Building on 2018

The last several years have been tumultuous for Africa’s oil and gas producers, and 2018 marked the first year of stability and real recovery since the oil crash in 2014. Indeed, 2018 brought by fresh optimism and a new wave of investor confidence that is expected to continue into the next several years.

“As the oil price is steadily rising towards pre-collapse levels, the outlook is positive,” PwC said in its annual Africa Oil & Gas Review released in November 2018. “Notably, 2017/18 has seen a significant increase in the number and size of final investment decisions (FIDs), demonstrating a renewed confidence in the sector.”

Capex spending in Africa dropped 42 percent between 2014 and 2018, but is now projected to more than double in value by 2030 to US$857 billion, according to PwC, with legacy producers Nigeria, Angola and Algeria driving much of the growth. But a few newbies on the block — like Mozambique, Egypt, Senegal and Tanzania — are also expected to make up a large percentage of the pie.

Source: PwC, Africa Oil & Gas Review 2018

By June 2018, more than $110 billion in global oil and gas projects had been approved since 2017 — a more than 100 percent increase from 2016, when only $50 billion in new spending was announced, according to Rystad Energy.

The improved oil price has also revived offshore drilling, which took a hard hit in the price crash. Globally, jackup utilization fell from 80 percent in 2014 to 55 percent now. West Africa, dominated by offshore drilling, saw jackup utilization plummet to 25 percent, the worst in the world, according to Rystad.

In 2018 Africa also saw a continued dip in discovered volumes — which is in line with the drop in drilling activity, is also due to a lack of exploration success. Of the 16 high-impact wells drilled in Africa since 2014, only four boasted commercially successful discoveries.

 

 

 

 

 

 

 

But this narrative is starting to change.

“Deepwater projects on either side of the Atlantic Ocean – from Norway to the US and from Angola to Brazil – are leading the charge towards new approvals. Higher oil prices, an improved outlook for gas demand and lower offshore development costs are driving this rebound in the industry,” said Readul Islam, senior research analyst for Rystad Energy, in a report.

Total’s Zinia deepwater project in offshore Angola was one of the key mega projects to get off the ground in 2018. In total, 17 deepwater projects were approved between January 2017 and June 2018 — 16 of which had previously been delayed.

New drilling for 2019 is also on a positive trend, with 15 high impact wells already planned from the 15-month period from November 2018 through 2019 throughout Africa, including Egypt, Morocco and Tanzania, Gambia, Namibia, South Africa, Ghana, Mauritania and Angola.
“The participation of super-majors like Total and ExxonMobil, and Norwegian E&P Equinor and British Independent Tullow as well as Kosmos and FAR Limited who have already seen success in the Mauritania – Senegalese waters, shows encouraging signs for near term future exploration activity in Africa,” says the report.