Tuesday, March 29, 2011

East Africa - continent's new hotbed for oil & gas exploration!!

Traditionally, west and north Africa have been the continent’s hotspots of oil & gas E&P, but recent success in east Africa may change that.  North Africa has seen 20,000 wells sunk over the past few decades, while drillers have sunk 14,000 wells in and off West Africa. In East Africa, the total is about 500 wells.

Significant discoveries in the region, combined with a range of new opportunities through licensing rounds, are attracting new players to relatively underexplored countries on the eastern part of the African continent.

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The East African Region has a total of 28 prospective sedimentary basins with resource potential of about 2 billion barrels of oil in place and 3 tcf of natural gas.
Datamonitor forecasts total oil production in the region (excluding Sudan and South Africa) to reach approximately 210,000 barrels per day (bpd) in 2015, and nearly 389,000 bpd by 2020.

…. oil & gas hunters!
  • Tullow Oil has already made significant discoveries in Uganda, and is targeting other exploration fields in the East African rift basins, mainly in Kenya and Ethiopia.
  • Wildcatters and majors such as Italy's Eni, Petronas of Malaysia and China National Offshore Oil Corporation (CNOOC) have all moved on East Africa in the past few years, hoping to mimic Tullow Oil’s success in the region.
  • Africa Oil Corp with its assets in Ethiopia and Somalia is yet to explore the region.
  • In addition, Dominion Petroleum has invested nearly $40m in drilling activities in Tanzania and Uganda in recent years and will continue its efforts in the region, including some farm-out initiatives.
  • Anadarko and Cove Energy also have plans to move into south-east Africa, and together intend to invest around $150m in drilling activities over the next two years.

Datamonitor forecasts a total offshore capital expenditure (CAPEX) in the region (excluding Sudan and South Africa) of nearly $400m in 2010 ($312m on drilling and $77m on seismic activities). The total offshore CAPEX is forecast to grow by a compound annual growth rate of 20%, totaling nearly $994m in 2015.

Future holds bright for East Africa!
  • Uganda Prime Minister Apollo Nsibambi said, “East African countries will jointly explore their “vast” oil and gas fields to foster development of their economies”. The cooperation will attract more investment capital and spur economic growth, Nsibambi told a petroleum conference in Kampala, the Ugandan capital, with giving details on how this will work.
  • Uganda will issue more oil-exploration licenses later this year after a new industry law is formulated, Nsibambi said. It has five remaining oil blocks after suspending the awarding of concessions in 2006 pending the new law, he said.

Source: Derrick Petroleum E&P Transactions Database
  • Kenya issued six exploration licenses between 2000 and 2002 and two more to CNOOC in the next four years. "Despite a long history of unsuccessful exploration, the oil companies are investing in Kenya," says Mwendia Nyaga, managing director of the National Oil Corporation of Kenya. "The question is not if any hydrocarbon deposits exist, but where they are."
  • Other East African countries which are likely to hold significant resource potential are Somalia, Ethiopia and Mozambique. However, Somalia remains a no-go zone for investors due to its political unrest while Ethiopia’s eastern Ogaden region is beset by a violent rebel insurgency. Mozambique is still recovering from its civil war which broke out in 1992.

Every new frontier area for oil and gas exploration & production faces its difficulties and East Africa is no exception to that. The political hurdles in the region if addressed properly, this region will prove to be a boon not only to exploration and production companies, but also to other market participants in the oil and gas value chain, such as drilling companies, service providers, and equipment manufacturers.

1 comment:

  1. The uncertainty is not so much whether, but when the upturn would occur and how the traditional definition of M&A would evolve in light of new realities. Read our latest M&A material to learn more on deal activity in Oil and Gas sector.

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