infrastructural development while private sector investment is expected to focus on manufacturing and development of offshore oil rigs.
According to the research firm Wood Mackenzie, sub-Saharan Africa could be pumping an additional 400,000 barrels of oil per day by 2018, bringing it to a total crude oil output of 6.6 million barrels per day. Because of this, the current development players are the who’s who of international offshore oil drilling.
U.S.-based Chevron announced in March 2013 that it will proceed with development of two projects 50 miles southwest of Pointe-Noire offshore the Congo basin. That project is expected to cost about $10 million and produce 140,000 barrels of crude oil per day by 2017.
But there may be as much as 600 million barrels of oil off the Congolese coast, according to Italian energy company Eni. Eni has been drilling in inland Congo since the late 1960s, and made the offshore discoveries while drilling in more than 9,800 feet of water 10 miles off the coast.
Paris-based Total SA reported in December it is progressing with development of the Moho Nord deepwater offshore Congo project, where the first oil is expected to come up in 2015.
Further south off Angola, BP Exploration’s PSVM development — 112 miles offshore and discovered between 2002 and 2004 — finally received approval from the government to proceed with the first deepwater project in December 2012. Today, the $14 billion PVSM has 48 wells and is the largest offshore project in Africa and one of the deepest in the world.
But it is Paris-based Total that currently pumps one third of Angolan oil and could help Angola beat out Nigeria as Africa’s leading oil producer. Total’s potentially 600 million barrel Kaombo site off Angola is expected to produce 200,000 barrels a day after its scheduled start in mid-2017. Total also plans to begin production at its CLOV project this year, which is expected to pump 160,000 barrels of oil per day. The $10 billion CLOV project has 34 wells northwest of Luanda and is estimated to hold 505 million barrels of crude, according to the company which is in partnership with Statoil ASA, Exxon Mobil and BP Exploration Angola.
Now, with the oil industry experiencing increasing demand from countries like China, there is greater pressure to step up exploration activity in untapped areas. Because of this, South and East Africa are experiencing their own offshore oil boom.
East Africa is expected to be a major driver of the new offshore oil boom. Companies including Anadarko, ENI, British Gas, Statoil, ExxonMobil, Total, Ophir, Apache and Tullow are already heavily invested. Offshore Tanzania, Anadarko’s deepwater operation reported new finds in 2012, while Brazil’s Petrobras is preparing to drill in two offshore blocks where it expects to produce more than 2 million barrels per day by 2020.
Offshore South Africa, foreign investment didn’t enter the picture until apartheid ended in 1994. Today, Royal Dutch Shell is looking to drill off the coast close to the border of Namibia, with each well costing $150 million to $200 million because of the depth of the water. And ExxonMobil was recently granted permits with South Africa’s government to conduct a one-year study on the potential of a deepwater basin off Durban.
In fact, five international companies now have licenses for seismic surveys along the east coast from Jeffreys Bay to the Wild Coast.
But the area covers more than 17,400 square miles of pristine tourism region popular with whale-watchers, and that has caused some concerns over just how much energy development versus tourism business is good. Following a complaint over the impact of underwater sound pollution from seismic surveys on sea life and the seasonal migration of humpback whales, South Africa briefly suspended oil and gas exploration until the government-run petroleum agency of South Africa could hold discussions between international oil firms and environmentalists.
While the ban was lifted Dec. 20, it raised questions: Can big international oil companies put influential pressure on bending local laws?
“No, U.S.-based oil companies have no influence in changing South African Laws,” O. Mans, Acting CEO of the Petroleum Agency of South Africa told AFKInsider. “All companies, whether local or international, that are interested in operating in South Africa have to adhere to South African rules and regulations.”
But for other regions, the power of some companies has been brought into question.
“I can say they are pressuring,” Energy & Corporate Africa CEO Oputa told AFKInsider.
Energy & Corporate Africa’s Sunny Oputa uses the historic case of Nigeria as an example of how some oil companies could pressure unstable political regimes.
“Nigeria tried to get this new petroleum industrial bill,” Oputa told AFKInsider. “It has been delayed a little because the international oil companies want to make sure it’s a win-win situation fully to the side of the company.”
Six years after it was first introduced, Nigeria’s Petroleum Industry bill remains in legislative limbo over disagreements with its proposed financial terms to increase Nigeria’s share of revenue. Companies such as Shell, Chevron and ExxonMobil think the new terms are too strong and could threaten continued investment.
“There are people that still feel that if government is putting a lot of pressure on international oil companies, foreign direct investment might reduce and these guys might pull out or reduce their investment in the offshore sector, which for most African countries including the South want to really double up,” Oputa told AFKInsider.
Nigeria may be an extreme example. Nigerian President Goodluck Jonathan is under pressure from the central bank to produce information on what happened to $50 billion in revenues from January 2012 to July 2013. And the London Royal Institute of International Affairs did an investigation of stolen Nigerian oil and its international money laundering connections. Concluding that “Nigerian crude oil is being stolen on an industrial scale,” the report notes that the U.S., Brazil, China, Thailand, Indonesia and the Balkans were the probable destinations for the stolen oil.
Despite Nigeria’s current issues, Oputa says the most important local issue throughout the entire oil-developing region that’s pitting local governments against pressure from international oil companies is the need for a greater use of local employees.
“You might be changing the extent of the law then because there are some areas where you may not have qualified level (of local skills) and if you say you must take from the local you may not get the degree of professionalism because some of them are not yet acquainted with certain technologies,” Oputa told AFKInsider.
One example is Angola. While BP’s PSVM project in Angola was developed using more than 20 percent local content in the manufacture and assembly of drilling equipment at local construction yards, Angola has been urging companies such as Total, Chevron and ExxonMobil to use more Angolans. On average, the oil industry employs just 1 percent of Angola nationals, though it accounts for nearly all the country’s exports.
Oputa says one of the things that will happen in Africa in the next five years is what he calls a “regional content” shift.
“Regional content is where some new countries will depend on countries like Nigeria and Angola that have had some professionalism for long time. You can see how Nigeria has Kenya to develop this new oil sector. Nigeria has helped Uganda to develop their new oil sector,” Oputa told AFKInsider. “Africa will create a balance.”