If anyone needed any further proof that Africa is shaping up as the next major hot spot in oil and gas, this year’s edition of Africa Oil Week will provide it. The event launched amid higher oil prices and booming exploration activity across the continent with supermajors and independents both upbeat about their prospects there.
If we ignore the waywardness of oil prices, which served as the basis for Africa’s oil and gas recovery, and which can once again plunge local oil producers into recession should they drop, prospects are bright.
A PwC report on the state of the oil industry of Africa, released on the first day of the event, noted how local oil and gas field operators had adjusted to the lower-price environment and are now in a position to reap the benefits of higher international prices for oil while their costs remain low.
“Africa’s oil & gas companies have weathered the downturns and capitalised on the upswings focusing their efforts on new ways of working, reducing costs and utilising new technology,” one of the authors of the report, PwC Africa Oil & Gas Advisory Leader Chris Bredenhann said.
There is abundant evidence that the message captured in the PwC report reflects reality. None other than Exxon is looking to Africa for its next elephant find. The U.S. Geological Survey estimated that two years ago there were at least 41 billion untapped barrels of crude oil in sub-Saharan Africa alone. Exxon is focusing on western and southern Africa in its exploration work and has been amassing stakes in oil and gas prospect in Ghana, Mauritania, Namibia, and South Africa. The supermajor hopes to strike a discovery containing no less than a billion barrels of crude, also known as an elephant.
BP and Shell are also expanding in Africa. Shell earlier this year announced its first exploration rights acquisition in Mauritania. BP has partnered with Kosmos Energy on a gas project in Senegal. Also in Senegal, ConocoPhillips is partners in the giant SNE block, which might contain up to 1.5 billion barrels of crude.
Then there are the independents, some of them with a special focus on Africa, such as Tullow Oil and Cairn Energy.
“When you go for business development, trying to acquire licenses or make partnerships in West Africa, you can sense the competition,” Bloomberg quoted South African Sasol’s senior VP for exploration and production, Gilbert Yevi.
“It’s like a new California gold rush.”
The rush is far from contained to legacy oil producers such as Nigeria or Angola. On the contrary, there is a flurry of newcomers on the oil scene, from Uganda and Kenya to Madagascar, which shares a gas-rich basin with Mozambique and has proven oil reserves, which have remained largely untapped until now.
African governments have also sensed which way the wind is blowing. Sudan and South Sudan recently said they had settled their differences and will work together to bring South Sudanese oil to export markets via the single pipeline through Sudan. Ethiopia struck a deal with rebels active in a gas-rich province, improving greatly its chances of getting developed.
In short, Africa has got on the oil bandwagon, and as long as prices stay where they are or at least don’t fall by much, this wagon could go a long way.