OPEC Beware: West Africa Could Lead The World's Next Production Boom

“Nigeria has some of the largest resources and a large population, but they have never really invested in the technology that is driving 80 percent or more of their economy,” he explained. “That’s horrific.”

As a result, West Africa remains ripe for investors who are willing to exploit smaller fields.

“Who will rally? Who will be the leader? The resources are there. Who’s going to pursue them and how long will it take? Those are the questions,” Millheim said.

Dynamite Comes In Small Packages

Because the threshold for many major operators is roughly 200 to 300 million barrels of recoverable oil, many, including Royal Dutch Shell plc and Chevron Corp., have abandoned many oilfields considered small or marginal in Africa in search of larger ones, said Sunny Oputa, CEO of Energy & Corporate Africa, to Rigzone.

“They were not worth the economic investment to Shell or Chevron but you know what they say: ‘One man’s meat is another man’s poison,’” Oputa said. “These small fields are good for small, independent and indigenous companies. Some wells could produce for 10 to 15 years. They will make money.”

Investors intrigued by Africa’s small, offshore fields are often wary of two things: the cost and availability of innovative technology that can make exploiting small fields commercial, and the fact that many small fields are located in deep water, Millheim explained.

However, unconventional types of technology can be successfully applied to developing small, conventional deepwater oilfields.

“There are service companies and providers that can do it all,” Millheim said.

Deepwater locations shouldn’t be feared either, especially when some African countries have reputations for insurgency and militancy.

“Deepwater fields are far away enough to avoid problems of groups seizing facilities,” he added.

“Whether they are indigenous companies or small companies that feel strong enough to play in West Africa, that’s where we will get our major activity from,” Millheim said.

Needed: Technical Innovation

To make a small play commercial in West Africa, the key will be using existing technology in unconventional ways. Just as horizontal drilling had been used for decades before its combination with hydraulic fracturing made it a powerhouse technology, the same type of application must take place in Africa for lucrative discoveries to be brought on production, Millheim said.

One way to help pave the road to a boom, so to speak, is to lower the cost of operations and infrastructure, Oputa said. An as example, he suggested riser technology that is connected directly to small production vessels called Floating Production Units (FPU) rather than relying on costly FPSO vessels.

For reservoirs with geological challenges, hiring an adept reservoir engineer and implementing an effective reservoir management plan can be a good solution, Oputa said.


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WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Ken  |  July 12, 2015
I have already spent six years in West Africa. Huge potential for Oil & Gas Exploration and Development.. Biggest single problem is corruption. When the money starts coming in, problems arise on the distribution of wealth. But, sticking to the main topic, I do feel there is much to gain in future oilfield development in West Africa. Been there! Seen it!
Khalid  |  July 10, 2015
Like anywhere else, there is potential in Africa. But I think the title of the article is too dramatic for no reason Beware OPEC! The article talks about small companies making a buck here and there from marginal fields that the majors passed on. Africa will have to find elephant fields before OPEC has anything to worry about!
Enoch Oblitey  |  July 10, 2015
It is hypocritical for the Western world to feed us at this time about West Africa, and its ability to outshine Saudi Arabia. The small country of GHANA has employed so many Western Oil Well experts for many years before now, and they have always come up EMPTY. Was it a conspiracy on the part of the Western Oil Well experts, one is bound to come to the conclusion that it is SO. I do not even believe they did what they were supposed to do. They only took the money and left. Now that the price of oil has been lowered by the Western World, oh they say there might be lots of oil in there after all. We are all watching the next steps. I am only an outside observer, but Long Live Africa!
Choma  |  July 10, 2015
This is possible because Nothing is Impossible!! But then I can relate with what Mike is talking about. However, it does not end there. I am sure some National Oil Companies will rise up above corruption and make full utilisation of an effective local content law like we have in Norway and Brasil and not just being a cost centre. Nigeria for instance after the review of the Petroleum Bill will see a new industry. However, I am a bit skeptical about our ability to take the large scale gamble that the multinationals take in the area of prospecting where a large sums of monies are spent and nothing may not come out as expected and they do not close shop but rather continue to prospect due to their financial capabilities. If West Africa tells herself the truth, learn from her past mistakes and do the right thing henceforth, this is very very possible.
Alozie  |  July 10, 2015
Im with Mike on this one. There’s enormous potential in West Africa and its a shame that the leaders are not enacting and enforcing policies to make the region thrive. True indigenous companies are taking steps to take advantage of the opportunities available but without long-term policies and a vision for sustained development at the moment. We have the resources, human and material but the environment is the limiting factor at the moment. Hopefully the present govt in west african countries, particularly Nigeria, will change this dynamic...an Egg in cold water will not turn into a hardboiled egg, just like carbon without extreme pressure will not turn into a diamond. Success was achieved in the North Sea and US due to the conducive environment for business and that is what West Africa is lacking in my opinion.
Sandra Akadidi  |  July 09, 2015
Nigeria really need to take advantage of this. Small companies can do the job and become bigger than the so called big companies now. Patience is all they need to have.
Dela  |  July 08, 2015
Its sceptics like you, Mike, whose faces I cant wait to see when it all happens. The companies who understand have already set up in West Africa. It wont be anither decade.
Godwin  |  July 08, 2015
Tend to disagree with Mike slightly. Its a sure possibility, the corruption challenges notwithstanding. I know that the awareness of this issue is driving most of the countries government to reverse the trend and attract investors. Its possible.
Emmanuel Okoroafor  |  July 08, 2015
West Africa will thrive. Serious companies (not Cash & Carry) will always find their ways around potential obstacles to conduct ethical and profitable business at the same time as they are helping develop the communities they operate in.
Julius  |  July 08, 2015
As it stands, Royal Dutch Shell and some of the IOCs divested alot of their onshore investments in Nigeria in the past 10 years and local small producers are investing heavily in them. Nevertheless, we still lack funds and interest in R&D to really push for out of the box innovative procedures for the recovery of small marginal deepwater reserves. Local Capacity development is on-going with the advent of Local Content bill but no way near where it should be, local workers are still not well trained and school curriculums are obsolete and out of touch with current industry tactics/technology. Honestly, I dont see this happening in the nearest future if the current status quo remains.
Mike  |  July 07, 2015
Never going to happen unless the west African countries become less corrupt and reverse their visa policies. Its quickly becoming impossible to do business there. As the trend stands, in a few years companies wont be able to get in to explore and produce anything.


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