What’s new in West Africa?: part one
The impact of low oil prices has been felt by producers across the globe; no region, no matter how dynamic has completely avoided the impact of the downturn. The squeeze has been felt in Houston, with redundancies and lay-offs becoming an unpleasant reality for many oilfield veterans; Sheikh Sabah al-Ahmed al-Sabah, Emir of Kuwait, has urged his government to adopt urgent reform measures and cut national spending in the wake of a 60% drop in income;1 and even Saudi Arabia is rumoured to be setting up a special department to manage spending cuts.2
West African O&G at a glance
The West African O&G industry is far from immune to market turmoil and has felt the impact of the downturn just like anywhere else with many operating companies (both indigenous and international) posting shrinking profits and even outright losses. Two such examples are: African Petroleum, which operates across five countries in West Africa and posted a net loss of just over US$8 million for H1 2015, and Oando Energy Resources, which focuses mostly on on- and offshore Nigeria, and posted a net loss of more than US$50 million for the same period.
However, despite these losses the region continues to show promise; the rig count drop experienced earlier this year was lower than that experienced in other regions and, despite taking something of a hit, exploration activity is still ongoing.3
Indeed, a series of recent discoveries has fuelled industry optimism: Total and Foxtrot International both made finds offshore Côte d’Ivoire; Hess Corporation struck hydrocarbons offshore Ghana; Kosmos Energy encountered 117 m of net hydrocarbon pay with the Tortue-1 well offshore Mauritania; and Cairn Energy’s SNE-1 discovery offshore Senegal was one of 2014’s largest discoveries. With this spate of discoveries in mind, it is perhaps unsurprising to note that West Africa Transform Margin (WATM) currently boasts an enthusiasm-bolstering 65% exploration success rate.4
Problems with piracy
As well as opportunities, however, West Africa also faces plenty of challenges, many of which have little to do with lower oil prices. Piracy, oil theft and institutional corruption are ongoing hazards and pose significant concerns for IOCs hoping to invest in the region.
Of these challenges, piracy is perhaps the most alarming; the Gulf of Guinea saw more than 100 attempted vessel hijackings in 2013 alone. Reports have also shown that over recent years the violence of pirate attacks in the Gulf of Guinea has increased with crewmembers being tortured, kidnapped and shot. As of 2013, rates of kidnapping for ransom were also on the rise.5
Making the problem of piracy particularly intractable is the trend for hijacking attempts to occur well within territorial waters and close to terminals and harbours rather than on the high-seas; this limits the ability of international military forces to intervene. As a consequence, operators are left relying on local naval and coastguard forces, which in turn are often prohibited from entering the territory of neighbouring nations, thus hindering their ability to pursue pirates and hijackers.6
Local laws also complicate the matter of providing vessels with adequate security; international maritime security firms are banned from carrying firearms in many of the region’s territorial waters, limiting their efficacy. When armed guards are available, they are often only available from local government forces, which have been cited as having generally poor professional standards.
References
1.http://www.reuters.com/article/2015/10/27/kuwait-economy-emir-idUSL8N12R30S20151027
6.Ibid.
Part two to follow.
Read the article online at: https://www.oilfieldtechnology.com/exploration/30122015/whats-new-in-west-africa-part-1/
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