OPEC Beware: West Africa Could Lead The World's Next Production Boom
During the early 1970s, Saudi Arabia cut production as a reminder that it held the cards to the world’s petroleum resources. What the swing country did not count on was the slew of development and production that would subsequently take place in the North Sea. As a result, a new oil supply was born far away from the Middle East.
Fast forward to today: With oil saturating the market again, Saudi Arabia has kept its spigots on this time to try and prove once again its place on top of the hydrocarbon pyramid. Despite its effort to slow production – primarily from shale in the United States – there is still room for surprise in the oil marketplace.
The small offshore oilfields of West Africa, if exploited properly, could become the next big economical play even as oil prices hover around $60 a barrel, said Keith Millheim, a director at Atlantis Offshore, an offshore technology company focused on well testing, production and drilling, to Rigzone. And, all it takes is one adventurous company to get the ball rolling.
Innovation in the North Sea
Entrepreneurs such as the U.S.-owned Hamilton Brothers learned how to make small fields in the North Sea economical in the mid-1970s, specifically the Argyle Field off the coast of Scotland that brought Great Britain its first oil. The company’s game-changing technology was the first Floating Production Storage and Offloading (FPSO) vessel deployed for oil production. It changed the offshore industry forever.
“If you have the money and you can find the technology to make it work, things begin to snowball and other companies come in, just as Hamilton Brothers essentially launched the industry in the North Sea. Entrepreneurs created the small companies that grew the North Sea,” said Millheim, who will be speaking at the 2015 Africa – Small & Marginal Oil Fields Development Conference in London this August.
Small and midsized companies came into the North Sea with a new set of tools, such as FPSOs, to make small fields commercially viable. Their key ingredients were their willingness to take risks, innovative technology and investors willing to back their ideas, Millheim said.
Countries including Norway and the United Kingdom opened their doors to major operators and required them to invest in the countries’ internal research entities and to train their people – thus creating a path to a self-sustaining industry.
Making West Africa Economical
West Africa, particularly its small offshore oilfields, could be the next “North Sea scenario” if played correctly, Millheim said.
“From the typical types of reservoirs encountered offshore to their size and how prolific they are, it’s really a dream,” he said. “There is possibly more oil in the small fields in West Africa than in the reserves in the big fields. How do we change our thinking to make them work?”
Many fields are capable of producing 8,000 to 20,000 barrels of oil a day, Millheim said.
“If you can do it economically, it’s a company maker,” he said.
Unlike the North Sea, which comes with environmental challenges of rough weather and sea ice, the coast of West Africa is a more ideal place to work – more ideal than the Gulf of Mexico, which battles hurricanes and other destructive currents, Millheim said.
Furthermore, the continent is welcoming of international investors, as the majority of its countries have done little to invest in the technology needed to extract their own hydrocarbons.
Over the years, major oil companies have exploited the large oilfields of West Africa as they saw fit. The host countries never required that investments be made in internal technology centers or in research and development activities, Millheim said.
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