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Oil & Gas Africa: Offshore Exploration Heats Up In Gabon And Congo  

Oil & Gas Africa: Offshore Exploration Heats Up In Gabon And Congo  

As frontier markets, the countries of Africa represent both tremendous opportunities and tremendous risks. On the risk side of the ledger are all the usual complications of international trade and investment compounded by the problems inherent in developing, emergent continental markets consisting of 54 countries and 1.1 billion people – it’s a lot to keep track of.

Luckily, the ups and downs of the African oil and gas trade aren’t one of them if you know where to look. To help with that, AFKInsider has compiled all the news you need to know now in order to slim down your risk in the weeks ahead. Let’s see what’s happening out there.

A new lease on life for two old African oil provinces?

The Republic of Congo and Gabon are two veteran producers of crude oil that have long served as important production bases for European firms, most prominently France’s Total and Italy’s Eni.

However, in recent years production in both has plummeted as maturing onshore fields and political unrest took a toll on the investment needed to keep crude flowing. To make up for that decline from traditional areas, international players are now searching the deepwater portion of both countries offshore.

Like much of the rest of West Africa, interest in deep water is being driven by the massive pre-salt finds in Brazil, where the world’s largest offshore discoveries are now being made since the discovery of Mexico’s Cantarell Field in 1976.

This raises interest in West Africa, in particular the Gulf of Guinea and adjoining seas — areas seen as the geological analogies to the rich areas now being explored off Brazil.

Since these two areas were once part of one larger entity, goes the geological reasoning, the same process of oil formation must have played out in West Africa’s deepwater in the distant past much as it did off the coast of Brazil.

This hypothesis seems to be bearing fruit. Further north in Ghana, Tullow Oil discovered the giant Jubilee Field in offshore Ghana in 2007.

Jubilee sits just 60 kilometers (37 miles) offshore between the Deepwater Tano and West Cape Three Points Blocks in water 1,100 meters (3,609 feet) deep. Estimated to hold 1.2 billion barrels of oil and gas, the field went into production in 2010 and transformed Ghana into a major African oil producer.

Likewise, further south of Congo and Gabon, Angola’s mostly offshore oil fields hint that a long line of oil deposits may lie along portions of Africa’s western coast.

Republic of Congo and Gabon

Of the two countries, Gabon has seen a number of large discoveries in recent months. In October, Shell and CNOOC — China’s state-owned offshore oil company — discovered a 656-foot gas column in an offshore, pre-salt formation they termed a “significant’ discovery.

This follows work earlier this year by Eni, which made a 500-million-barrel discovery at the Nyonie Deep prospect in Gabon’s Block DV. In addition to these, other companies exploring in Gabon’s offshore regions include ExxonMobil, Repsol, Ophir Energy, Petrobras and Marathon Oil.

In Congo, meanwhile, explorers have also been probing offshore. In Early October SOCO International reported making an oil discovery at its Lidongo X Marine 101 exploration well.

While SOCO found only a relatively small amount of oil, the larger potential of Congo was made public a few weeks later when Eni announced that it, too, had recently made an offshore Congo discovery.

However, unlike SOCO’s relatively smallish find, Eni’s wildcat intersected a 1,380-foot column of light oil. Like the deepwater finds in Ghana and Brazil, Eni’s was found in a deep reservoir and altogether the company believes that as much as 1 billion barrels of oil and oil equivalent may be found there.

When other offshore Congo discoveries are added to Eni’s find as well as those in Gabon, the total in the area could amount to 4 billion barrels of oil.

Timeline from discovery to production

If Eni’s estimate is correct that would double the oil thought to be found between the two countries. The question is how quickly all that oil can be brought to market.

Jubilee took roughly three years, from discovery to production and that included the worst years of the recent financial crisis when oil crashed to new lows and the global economy nearly ground to a halt.

That suggests that if these volumes pan out then a three-year development timeline might not be out of the question. This is especially the case if existing production infrastructure in both countries can be used to facilitate development.

Opportunities for investors

So, as with much of the rest of the West African littoral, investors should be eyeing the possibility of an expansion of the pre-salt oil boom to both Gabon and Congo. This will mean opportunities not just in the oil sector, but also in secondary and tertiary sectors that will support and supply offshore production.

This includes support vessels of all types, onshore facilities and services, and security in addition to the general benefits of more money being pumped through the local economy.

Does this mean Gabon and Congo will boom overnight? No, but their long-term prospects are definitely improved by the likely addition of  significant new volumes to their existing, and declining, shallow-water and onshore reserves.

Jeffrey Cavanaugh holds a Ph.D. in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFK Insider and Mint Press News.