2017 Recap: LNG, Pipelines and New Frontiers

The stabilization of oil prices around $50 per barrel in 2017 was welcome news for producing countries in Africa, with oil dependent markets like Nigeria and Gabon benefiting directly from the stronger prices as they ramped up production and exports. Sub-Saharan Africa is estimated to have contributed about 5.47 million bopd to global production in 2017, up from 5 million bopd in 2016, signalling a progressive output recovery.

The production increase in 2017 was largely supported by a recovery in Nigeria’s crude oil production; new fields coming on-stream in Ghana (output recovery from the Jubilee field, output rise from the TEN field and start of production at the Sankofa field); the commencement of production from Chevron’s Mafumeira Sul project and Eni’s East Hud Development project in Angola; and production starting offshore block CI-27 in Cote d’Ivoire.

The restart of Shell’s Trans Forcados crude export pipeline in Nigeria following its shut down in February 2016, along with Libya going back to full production helped the continent increase oil output to about 9.1 million bopd in 2017.

Sub-Saharan Africa’s gas production is expected to have increased to 7.1bn cubic feet per day in 2017, up from 6.3bn cfpd in 2016, fueled by sustained investment in gas-to-power projects across West Africa.

LNG Projects and Initiatives

  • In June 2017, Mozambique launched its landmark $7bn Coral South LNG project with the signing of the drilling, construction and installation contracts, as well as the agreements for the regulatory framework and financing of the project. The project intends to develop the Eni-operated Coral field located in the Rovuma Basin’s Area 4, which contains about 450bcm of gas, and will see the commissioning of a 3.4 million tpa FLNG unit. Production is expected in 2021/2022.
  • In August 2017, the government of Mozambique signed concession agreements with Anadarko for another LNG terminals following positive exploration results from the operator’s Area 1. The planned two onshore LNG trains will have a combined capacity of 12 million tpa.
  • In November 2017, Russia’s Gazprom signed a 12-year LNG supply deal with the state-owned Ghana National Petroleum Corporation (GNPC) to supply the country’s upcoming $550 million, 3.4 million tpa Tema LNG regasification terminal, with exports from Russia expected to start in 2019. In August 2017, Ghana signed a similar agreement with Equatorial Guinea to receive about 150 million standard cubic feet per day and build another LNG regasification terminal in Takoradi.
  • In September 2017, Equatorial Guinea signed an MoU with Burkina Faso to sell LNG and develop key LNG infrastructure in the landlocked West African country.
  • In December 2017, Cameroon became the first African country to commission an FLNG unit when Jumbo Offshore hooked up Golar LNG’s Hilli Episeyo unit to Cameroon’s Kribi field subsea anchor system. Shipments from the $1.2 billion project are expected in February 2018.
  • Equatorial Guinea is planning Africa’s first deepwater floating liquefaction facility, and shortlisted oil trader Gunvor as the offtaker in August 2017. The umbrella agreement was signed in May 2017 by Ophir Energy with the Equatorial Guinean government, OneLNG and GEPetrol for the 2.2 million tpa production facility. FID is expected in 2018.
  • In November 2017, China’s POLY-GCL Petroleum Group Holdings signed an MoU to invest $4 billion in a 12bcm natural gas pipeline from Ethiopia’s eastern Ogaden Basin to Djibouti, a 10 million tpa liquefaction plant and an export terminal in Damerjog, Djibouti.

2017 was marked by major transnational pipeline projects moving forward and set to transform the geopolitics of energy…

  • In May 2017, Uganda and Tanzania signed an agreement on the proposed $3.55 billion, 1,455km crude export pipeline from Hoima in western Uganda to the port of Tanga in Tanzania. The project is set to become the longest electrically heated crude oil pipeline in the world when completed in 2021. It will transport oil at a tariff of $12.2 per barrel. The foundation stone was laid in August 2017.
  • Kenya, which was in competition with Tanzania on the exit route for the Uganda crude oil pipeline, is now working on another pipeline project of its own. In October 2017, it signed a feasibility study agreement to transport oil from its oilfields to the Indian Ocean coast via a $2.1bn, 820km pipeline to be completed in 2021. The agreement includes Tullow Oil, Africa Oil and A.P. Moller-Maersk.

2017 also confirmed the emergence of new African hydrocarbons frontiers…

  • In Senegal, BP struck gas at Cayara’s Yakkar-1 well in May 2017, as part of a multi-billion dollar investment made with Kosmos Energy to develop the Cayar Offshore Profond block.
  • In Mauritania, BP and Kosmos Energy awarded KBR the pre-FEED and project support services contracts for the development of the Tortue/Ahmeyim field offshore Mauritania and Senegal in August 2017. FID is expected in 2018.
  • In Namibia, BW Offshore acquired a 56 percent operating stake in the Kudu gas field in September 2017; Total acquired 70 percent of Impact Oil & Gas’ interest in offshore block 2913B in October 2017; ONGC Videsh acquired a 15 percent stake in offshore block 2012A in November 2017; Pancontinental Oil & Gas signed a petroleum agreement including a 4-year exploration program for offshore block 2713 in December 2017.
  • In Guinea, Total signed a Technical Evaluation Agreement with the National Office of Petroleum of Guinea (ONAP) in October 2017 to study deep and ultra-deep offshore areas covering about 55,000 square kilometers. Total will be assessing existing data for a year, after which it can choose three blocks to commence exploration. Guinea currently has no producing fields and all recent exploration activities has been carried out by US Independent, Hyperdynamics Corp, which drilled the Fatala-1 well in deepwater offshore Guinea in early 2017.
September 5-7, 2018 Cape Town International Convention Centre