Wood Mac: Africa has oil potential, but progress will be slow

Billions of barrels of oil potential exist, but capital investments have been waning.
By Daniel J. Graeber  |  Oct. 23, 2017 at 5:49 AM
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Oct. 23 (UPI) -- Sub-Saharan African oil producers may be among the more promising emerging players, though a downturn in investments is striking a blow, analysis finds.

Nigeria is a member of the Organization of Petroleum Exporting Countries and one of the more established producers in the region. At least three new projects there are expected to start production within the next three years and, according to new analysis from consultant group Wood Mackenzie, new developments from Sub-Saharan Africa could commercialize 13 billion barrels of oil equivalent reserves before the end of the decade.

Nigerian crude oil production averaged 1.85 million barrels per day in September, according to economists with OPEC. That's up 7.4 percent from July and the national economy came out of recession during the second quarter, after five straight months of contraction. Militancy, however, has been a problem for Nigeria and the country is exempt from a OPEC-led effort to balance an oversupplied market with production cuts because it needs the oil revenue for national security efforts.

Elsewhere, work is underway to bring the SNE oil basin offshore Senegal into service. When discovered in 2014, the basin was counted among the largest in the world. By the estimates of the companies involved, Senegal could hold more than 1.5 billion barrels of oil off its coast

Nearby Gambia also holds promising prospects, though regional spats over maritime borders and licensing issues with operating companies cloud the prospects. Overall, analysis from Wood Mackenzie finds the region is emerging as a strong oil producer, though progress will be slow.

"Stubbornly high labor and logistical costs, and the shift from capital investment to field maintenance have increased the per-barrel operating cost in some countries," the emailed report read.

Region-wide, the consultant group's regional profile said production has been hit hard by a lack of investments. Production expectations have been lowered by 700,000 bpd and more than 80 projects have been downgraded, deferred or cancelled in Angola and Nigeria alone.

"Exploration is at a historic low, despite cheaper rigs," the report found. "Sub-Saharan Africa is not out of the woods yet."

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