Tuesday, November 15, 2016 

Oil firms in $100bn cost cuts for Africa

NOT AS ACTIVE: The low international prices for crude oil has caused cut-backs across the board.

LONDON,UK - Capital investment in the oil and gas industry in sub-Saharan Africa has been cut by $100 billion over the next five years, according to Wood Mackenzie’s latest report on upstream activity writes JOHN SAMBO

“Exploration cuts in the region will also contribute to a longer-term production slump as explorers have shied away from greenfield prospects, in favor of appraising known discoveries. However, the confirmation of the giant Owowo discovery in deepwater Nigeria shows the quality of resources Sub-Saharan Africa still has to offer,”Femi Oso, senior research manager for Sub-Saharan Africa, Wood Mackenzie, said last week. 

Wood Mackenzie expects a slow recovery for exploration. “Governments in sub-Saharan Africa need to revive the upstream oil and gas industry by offering attractive fiscal terms rather than look to increase state revenues in the current climate,” Oso said.

However, the biggest upstream success story in sub-Saharan Africa continues to be East Africa’s emergence as a gas region of global importance and notably Tanzania.

With over 168 Tcf of gas found and limited regional demand, East Africa is on track to become a major global LNG supplier and various export projects are awaiting final investment decision.

According to Wood Mackenzie’s research, Mozambique and Tanzania’s gas project economics are resilient and will “transform the global LNG market.”

“Mozambique and Tanzania’s LNG projects have remained relatively unscathed by cuts and will be timed to align with global LNG demand growth to achieve a better price,” explained Oso.

“The projects will appeal to buyers looking to diversify their portfolios, and BP has already committed to offtake all volumes from Eni’s Coral FLNG,” he said. 

He said, “The expected increase in gas production in Sub-Saharan Africa, from 6 Bcfd currently to 13 Bcfd next decade, is very good news for the region.”

Onshore LNG plants remain the preferred way to monetize gas, although liquefaction via third-party-owned FLNG vessels is emerging as a simpler and less expensive alternative.

By John Sambo, Tuesday, November 15th, 2016