SPE 128340

Deepwater Petroleum Exploration and Development in Africa

An Appraisal of Factors, Efforts, and Outcomes, 1998-2007
Omowumi Iledare, SPE, Richard Pincomb, SPE, and Derek Vitrano
LSU Center for Energy Studies, Baton Rouge, LA 70803, USA

Copyright 2009, Society of Petroleum Engineers Inc.

in petroleum prices. Consequently, the consensus
This paper was prepared for presentation at the 33rd Annual SPE International among energy analysts is that fossil fuels,
Technical Conference and Exhibition in Abuja, Nigeria, August 3-5, 2009.
especially petroleum, will remain the dominant
This paper was selected for presentation by an SPE Program Committee following
review of information contained in an abstract submitted by the author(s). Contents
transportation fuel in the global energy supply mix
of the paper, as presented, have not been reviewed by the Society of Petroleum for the foreseeable future.1
Engineers and are subject to correction by the author(s). The material, as
presented, does not necessarily reflect any position of the Society of Petroleum
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to publication review by Editorial Committees of the Society of Petroleum Engineers.
Paradoxically, the easy to find petroleum
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develop, and produce petroleum from places that
are remote and increasingly challenging, such as
Abstract the offshore deepwater and ultra deepwater
This paper describes qualitatively the key factors worldwide. Nearly every top-twenty international
driving deepwater petroleum exploration and oil and gas company now considers deepwater
development prospectivity worldwide, including operations as an essential component of its
2
but not limited to global petroleum supply and strategic business development. Thus, deepwater
demand fundamentals, availability and petroleum development and activity are expanding
accessibility to petroleum resources, technology worldwide despite challenges related to price
innovations and infrastructure development, and uncertainty and cost overruns, engineering
geopolitics and fiscal arrangements. Quantitative complexity and technical risks, and geologic and
indicators are estimated to analyze these factors geophysical issues. Further, the evolution of
with respect to deepwater activity and outcomes in deepwater petroleum development as an
Africa using number of fields discovered, the important element of the global offshore oil and
number of producing and on-stream fields, the gas industry can be credited to advances in
estimated average size of discoveries, drilling, completion, production, and infrastructure
instantaneous production flow estimates, development methods.
completion techniques and methods, and capital
expenditure compontents and trends. The paper The primary purpose of this paper is to describe
evaluates and compares the attractiveness and qualitatively the key factors driving deepwater
prospectivity of the deepwater in Africa using the petroleum exploration and development
above empirical indicators by country. prospectivity worldwide, including but not limited to
global petroleum supply and demand
Introduction fundamentals, availability and accessibility to
There is a great urgency in the global energy petroleum resources, technology innovations and
industry to find lasting solutions to global energy infrastructure development, and geopolitics and
demand growth, particularly transportation fuel fiscal arrangements. The paper discusses briefly
demand growth, keeping in perspective the each of these primary factors with emphasis on
environmental implications of global warming. the underlying features. Quantitative indicators are
Unavoidably, it would take quite a long time for estimated to analyze these factors with respect to
alternative energy to become a significant factor in deepwater activity and outcomes in the golden
the global energy supply mix because of volatility Atlantic region using number of fields discovered,
2 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

producing and on-stream, the estimated average discovery surprises and advances in technology
size of discoveries, instantaneous production by international and independent companies.
capacity estimates, completion techniques and These tend to lower finding and development
methods, and capital expenditure components and costs and put pressure on prices.
trends. In addition, quantitative relationships
between and among the prospectivity attributes The role of the Organization of Economic
will be examined to provide insight into the nature Cooperation and Development (OECD) countries
of the competitive process for worldwide capital in the dynamics of price formation is reflected in
investment flow. policies to accentuate supply source
diversification, strategic petroleum
Further, the paper evaluates and compares the reserves/inventory as an energy policy instrument,
attractiveness and prospectivity of deepwater and the promotion of energy conservation and
basins in Africa using the above empirical efficiency to manage demand in order to influence
indicators. The empirical indicators we employed price trends. Diversification of supply sources has
have been derived from deepwater specific data great impact on market responses to political
obtained from private and public sources and the uncertainty in the more volatile regions with
data show that the expansion in deepwater significant amounts of petroleum resources.
operations is a predictable response to the growth Further, OECD’s energy policy objectives of
in global oil demand as the finite nature of economic growth, affordable energy, and secure
petroleum resources onshore becomes more energy with a great deal of focus on clean
apparent to oil and gas operators worldwide. environment have implications on world oil supply
and pricing dynamics. Changes in protective
Factors Affecting Deepwater Operations measures or market restrictions such as
Worldwide subsidies, tariffs, or price controls, fluctuations in
The key factors which drive deepwater petroleum exchange rates, and regulations and market
exploration and development worldwide include, control of petroleum products are designed to
but are not limited to, global petroleum supply and influence prices.
demand fundamentals that underlie pricing
dynamics, availability and accessibility to The Organization of Petroleum Exporting
petroleum resources, technology innovation and Countries (OPEC) which currently includes 12 of
infrastructure development, and geopolitics and the most important producing countries in the
fiscal arrangements. world has changed the face of the petroleum
industry over the past 40 years with respect to
The price of petroleum is the most important managing the supply aspects of the global
signal that encourages petroleum E&P companies petroleum market. OPEC reached its ultimate
to search for and develop petroleum resources market power in the 1970s when oil prices
anywhere in the world including the more difficult quadrupled. There is no consensus among energy
areas like the deep offshore. Essentially, experts in the literature as to whether OPEC is a
4
petroleum prices are determined by supply and cartel or not. However, over the years, OPEC has
demand through factors such as the intensity of assumed the role of dominant incremental oil
petroleum use in the economy, exploration and producers within the context of the global
development efforts and outcomes, growth in petroleum economy, and has attempted to
productive capacity, improved technology, global promote price stability through security of supply
economic expansion, inflation, and the degree of by expanding production capacity even when
competition.
3 crude oil prices were down in the early 1980s.

Several key players attempt to influence crude OPEC accounted for 75.5 percent of proved oil
petroleum pricing dynamics by influencing the reserves and 43 percent of global oil production at
supply or demand aspect or both aspects of the yearend 2007 with reserves to production ratio (R-
global petroleum market. First, the multinational P) of 72.7 in comparison to the global ratio of
5
companies tend to want to maintain inventories of 41.6. Certainly, such a high ratio makes the task
petroleum reserves, so they engage in of balancing the market using its production
prospecting for oil and gas all over the world, capacity inevitable. Thus, the world oil market
making it possible to develop cheap oil first with tends to depend on OPEC to exercise discipline
advancement in technology. The expectations that whenever there is any evidence of market
finding costs will drift upward with basin maturity in imbalance. In years past, OPEC has adopted a
older petroleum basins are counteracted with production quota system to facilitate its
3 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

management of the supply aspect of the There is a general consensus on the finite nature
petroleum market in order to minimize price of petroleum resources, meaning that the
volatility. Price volatility has been a great endowment of petroleum resources is fixed but its
impediment to E&P investments that are development and depletion can span through
necessary to replace as much of petroleum many years. A significant amount of discovery,
reserves produced as possible. Unfortunately, development, and extraction efforts are required to
recent events would suggest that the OPEC quota translate resources from being prospective to
system has not stabilized the price dynamics becoming contingent and then to reserves. It is
because of petroleum demand growth in the estimated that the originally-in-place volume of
emerging economies of China and India, petroleum resource endowment worldwide is very
institutional development within OPEC, political large and several times the estimated recoverable
and economic development within OPEC, and the reserves (IEA, 2008). Geologic prospectivity of an
6
role of speculators. area is an important factor affecting the level of
exploration activity in that area irrespective of
Speculators are risk takers with no interest in whether it is an offshore or onshore producing
ownership of crude petroleum but are willing to area. It can be easily measured in terms of some
take price risks for possible larger profits. They do measure of maturity, likely success ratio or
9
not have to hoard commodity in traditional ways. distribution of field reserve size.
Neither do they have to own ships, tank farms,
wells nor storage facilities in order to stay in Petroleum resources and reserves are classified
business. Speculators are very dissimilar ranging based on the degree of technical and geologic
from being financial players, pension and hedge uncertainty and economic feasibility as proved,
funds, investment firms, and/or bankers. possible and probable. Proved reserves of
Regrettably, whereas oil and gas resource petroleum resources are classified as 1P reserves
markets deal with physical and finite commodities, which are economically recoverable at the
the speculators play in an indefinable and infinite prevailing economic and operating conditions.
paper market. The claim that speculators facilitate There is a 90 percent chance that 1P reserves can
price stability is, however, conjectural. It is be ultimately recovered using current
paradoxical, however, that the capital assets technologies. On the other hand, reserves
allocated to commodity index trading strategies classified as proved and probable or 2P reserves
rose from $13 billion at the end of 2003 to $260 have only a 50 percent chance that they can be
7
billion as of March 2008. But the estimated produced profitably. The 3P reserves (proved +
cumulative worldwide deepwater CAPEX from probable + possible) require advanced technology
2003-2007 was $64.722 billion.2 A low budget for for its profitability at a lower end of the probability
E&P activity can lead to low discovery and range. Reserves estimates can vary significantly
subsequently higher prices if petroleum supply depending on the underlying assumptions
cannot adjust fast enough to meet the demand imposed and the methodology adopted in the
growth. estimation process.

Rapid advancements in technology in the last It is, however, not enough for a geographical area
several decades have also led to deepwater to have abundant petroleum resource endowment,
petroleum discoveries worldwide. Technical but the area must also have efficient and dynamic
progress in geological information gathering and fiscal arrangements in order to make the
processing has made company operations more exploitation of its resources attractive to investors.
efficient. The industry has experienced advances Usually, the primary objective of the host
in exploration, drilling and completion, and government in a petroleum producing nation is to
production technology. These enhancements have ensure maximum economic benefits for the
also made the search for and development of country without necessarily seeking total control of
petroleum more cost effective and environmentally the entire E&P terms and conditions, investments
responsible than years past. Frontier areas and/or production. Other objectives may, however,
considered untouchable two to three decades ago include the pursuit of efficient resource
have become prime targets for petroleum development, access to technology, skilled
exploration and development expansion as a national man power, investment funding for local
10
result of the evolving “sophisticated imaging E&P activity, and sustainable economic growth.
technologies, including 3-D seismic and 4-D time- On the other hand, fiscal regimes of host countries
8
lapse systems”. are viewed critically by investors on the basis of
their financial objectives. E&P firms or investors
4 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

bidding for the right to explore and develop discovered 69 percent of deepwater fields in Africa
petroleum in the host countries desire to receive a in comparison to 32 percent of fields discovered
fair and satisfactory return on investment in a by IOC worldwide. Although Africa accounted for
quick and orderly manner. Thus, fiscal instruments just 25 percent of worldwide field discoveries, the
and terms are negotiated while some are continent accounted for 46 percent of discovered
determined through the legislative process in the reserves measured in million tons equivalent
host country keeping in perspective the host (MMTOE).
government and E&P firms’ objectives. One
important and critical concern to investors in The estimated average size of discoveries
deciding where to search for and develop oil and worldwide from 1998-2007 was estimated to be
gas resources is stability in host government fiscal about 19 million TOE. The estimated size of
11
arrangements. Investors have no obligations to discoveries in Africa during the same period was
develop petroleum resources in a country when 34 MMTOE per field. A majority of offshore oil and
factors affecting the balance between risks and gas reserves are found in the deep and ultra deep
rewards are out of sync.12, 13 water depths worldwide. Africa is not an exception
in this regard. Reserves in Africa from the deep
Deepwater Operations and Prospects in Africa water zone (water depth range of 400-1500
Deepwater operations in Africa began in earnest meters), however, accounted for more than 50
in the early 1990s and in comparison to every percent of worldwide aggregare reserves
other region is relatively immature.14, 15 discovered from 1998-2007. As of yearend 2007,
International oil companies dominated deepwater no ultra deep fields (water depth >1,500m) were
operations in Africa from 1998-2007. In on-stream in Africa. On average, the estimated
comparison, the presence of local oil companies in production capacity for fields discovered in Africa
deepwater operations in North America was much between 1998 and 2007 is significantly higher
more significant during this period. On the other than the estimated production capacity in any
hand, national oil companies dominated other region. In fact, the worldwide estimated
deepwater operations in Latin America and instantaneous hydrocarbon production rate,
Europe while the presence of local oil companies 29,234 BOEPD, was less than 50 percent of the
was more prominent in the regions classified as estimated average field capacity in Africa.
others as evident in Figure 1. Figure 2, however,
shows that local oil and gas companies had about Most deepwater operations and activity in Africa
the same number of prospective deepwater wells are currently concentrated in West Africa and
as international oil companies in North America North Africa as shown in Figures 5,6, and 7.
from 1998-2007. But international companies Angola leads all aspects of deepwater operations
maintained their dominance in deepwater in Africa at this time, accounting for 45 percent of
operations in Africa and national oil companies discovered fields and 45 percent of fields on-
hold forth with their prominence in future stream in Africa. Table 3 presents the outcomes of
deepwater operations in Latin America. Table 1 deepwater field discovery efforts in Africa by
shows the distribution of operational and country.
prospective wells for each category of firm type at
various water depth zones worldwide from 1998- The estimated average field size in Nigeria as of
2007. Most prospective drilling operations are yearend 2007 was 1,094.2 MMTOE, the highest in
primarily focused on deep offshore blocks Africa. The estimated initial field production
worldwide. Nearly half of operational wells in deep capacity of about 110 MBOEPD in Nigeria is also
offshore from 1998-2007 are located in Africa and the highest in the continent. Angola’s estimated
55 percent of prospective wells are alos located in field production capacity of 62 MBOEPD and
Africa. Congo Brazzaville’s 49 MBOEPD are significantly
higher than the estimated worldwide average field
The aggregate outcomes of worldwide exploration capacity of approximately 29 MBOEPD.
and development efforts in terms of number of
fields discovered and the estimated aggregate The potential for profitable deepwater prospects in
reserves discovered by firm type worldwide from Africa is huge, especially in the deep and ultra
1998-2007 are presented in Figures 3 and 4 and deep water depths. According to a report
Table 2. Of the 353 fields discovered between published by Infeild Systems Limited (ISL), a total
1998 and 2007, about 53 percent were discovered of 67 field prospects in deep and ultra deep water
in North America. Discoveries in Africa accounted depths are projected to come on-stream between
2
for only 25 percent. International companies 2008 and 2012. This is more than twice the fields
5 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

on-stream in comparison to the immediate past

five years (2003-2007) in the region. It is Deepwater Operations and Prospects by
noteworthy that these Africa field prospects Country in Africa
represent 28 percent of worldwide field forecasts.
The magnitude of the ISL forecast for Africa is Angola: Angola is the second largest hydrocarbon
remarkable because the proportion of fields on- producer in Africa behind Nigeria. Most of its
stream in Africa relative to worldwide prospects reserves are located offshore with some near the
was only 11 percent between 1983 and 2007. city of Soyo. A civil war that ended in 2002 lasting
Figure 8 compares ISL aggregate historical fields 27 years has hindered progress in finding
on-stream between 2003 and 2007 and the reserves onshore. Sonangol, created in 1976, is
estimated fields on-stream from 2008-2012 by the national oil company of the country. The
country. The ISL forecasts assume a robust crude company works with foreign investors, exploration
oil and natural gas price environment over the and production majors, through joint ventures and
forecast period. A significant portion of the new production sharing agreements. Angola has a
field developments are expected to come from total of 45 fields discovered as of 2007
Angola, Nigeria and Egypt. A pictorial view of deep representing over 45 percent of fields discovered
and ultra deep field prospects in Africa is in Africa. Average reserves are 36 MMTOE. 20
presented in Figure 9. deepwater fields are producing with an average
production of 53.9 BOEPD. By 2012 Angola is
According to the ISL forecasts, a significant projected to have an additional 25 fields on stream
production growth is projected for Africa from with average production rate of 47.7 BOEPD (ISL,
2008-2012 with Angola and Nigeria accounting for 2008).
a significant portion of the growth. The estimated
production capacity from the deep and ultra deep Multiple completion techniques are used in
prospects for the 2003-2007 period was 1.045 Angola. Two fields used extended reach drilling
million BOE per day in comparison with the (ERD) which allows drilling onshore to extend to
production capacity forecast of 4.153 million BOE an offshore location. This eliminates the need for
per day for the 2008-2012 period. Nigeria’s deep platforms or other expensive offshore equipment
and ultra deep fields are expected to account for a allowing the company to produce hydrocarbons
44 percent share in production capacity forecasts onshore. ERD will decrease the well site footprint
for Africa in the next five years beginning in 2008. and provide a more environmentally friendly
Figure 10 compares ISL production capacity solution. Seven used floating production, 3
forecasts with historical production capacity by subsea satellite to fixed production, 7 subsea
country in Africa. satellite to floating producing and 1 fixed
production platform.
The projected expansion in deepwater production
in Africa requires capital investments of CAPEX investment in Angola for the 2003-2007
approximately US$42 billion from 2008-2012, period was about US$ 3,252 million on platforms,
according to the ISL study. This corresponds to US$ 5,227 million on subsea completions and
nearly twice the total CAPEX for 2003-2007. US$ 2,805 million on pipelines. According to the
Pictorial views of the historical and projected 2008 ISL forecast, CAPEX for 2008-2012 in
CAPEX by country in Africa are presented in Angola is projected to be US$ 3,414 million for
Figure 11. Table 4 shows CAPEX by its platforms, US$ 7,996 million for subsea and US$
components and country. An evaluation of 6,155 million for pipelines.
production capacity to total CAPEX ratio shows a
significant increase of about 47 BOE in capacity Congo (Brazzaville): Congo's economy is based
per US$1,000 over the historical 146 BOE per primarily on its petroleum sector, which is by far
$1,000 ratio for the 2008-2012 forecasts. The the country's major revenue earner. The oil and
estimated finding and development costs for Africa gas sector is dominated by international oil
ultra deep and deep prospects range from about companies that enter into production sharing
$3.67 in Egypt (MED) to $8.14 in Nigeria from agreements with the country. Most of Congo’s
2003 to 2007. Figure 12 shows a pictorial view of reserves are located offshore. Seven fields have
the variation in the estimated historical and been discovered by 2007 averaging 16.8 MMTOE
forecast CAPEX per field capacity by country. in reserves. It is expected that all seven fields will
be on stream by 2012. The fields will average 40.4
MBOEPD, according to ISL.
6 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

gas reserves located off of Bioko Island. The

The breakdown of completion techniques does not hydrocarbon exploration and production is
vary far from other countries in Africa. Four regulated by the Ministry of Mines, Industry and
floating production facilities and three subsea to Energy. In 2002 the government created the
floating production completion is expected to be national oil company, GEPetrol, and the national
used. Capital expenditures in Congo will gas company, Sonagas, in 2005. The two national
experience the biggest increase in comparison to companies manage primarily governments
other African countries. A 215 percent increase is interests with foreign oil and gas companies
expected for platform CAPEX according to ISL. through producion sharing agreements and join
Subsea projects is projected to experience an venture contracts. The government also has
increase in capital inflows from zero at yearend passed legislation that increased local
2007 to US$ 1,219 million by 2012. Pipelines will participation (GEPetrol and Sonagas) to a
have an increase of 766 percent from the yearend minimum of 35 percent. The country is also
total of US$ 118 million. seeking compliance with Extractive Industries
Transparency Intitiatives (EITI) rules for
16
Egypt (Mediterranean): Local Oil Companies transparency.
(LOCs) play a predominant role in the E&P sector
in Egypt on a production-sharing basis with the The estimated average size of discoveries in the
Egyptian General Petroleum Corporation and country is approximately 16 MMTOE for the 8
Egyptian Natural Gas Holding Company. Oil discovered deepwater fields. The reserves are
production in the country comes from the Gulf of below the African average of 43 MMTOE. Seven
Suez, Western Desert, the Eastern Desert, and fields have come on-stream by 2007. By 2012 it is
the Sinai Penisula. Gas production on the other estimated that an additional field will come on-
hand is predominantly from the Nile delta region stream. Two of the fields have been completed
and Western Desert. The country exports with ERD, 4 used floating production, and 1 field
hydrocarbons through 2 pipelines, such as the was a subsea satellite to floating production. The
Sumed and Arab gas pipeline, and tankers additional field to come on stream by 2012 is
through the Suez Canal. expected to be completed using subsea to floating
production at an estimated prodcution rate of
The estimated average size of discoveries in 40,000 BOEPD.
Egypt is 32.7 MMTOE for the 17 fields discovered.
This places Egypt right at the continent’s average The level of CAPEX expended by 200t on platform
reserves of about 34 MMTOE. As of 2007, Egypt was about US$ 215 million. It is expected that
had 7 fields on-stream producing with average investment will double by 2012 according to ISL
instantaneous prodcution rate of 37 MBOEPD. survey (ISL, 2008). Subsea CAPEX will decrease
The ISL forecast for Egypt shows that 10 fields will from US$ 723 million to US$ 201 million by 2012.
come on-stream adding 33 MBOEPD to CAPEX for pipelines will stay relativly unchanged
production by 2012. from the 5-year average at US$ 326 million.

Currently, Egypt has 7 deepwater fields that were Ghana: Ghana started oil operations in 1983
completed using subsea satellite to onshore when the country passed the Petroleum Law. The
facilities. Of the future 10 fields to come online, 9 law created the Ghana National Petroleum
will be completed by subsea satellite to onshore Corporation, a state owned company, responsible
facilities and one by subsea satellite to fixed for exploration and development of oil fields.
production. Regarding CAPEX, Egypt has spent Though the company can develop and produce oil
no CAPEX for platforms as of 2007 and there are fields it mainly enters into production sharing
no plans to invest for the future. But US$ 577 agreements with international oil companies that
million has been invested in subsea, cost of well fund exploration and development projects. Most
drilling, completion, and equipment costs. of Ghana’s reserves are located offshore. Ghana
However, the ISL forecast for 2012 is US$ 994 is also a candidate country for the EITI.
million for subsea CAPEX. Pipeline CAPEX is
expected to more than double by 2012 from US$ During the 1983-2007 period two fields were
538 million to US$ 1,214 million. discovered with an estimated average reserve
size of 32.1 MMTOE. Currently, there are no
Equatorial Guinea: Equatorial Guinea is the third fields on stream. ISL estimates that 2 fields will be
largest oil exporter after Angola and Nigeria. Most on-stream by 2012 producing an average of 70
of its oil reserves are located offshore and natural MBOEPD. One of the 2 fields online by 2012 will
7 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

utilize floating production completion method and is relatively low compared to other African
the other will be a subsea to floating production countries. Platform investment was US$ 180
completion. million by yearend 2007 and an additional US$
110 million has been projected to be spent over
Ghana as at yearend 2007 has no capital inflows the next 5 years. The bulk of CAPEX was in
for platform, subsea or pipeline projects. ISL subsea projects with US$ 307 million spent. ISL
forecasts that about US$ 400 million will go to projected a 50 percent increase in spending by
platforms, US$ 288 million for subsea and US$ 2012. The biggest increase in CAPEX is expected
354 million for pipeline projects by 2012. in pipeline projects from US$ 175 million to US$
402 million according to ISL.
Ivory Coast: The Ivory Coast oil industy started to
take off in 2001, though the country began Nigeria: Deepwater petrolum reserses in Nigeria
exploration and development in 1975 with the have been discovered in the Bight of Benin, Gulf
creation of the state run Petroci. It has a vast of Guinea, and the Bight of Bonny. Nigeria is the
majority of its oil and gas reserves located largest hydrocarbon producer in Africa and a
offshore. The Ivory Coast is a candidate country member of OPEC. In 1977 the Nigerian National
for EITI membership. Two fields were discovered Petroleum Corporation (NNPC) was created to
between 1983 and 2007 with estimated reserves regulate and manage the country’s oil industry. A
of 17 MMTOE, on average. One field was majority of the oil and natural gas projects are joint
brought on-stream between 1983-2007 and one ventures with oil and gas companies with NNPC
more field will be brought on-stream by 2012. as the the major shareholder. Nigeria and Sao
Production as of yearend 2007 was estimated as Tome and Principe created the Joint Development
17.5 MBOEPD and it is expected to increase to 20 Zone in which the two countries have agreed on a
MBOEPD by 2012, according to ISL 2008 60/40 revenue split.
forecasts.
Fifteen deepwater fields have been discovered in
The completion method of choice in Ivory Coast Nigeria averaging about 72.9 MMTOE in reserves
for the one field on-stream is floating production. per field. Four fields are currently producing at
It is expected that the next field to come on-stream about 136 MBOEPD on average. According to
by 2012 is going to be a subsea satellite to fixed ISL 2008 forcasts, 10 fields averaging about 157
production. Approximately US$ 200 million was MBOEPD will come online by 2012.
spent on platforms, US$ 418 million for subsea
and US$ 213 million for pipeline installation from Nigeria used floating production completion
2003-2007. CAPEX investment is not expected to technique in its deep offshore fields. Four fields
increase much between 2008 and 2012. About were completed using this technique. According
US$ 143 million is expected to be spent on subsea to ISL, 7 of the 10 fields coming on-stream by
completion and US$ 75 million on pipelines. 2012 will use floating production method and 3
subsea to floating production method. Floating
Mauritania: Mauritania is a relative new comer production systems have gained much popularity
with its first major discovery in 2001 the offshore due to the economic benefit in utilizing such
17
field, Chinguetti. The industry is regulated by the facilities.
Ministry of Water and Energy, which partakes in
production sharing contracts to attract investors CAPEX in Nigeria represents over 40 percent of
for offshore projects. Most of the reserves in the the total CAPEX spent in Africa. US$ 3,008
country are located offshore. The country has million was spent on platforms from 2003-2007
estimated average reserves of 12.3 MMTOE from and ISL has projected an additional US$ 5,160
2 offshore fields discovered between 1983-2007. million to be spent by 2012. Subsea CAPEX is
Mauritania’s average field size is significantly expected to increase from US$ 2,144 to US$
below the African average of 37 MMTOE. 6,559 million by 2012. Further, ISL projected that
pipeline CAPEX is expected to double to US$
Only one field is on-stream with estimated 3,145 by 2012.
production of 14.8 MBOEPD though two additional
fields will be on stream by 2012 producing 84 Concluding Remarks
MBOEPD. The current on-stream field utilizes Deepwater operations and activity in Africa are
floating production and the field to come online by currently mostly concentrated in West Africa and
2012 will also use floating production. Capital North Africa and they began in earnest in the early
investment in the oil and gas industry in Mauritania 1990s. The first discovered field was reported in
8 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

1995 and the field came on-stream in 1997. Thus Numenclatures

in comparison to every other region, deepwater FLDDSC = Fields discovered
operations in Africa are relatively immature. FLDPRD = Fields producing
FLDSTR = Fields on-stream
Deepwater fields discovered in Africa represent PRDLAG = Discovery to production lag
approximately 17 percent of worldwide deepwater FLDLFE = Field depletion years
discoveries between 1983 and 2007 or 23 percent HYDRSVS = Hydrocarbon reserves
of discoveries between 1995 and 2007. OILPRD = Oil production
Approximately 41 percent of fields discovered in HYDPRD = Hydrocarbon production
Africa were put on-stream during the period 1995- GASPRD = Gas production
2007. On-stream fields in Africa represent about CONPRD = Condensate producion
11 percent of the 378 worldwide field prospects
on-stream during the period 1983-2007. The Acknowledgments
distribution of discovered reserves measured in This report is based on private offshore energy
tons of oil equivalent favors Africa, which currently data we acquired from Infield Systems Limited in
accounts for 31 percent of worldwide deepwater the United Kingdom and on available public
petroleum reserves discovered since 1983. Africa records. Ric Pincomb, Derek Vitrano, Michelle
currently has the most under development and Barnett, and Osahon Abbe were helpful in
future subsea wells with 189 and 518, respectively obtaining and processing these data. The author
and international oil companies currently dominate gratefully acknowledge Minerals Management
deepwater operations in Africa. Service of the U.S. Department of the Interior for
sporsoring this research. The usual disclaimer
According to the ISL forecasts, a significant applies.
production growth is projected for Africa from
2008-2012. The current field production capacity References
from the deep and ultra deep prospects for 2003-
1. International Energy Agency (IEA). 2008.
2007 is estimated as 1.045 MMBOE per day in
World Energy Outlook 2008. International
comparison to production capacity forecast of
Energy Agency, Paris.
about 4.153 MMBOE per day for the period 2008-
2. Infield Systems Limited (ISL). 2008.
2012. The projected expansion in deepwater
Global Perspectives Deep and Ultra-
production in Africa will require capital investments
deepwater Market Update 2008/12. Infield
of approximately US$42 billion from 2008-2012,
Systems Limited, London.
according to the ISL report (ISL, 2008). This
3. Adelman, M. A. and M. A. Adelman 1993.
corresponds to nearly twice the total estimated
The Economics of Petroleum Supply:
CAPEX for 2003-2007.
Papers by M. A. Adelman 1962-1993. MIT
Press, Cambridge, MA.
Further evaluation of total CAPEX to production
4. Alhajji, A. and D. Huettner (2000). "OPEC
capacity shows a significant increase of about
and other commodity cartels: a
$21.28 per BOE capacity over the historical
comparison." Energy Policy 28(15): 1151-
$6.85 per BOE for the 2008-2012 forecasts. The
1164.
estimated finding and development costs for Africa
5. British Petroleum Company (BP). 2008.
ultra deep and deep prospects range from about
BP Statistical Review of World Energy
$3.67 in Egypt (MED) to $8.14 in Nigeria from
2008. British Petroleum Co, London.
2003 to 2007.
6. Chima, C. M. 2005. "Energy - GDP
relationship in the U.S.A., 1949-2003."
USAEE 13(2): 17-19.
7. Hamilton, J.D. 2008. "Understanding
Crude Oil Prices." NBER Working Paper,
Cambridge, MA.

8. U.S. Dept. of Energy. Office of Fossil

Energy. 1999. Environmental Benefits of
Advanced Oil and Gas Exploration and
Production Technology. U.S. Department
of Energy, Washington, D.C.
9 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

9. Kellas, G.K. and S.G. Hodgshon. 1992. petroleum arrangements.” U.S.

“Risk and Reward: The Relationship Department of the Interior, Minerals
Between Prospectivity and Fiscal Management Service, Gulf of Mexico OCS
Regimes.” Oil and Gas Economics, Region, New Orleans, La. OCS Study
Finance and Management Conference, MMS 2004-016.
SPE Paper #24245. 14. Ghazvinian, J. H. (2007). “Untapped : the
10. Iledare, O.O. 2008. “Petroleum and the scramble for Africa's oil.” Orlando,
Future of Nigeria: Challenges, Constraints Harcourt.
and Strategies for Growth and 15. Oyewole, Peter O. and Michael J.
Development.” IPS Monograph Series Economides. 2003. “Africa is Poised to
No.5, pp30. Institute of Petroleum Studies, Become the Next Energy Superpower.”
University of Port Harcourt, Nigeria. SPE Annual Technical Conference and
11. Johnston, D. 2003. International Exhibition, SPE Paper# 84432, October 5-
Exploration Economics, Risk, and 8.
Contract Analysis. Pennwell Books. 16. Extractive Industries Transparency
12. Johnston, D. 2006. “Progressive Elements Initiative (EITI). 2005. “Source Book.” UK
of Petroleum Fiscal Systems: Options for Department of International Development.
African Producers.” Oil, Gas & Energy 17. Behrenbruch, Peter. 1995. “Floating
Law Intelligence 4(3): 1-23. Production Facilites Key to Lower Cost
13. Kaiser, M.J. and A.G. Pulsipher. 2004. Deepwater Development.” Offshore, 55
“Fiscal system analysis: Concessionary (10).
and contractual systems used in offshore
10 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

Figure 1. Operational Wells by Firm Type

Figure 2. Prospective Wells Distribution

Table 1. Worldwide Operational and Prospective Wells

11 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

FIRM Operational Wells Prospective Wells

REGION TYPE Slope Deep Ult. Deep Slope Deep Ult. Deep
Africa IOC 30 245 - - 505 69
LOC 24 55 - - 70 12
NOC - 14 - - 38 -
Europe IOC - 7 - - 6 -
LOC - - - - 1 -
NOC 12 - - 3 - -
Latin America IOC - - - - - 16
LOC 2 - - - - -
NOC - 21 - - 140 23
North America IOC 2 65 14 - 47 142
LOC 39 100 29 1 137 36
NOC - 8 15 - 5 16
Others IOC - 65 - - 48 -
LOC 8 100 - 2 104 -
NOC - 8 - - 17 -
Worldwide IOC 32 382 14 - 606 227
LOC 73 255 29 3 312 48
NOC 12 51 15 3 200 39

Figure 3 Distribution of Fields Discovered

12 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

Figure 4 Distribution of Aggregate Reserves

Table 2 Worldwide Discovered Fields and Reserves, 1998-2007

FIRM Number of Fields Reserves, MMTOE

REGION TYPE Slope Deep Ult. Deep Slope Deep Ult. Deep
Africa IOC 2 54 5 108.78 2,146.34 122.46
LOC 2 19 2 80.24 464.29 39.47
NOC - 5 - - 96.81 -
Europe IOC - 2 - - 9.33 -
LOC - 1 - - 0.40 -
NOC 5 - - 23.63 - -
Latin America IOC - - 2 - - 68.70
LOC 1 - - 12.15 - -
NOC - 22 8 - 662.19 36.73
North America IOC 3 23 17 1.59 375.10 544.63
LOC 25 85 21 22.11 522.50 170.02
NOC - 5 9 - 25.37 79.12
Others IOC - 6 - - 168.53 -
LOC 1 25 1 25.86 797.05 25.51
NOC - 2 - - 60.77 -
Worldwide IOC 5 85 24 110 2,699 736
LOC 29 130 24 140 1,784 235
NOC 5 34 17 24 845 116
13 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

Figure 5 Distribution of Discovered Fields in Africa

Figure 6 Distribution of Discovered Fields On-Stream

14 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

Figure 7 Operational Wells in Africa

Table 3 Deepwater Exploration Outcomes by Country in Africa

FLDDSC FLDSTR PRDLAG FLDLFE HYDRSVS HYDPRD

OUTCOMES TOTAL TOTAL MONTHS YEARS MMTOE BOEPD
Angola 45 20 83.3 19.0 1,646.9 62,030
Congo (Brazzaville) 7 - 136.0 15.0 117.9 49,018
Egypt (Mediterranean) 17 7 66.9 23.4 557.1 42,216
Equatorial Guinea 8 7 46.1 12.9 126.8 26,906
Ivory Coast 2 - 53.0 15.0 33.9 17,486
Mauritania 3 1 57.0 8.0 37.0 14,800
Nigeria 15 4 78.0 17.8 1,094.2 109,731
Source: (ISL, 2008)
15 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

Angola

Egypt (Mediterranean)

Nigeria

Equatorial Guinea

2003-07
Mauritania
2008-12

IvoryCoast

Ghana

CongoBrazzaville

0 5 10 15 20 25 30 35

FieldsOn-Stream

Figure 8. Historical and ISL Forecasts of Fields On-Stream in Africa.

19%
Angola
Congo Brazzaville
3% Egypt (Mediterranean)
1% 45%
Equatorial Guinea
3%
2% Ghana
Ivory Coast
Mauritania
15%
Nigeria

12%

Figure 9. Distribution of ISL Forecasts of Prospects in Africa by Country.

16 O. Iledare, R. Pincomb and D. Vitrano SPE 128340

Equatorial Guinea

Mauritania

Ghana

Congo Brazzaville

Egypt (Mediterranean)

Angola
Figure 10. Historical and Forecasts of Africa Deepwater Production Capacity, MBOEPD.

Figure 11. Historical and Forecasts of Africa Total CAPEX.

17 Deepwater Petroleum Exploration and Development Efforts and Outcomes in Africa SPE 128340

Table 4
Components of CAPEX for Africa Field Prospects, $Million

Platform Subsea Pipeline Control Line

COUNTRY 2003-07 2008-12 2003-07 2008-12 2003-07 2008-12 2003-07 2008-12
Algeria 0 0 0 0 0 533 63 63
Angola 3,252 3,414 5,227 7,996 2,805 6,155 210 279
Congo Brazzaville 336 1,059 0 1,219 118 1,022 0 44
Egypt (Mediterranean) 0 0 577 994 538 1,314 118 293
Equatorial Guinea 215 0 723 201 326 105 28 11
Ghana 0 400 0 288 0 354 0 18
Ivory Coast 200 0 418 144 213 75 8 5
Libya 361 0 0 0
Mauritania 180 110 307 494 175 402 15 28
Nigeria 3,008 5,160 2,144 6,559 1,857 3,145 104 116
GRAND TOTAL 7,191 10,142 9,396 17,894 6,392 13,104 547 857

Source: ISL, 2008.

Africa

Angola

Egypt (Mediterranean)

Nigeria
2003-2007
Equatorial Guinea 2008-2012

Mauritania

Ivory Coast

Ghana

Congo Brazzaville

0.00 2.00 4.00 6.00 8.00 10.00

Estimated CAPEX per Field Capacity, $/ BOE

Figure 12. Historical and Forecasts of CAPEX per Field Capacity in Africa.