Authors: Olga Kerimova & Veronika Akuliniseva, Analysts, Rystad Energy
Publisher: PESGB Newsletter, March Edition
Rystad Energy forecasts West and East Africa production to be rather stable in the medium term, potentially experiencing a decline post 2020. Nevertheless, output growth is possible in the long term provided that fields discovered over the last two decades are actively invested in and put on production in a timely manner. This article assesses West and East Africa’s E&P status and outlook, illustrated by the three key drivers: production, exploration success and spending.
Figure 1 depicts the total production for West and East Africa from 2010 to 2025 split by key contributing areas. In 2016, more than 70% of total volumes in the region were produced in Nigeria and Angola, with output reaching 2.65 million boe/d and 1.75 million boe/d respectively. Nigeria’s production dropped 400 thousand boe/d year-over-year in 2016 due to the ongoing conflict in the Niger Delta. Rystad Energy expects the country’s production to gradually recover in 2017. West Africa’s production is anticipated to stay rather flat for the next couple of years before starting to show some decline post 2020. Stable output forecast in the medium term is supported by volumes coming from already sanctioned fields, some of which are expected to start producing already this year. Meanwhile, long-term performance is highly dependent on timely development of numerous discoveries made over the last two decades. However, a lack of large projects in the pipeline undermines the future potential in these countries, and unless a significant number of fields is put on production simultaneously, output in West Africa as a whole could experience a rather high decline rate post 2020. In contrast to the Western part, East African volumes made up less than 5% of total supply last year, but its share is currently expected to increase to up to 10% by 2025. Production has a potential to grow to nearly 800 thousand boe/d from 250 thousand boe/d produced last year, contingent on development of discoveries within Area 1 LNG, Coral FLNG, and Buffalo projects, to name a few.
Figure 2 shows the discovered volumes for East and West Africa from 2005 to 2016. Most of the discoveries are still unsanctioned (virtually all of the post 2005 discoveries in East Africa and the recent discoveries in West Africa). Over 13 billion boe were discovered in 2012, dominated by the Mamba North and North East, Golfinho, Coral and Atum gas fields in the Cabo Delgado Province in Mozambique as well as discoveries in Tanzania’s blocks 1 and 2. A large part of these discoveries is expected to be developed as LNG projects. Other major discoveries in East Africa include the Mamba South (2011) and Orca (2013), both offshore Mozambique. However, the region has seen a reduction in exploration success in the recent years with no significant discovered volumes in 2015 or 2016. West Africa, on the other hand, has seen a fairly stable exploration trend in the last five years with around 1.8 billion boe discovered on average in 2012-2016. In 2012, the Owowo West field was discovered in Nigeria (further extended in 2016) and Cobalt made a sizeable discovery in the Cameia prospect (Block 21) in Angola. In August 2013, the Nene Marine discovery was made by Eni in Congo, while 2014 was marked by large discoveries in Senegal (Cairn Energy-operated SNE field) and Angola (Cobalt-operated Orca field). In 2015-2016, Ahmeyim and Marsouin fields were discovered offshore Mauritania and Senegal with combined estimated resources of around 2.6 billion boe. In April 2016 a major gas discovery, Katambi, was made in the BP-operated Block 24. Although adding significant resources, the discovery may take a longer time to be developed due to a lack of gas infrastructure in Angola, where production has historically been from oil fields.
Figure 3 shows the total spending in West and East Africa from 2010 to 2020. Investments in the region have reached the peak in 2014 and following the oil price collapse have decreased by 16% in 2015 and another 21% in 2016. Exploration expenditures have been cut the most – by 40% yearly during 2015-2016. Total spending stood at $70.5 billion last year, 96% of which was spent in West Africa. Nigeria and Angola had the highest spending in the region in 2016, reaching $28 and $18.8 billion respectively. The declining investment trend is currently expected to continue until 2019, largely as a result of lack of new projects being developed. Active sanctioning of discoveries in medium to long term is seen to revert the trend contributing to a steadily growing spending post 2020. The highest growth in investments is currently forecasted in East Africa, where capital expenditures are estimated to increase to almost $9 billion towards 2020 from barely $1.2 billion spent last year. Nearly 90% of the capex in 2020 is anticipated to be invested into key discoveries waiting to be developed.
Production in the region is expected to remain stable in the short term while showing a declining trend post 2020. The reversal of this trend in the longer term is dependent on the timely development of the resources discovered over the last two decades. In particular in East Africa, the sanctioning of the 2012 gas discoveries in Mozambique is expected to boost long-term production in the region. In West Africa, production growth post 2022 is driven mainly by the development of oil projects in Nigeria and Angola. While most of the discoveries made in the last five years are still unsanctioned, their development is expected to contribute to the growth in the medium and long term investments in the region.
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Contact: Olga Kerimova, Analyst
Phone: +47 24 00 42 00
Contact: Veronika Akulinitseva, Analyst
Phone: +47 24 00 42 00
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), as well as Singapore and Dubai.