January 2018

With US production on the rise, along with the potential future output from large discoveries in Guyana, Mexico and Brazil, the market is becoming increasingly saturated, resources are increasingly scarce, and competition is fierce. Africa has to compete for investment against these markets, and standing out from the crowd can be difficult. Nonetheless, with world-class discoveries such as those recently made in the MSBGC Basin, investors ought to take another look at the array of largely untapped and underexplored opportunities on the continent. While a lot of focus is currently placed on North America, industry stakeholders risk missing out by overlooking the potential of the African industry and the many opportunities on its horizon.

While it faced a wide spectrum of challenges and obstacles, overall it can be said that 2017 was a good year for the African E&P sector. So what can we look forward to in 2018? For one thing, drilling activities will be going ahead throughout the continent. To name a few, Tullow Oil is to start drilling offshore Namibia, TOTAL is set to drill a wild cat well offshore South Africa,  and BP and Kosmos Energy are to begin drilling in Senegal. Others wells to watch include Eni’s activities with Saipem in the Rabat Deep Offshore licence in Morocco, and the Samo prospect in The Gambia where FAR is looking to start drilling towards the end of the year, marking the first exploration well in The Gambia since 1979.

With future energy policy focused on reducing the carbon intensity of the global economy, gas is the new reigning king and its importance will continue to grow across the world. Africa’s gas potential is largely untapped but undeniably important. Looking at Mozambique alone, the Coral Field holds around 450 billion cubic metres of gas. To the North, the gas giant Zohr has started to deliver, with production underway which is set to transform Egypt’s energy landscape. Self-sufficiency is on the horizon for Egypt, expecting to be achieved by 2018, setting the country on the path to leaving its import-dependent past and become a competitive exporter of natural gas.

While the general sentiment is optimistic, it would be naïve to say that the future of the Africa E&P industry is obstacle-free. Amongst these challenges, there is a real need to focus on creating attractive business environments for new market entrants. Communication amongst the interested stakeholders needs to be clearer, decision-making streamlined, and agreements transparent. Too many NOCs have suffered due to miscommunication surrounding rules and regulation around CSR and local content policy, which unfortunately often ends up coming across more stringent and repelling than it may have originally been created to be. Misconceptions over regulation surrounding local ownership are arguably acting as a deterrent to foreign investors.

Governments and NOCs will need to focus on working alongside international operators, as partners working towards the common objective of bringing their national hydrocarbon industries into the next stage of development. Once this becomes a reality, the industry will be in a much better position to make the most of the recovering oil price. This kind of progress is already becoming apparent throughout the continent. For instance, the speed at which Senegal’s oil and gas province has developed has been impressive to say the least, and a great example of what can be achieved when the interests of the government and international oil companies are aligned. 2018 could be a promising year for the African energy industry, but there needs to be a concerted effort from all parties involved to get the pace going.

Join in the discussion and book your ticket for this year’s Africa Assembly, taking place on the 5^th and 6^th of June in Paris. For more information, please contact Esme Till at [email protected] or +44 (0)207 384 7861.