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Page 1: AFRICAN ENERGY OUTLOOK€¦ · Outlook Investment Outlook: Oil Announced Oil Projects Investment Outlook: Gas In Focus: Floating Gas Makes Waves Announced Gas Projects Market Access

AFR

ICA

N

ENER

GY

OU

TLO

OK

2020

www.energychamber.org

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AFRICAN ENERGYOUTLOOK

2020

AfricanEnergyChamber

Page 3: AFRICAN ENERGY OUTLOOK€¦ · Outlook Investment Outlook: Oil Announced Oil Projects Investment Outlook: Gas In Focus: Floating Gas Makes Waves Announced Gas Projects Market Access

Dear Reader,

At the African Energy Chamber, we are passionate about promoting Africa’s oil and gas sector, free enterprise and individual liberty. Our goal is to see a dynamic, fast-moving private sector unleashed to unlock the continent’s extraordinary potential.

After nearly a century of oil exploration and production, we have not come close to exhausting the resources of this last-remaining great hydrocarbons frontier. The opportunity is vast. Africa holds around 7 percent of the world’s proven crude oil and natural gas reserves. So, how do we move forward?

That question arises at a time of transition in the global energy industry. The United States is exporting its shale revolution. Trade disputes are disrupting long-established global supply chains. The technological and economic challenge of securing a lower-carbon future persists. And, here at home, we are witnessing a growing imperative to ensure that natural resources deliver transformative development to host countries and local communities.

These factors present real challenges and significant opportunities for our industry.We believe that a prosperous future African energy industry is one that faces this

period of transition holistically and in unison, remaining true to the principles of free enterprise that we have seen deliver incredible progress elsewhere around the world.

As we move into a new decade, the Chamber is stepping forward to provide the leadership and initiative required to deliver that concerted action. We have established an unrivalled platform – rooted in an extensive network of relationships and comprehensive knowledge of the industry – from which we work to open dialogues and create trust between essential stakeholders in the industry, including energy firms, investors, government and local communities.

This report is part of that effort. We are providing a thorough look at the oil and gas sector across sub-Saharan Africa, with a focus on key strategic and operational developments for 2020, identifying opportunities for investment and profiling key figures. Most importantly, the report offers an insight into what could be achieved if the industry is supported properly.

We look forward to welcoming you into our network and empowering you to push this tremendous industry forward in 2020.

Thank you.

Leadership for TransitionForeword:

NJ AYUK EXECUTIVE CHAIRMANAFRICAN ENERGY CHAMBER

Page 4: AFRICAN ENERGY OUTLOOK€¦ · Outlook Investment Outlook: Oil Announced Oil Projects Investment Outlook: Gas In Focus: Floating Gas Makes Waves Announced Gas Projects Market Access

Outlook

Investment Outlook: Oil

Announced Oil Projects

Investment Outlook: Gas

In Focus: Floating Gas Makes Waves

Announced Gas Projects

Market Access

Services Outlook

CONTENTS

BusinessEnvironment

06

2442

6436Introduction

Energy Markets

Strategic Outlook

Regulatory Outlook

Finance & Trading

In Focus: China’s Africa Energy

State of Play: China in Africa

08

09

14

16

18

20

23

44

46

48

50

52

54

56

58

26

32

33

34

Outlook

State of Play: African LNG

Facilities

In Focus: The Rise of African Gas

ProductionOutlook

Key Projects 38

InfrastructureOutlook

InvestmentOutlook

Twenty-Five Movers & Shakers to Watch

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African Energy Outlook - Business Environment | 76 | African Energy Chamberwww.energychamber.org

BUSINESSENVIRONMENT

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African Energy Outlook - Business Environment | 98 | African Energy Chamberwww.energychamber.org

THE MID-2014 TO 2017 OIL PRICE CRASH SIGNIFICANTLY IMPACTED AFRICA’S OIL AND GAS SECTOR.

Tough economic conditions, as well as political instability, regulatory uncertainty and inadequate infrastructure to evacuate products to market meant that several oil and gas projects were either halted or cancelled. The downturn also had a severe impact on oil-dependent economies – including Nigeria, Angola and the Republic of the Congo – which have experienced stalled economic growth and tightening government revenues.

As we look toward 2020, however, the view is very different. International oil companies (IOCs) and African national oil companies (NOCs) are adapting to the low price environment. Africa holds significant potential for international investors. At the end of 2018, the continent was assessed to have 509.6 trillion cubic feet (tcf) of proven gas reserves and 125.3 billion barrels of proven oil reserves1. Africa’s downstream sector, which has also remained stagnant in

recent years, is currently under recovery with new refinery and petrochemical complexes being constructed and upgrades to existing ones scheduled in the near term.

As global competition for investments heats up, foreign investors remain concerned about uncertain fiscal terms in sub-Saharan Africa. Governments must find better ways to reconcile their expectations of short-term tax gains with the need for sustainable and long-term investment in exploration and production. There are tens of billions of dollars’ worth of projects which are being delayed due to uncertain environments.

This section of the report provides an outlook on sub-Saharan Africa’s oil and gas business environment in 2020 and beyond beginning with analyses of global energy market conditions in 2019 and their impact on African producers in 2020. This is followed by an analysis of key strategic challenges that are likely to shape Africa’s energy sector in 2020 and a~~ look at key developments in the areas of regulation, infrastructure and finance.

Introduction

Africa’s Proven Reserves

Europe Brent Spot Price FOB Dollars per Barrel

Source: U.S. EIA, Thomson Reuters 1. BP Statistical Review 2019

Energy Markets

U.S. SHAPES SUPPLY AND DEMANDSeveral key market trends have emerged since the price recovery. The first is the United States becoming a net exporter of crude oil and products. IEA forecasts show that gross U.S. oil exports are poised to overtake Russia and close in on Saudi Arabia by 2024. Shale producers are now able to respond more swiftly to price signals than other suppliers, meaning that further price rises could lead to even higher levels of U.S. supply. Equally important, however, is the increasing supply growth from non-OPEC producers like Brazil, Canada, and Norway, as OPEC capacity declines.

On the demand side, economic growth in China and India, along

PRICE RECOVERY CONTINUESThe recovery in oil prices was sustained throughout 2019 and is expected to be maintained in 2020, with forecasts around the $60-70 per barrel range, which is consistent with long-term average prices. Brent crude oil prices have averaged $65.67 per barrel year-to-date, a 31 percent increment over the 2015-17 average price of $51.03 per barrel. At the same time, global oil demand increased by an estimated 1.8 percent in 2018, driven by strong growth in the United States and China, according to the International Energy Agency (IEA). To meet this demand, there has been a 3.43 percent increase in global oil production from 97.09 million barrels per day (mmb/d) to 100.40 mmb/d from 2015 to 2018, driven primarily by increased U.S. shale production.

0

20

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

40

60

80

100

120

140

INDUSTRY DOWNTURNAND RECOVERY

125 billion barrels of oil

7.3% of global reserves

509 tcf of gas

7.2% of global reservesSource: BP Statistical Review 2019

Oilwith the growing importance of petrochemicals, will remain key market drivers in 2020. Notwithstanding this, overall demand growth is expected to decline moderately over the coming years due to the impact of ongoing U.S.-EU and U.S.-China trade disputes.

Output has increased from the U.S., Brazil, Canada and Norway, affecting global prices.

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African Energy Outlook - Business Environment | 1110 | African Energy Chamberwww.energychamber.org

GLOBAL IMPACT ON SUB-SAHARAN AFRICABeyond commodities prices, there are several factors which are currently shaping the global oil and gas business environment. Most notably, the transition to a low carbon future (including the use of natural gas as a transition fuel) underpinned by the Paris Climate Agreement and a sharp focus on efficiencies and cost reduction across the industry, from operators to suppliers. These complex conditions impose constraints on energy firms which require continued capital rationing. In this context, although Africa’s diverse energy industry possesses an array of investment opportunities across the value chain, these fundamental global challenges are likely to impact sectoral investments in 2020 and beyond.

Africa’s energy landscape is dominated by large IOCs, as such their strategic decision-making on the continent is shaped by global developments. While some IOCs are pulling back from the continent (for example, Occidental divesting Anadarko’s African assets following a $38 billion takeover), we can expect to see the strengthening of strategic alliances between smaller and larger IOCs to enhance project viability and competitiveness. One such example is the agreement between U.S. firm Kosmos Energy and Shell to cooperate in offshore projects in Namibia and São Tomé and Príncipe .

EXPLORING SMALLER MARKETSSmaller countries in east and west Africa are likely to drive the exploration and development of new fields in 2020 and beyond. Examples of such projects include Senegal’s SNE field development by Woodside Energy and Cairn Energy and the Lokichar Basin project in Kenya by Tullow Oil. Deepwater drilling is likely to continue into 2020 in Africa’s frontier regions Senegal, Mauritania, Namibia and South Africa as well as in more established markets such as Nigeria, Angola and Ghana. Likewise, several countries, including existing and upcoming producers, are expected to auction new blocks in year-long licensing rounds.

Nigeria will lead the way in terms of upstream expenditure as the continent’s largest producer. According to analysis from Global Data, there are currently nine oil projects across SSA which have reached final Investment decision (FID); they have a combined total CAPEX value of $17 billion. Five of them are in Nigeria with a total CAPEX value of $6.1 billion.

Global Oil Demand Growth 2018 –2024 (mmb/d)

Source: IEA

$6.1 billion in CAPEX for Nigerian upstream oil projects currently under construction – 35% of SSA total (Global Data)

PIX

AB

AY

0.44

0.32 0.32

0.16

0.21

0.230.25

0.16

-0.12

0.17 0.14

0.12

0.74

0.63

0.51

0.53

2018

2020

2022

2024

Rest of the world

Middle East

India

China

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African Energy Outlook - Business Environment | 1312 | African Energy Chamberwww.energychamber.org

Chinese demand for natural gas will increase by

134 bcm by 2024 (IEA)

70% of global proven gas reserves are recoverable at average breakeven price of <$3 per MMBtu (IEA)

GAS ON STEADY GROWTHThe natural gas market has been growing at an accelerated rate over the past decade and is expected to remain as the fastest-growing fossil fuel well into the next decade. The resource is widely recognised as a critical transition fuel toward a low carbon energy future, with its demand having increased at an average rate of 2 percent per annum since 2010, twice the global primary energy demand rate, according to the International Gas Union (IGU).

This growth is driven by booming markets in the United States, China

and other emerging markets in Asia. Along with increasing European gas imports, LNG markets are set to grow in 2020 and undergo drastic changes over the next five years as China and India emerge as major LNG buyers, according to IEA estimates. The Asia Pacific region is expected to account for almost 60 percent of total consumption increase by 2024. The IGU estimates that, China’s clean air policies have prompted a move away from coal, making it the fastest-growing market for natural gas. Similarly, across the globe, expect to see the expansion of carbon pricing policies and

other initiatives that will encourage the development of low-carbon gas technologies, such as carbon capture utilisation and storage, and hydrogen fuels.

PRICE CONVERGENCE

These developments mean that gas prices will continue to converge and likely fall at key regional hubs in Europe, North America and Asia, driven by lower project costs and greater efficiencies in shipping. Spot prices since late 2018 at key hubs have fallen in part due to LNG market oversupply as well as new technologies and innovations bringing down project breakeven costs. This trend is expected to continue in 2020.

AFRICAN OUTLOOKThere is a promising outlook for the African gas sector. The urgent need for rapid industrialisation will create tremendous opportunities for gas to fuel African societies in a more cost effective and environmentally sustainable manner. Large population increases, particularly in gas producing countries such as Egypt, Nigeria and Ghana, will be one of the critical drivers for African gas demand growth. According to PWC estimates, Africa’s energy demands will grow by 60 percent by 2030. The rapid development of projects in Egypt (Zohr Field) and Mozambique (Coral South) demonstrates the outstanding potential for new gas reserves to power industrial growth.

Several countries are restructuring their energy policies to provide more incentives to develop domestic gas reserves (associated and non-associated) to provide fuel for thermal generation and other industrial uses, such as petrochemicals. Significant attention is also likely to be placed on gas-to-power initiatives to meet increasing electricity demand while also reducing gas flaring, especially in Nigeria. The continent is likely to see the emergence of regional hubs and markets with the strategic ambition of procuring LNG imports for gas-to-power projects to replace expensive liquid fuels. Equatorial Guinea’s LNG2Africa initiative is an example of this.

2. Retrieved from https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/01/Opportunities-for-Gas-in-Sub-Saharan-Africa-Insight-44.pdf

Source: Oxford Institute for Energy Studies (2019)2

COUNTRY

Ghana

Benin

Togo

South Africa

Ivory Coast

Cameroon

Tanzania

Nigeria

Mozambique

Gabon

Equatorial Guinea

WHOLESALE PRICE ($/MMBTU)

8.65

8.30

8.30

6.41

5.90

3.89

3.43

3.08

1.66

0.80

0.25

CONSUMPTION

0.980

0.044

0.040

5.411

2.352

0.545

0.848

12.135

0.745

0.448

1.200

PIPE IMPORTS

0.330

0.044

0.040

4.440

-

-

-

-

-

-

-

LNG EXPORTS

-

-

-

-

-

-

-

30.571

-

-

4.454

SSA Gas Supply-Demand Balance 2017 (bcm)World Natural Gas Consumption Growth for Selected Countries and Regions, 2018-2024 (bcm)

PRODUCTION

0.652

-

-

1.126

2.352

0.545

0.848

43.019

4.912

0.551

6.000

Gas

Source: IEA

China MiddleEast

OtherAsia

Pacific

USA India Africa OtherEurasia

Central & SouthAmerica

OtherNorth

America

Europe Russia Japan

Industry

PowerGeneration

Buildings & Other Sectors

55

2330

18 188 12 5 5 1 4 1

35

76

35

15

106 13 10

2 5 6

-6

-24

12

6

11

4 6 15 1

-6

-13

3

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African Energy Outlook - Business Environment | 1514 | African Energy Chamberwww.energychamber.org

2019 Heavy Sweet Crude Exports by Load Region

U.S Crude & Petroleum Products Exports to China (thousand barrels)Strategic Outlook

ENERGY SUPPLY AND DEMAND ARE INTIMATELY LINKED TO THE SHIFTING SANDS OF GLOBAL AND REGIONAL STRATEGIC TRENDS. THIS SECTION PROVIDES AN OUTLOOK ON THE KEY ISSUES INFLUENCING AFRICAN PRODUCERS IN 2020, WITH AN INTERACTIVE LANDSCAPE OF THREATS AND OPPORTUNITIES.

IMO 2020 TO BOOST WEST AFRICA From January 2020, the International Maritime Organisation (IMO) will implement new regulations that require the shipping industry to use marine fuels with a sulphur content of no more than 0.50 percent. The marine sector is responsible for half of the global fuel oil demand – equivalent to 3.8 million barrels per day in 2017. Thus, the regulation

change will have a major impact on refineries and a significant knock-on effect on demand and prices for heavy sweet crude oil grades that are ideal for producing IMO-compliant bunker fuels .

West African producers are well positioned to benefit from the new regulation. According to ClipperData, around 75 percent of global heavy sweet crude is produced in the region, with Chad (Doba Blend), Cameroon (Lokele) and Angola (Dalia) accounting for more than 90 percent of that supply. Prices for these grades were trading at a premium of up to $3 on dated Brent in August.

Demand for Angolan crude has picked up in 2019, particularly from Chinese refiners. Data from IHS Markit shows an 8 percent year-on-year increase in Angolan exports to China for the period January to July

3. S&P Global Platts – August 2019

with especial interest in the Cabinda, Mondo and Saturno grades, though the overall Angolan market share in China is being squeezed by Saudi Arabia. Further, U.S. sanctions on Venezuelan and Iranian crude exports have also benefited Angola.

TRADE WAR OPENS DOORIn 2019, the global economic picture looks uncertain as the United States’ trade disputes with China and the European Union (EU) take their toll. The IEA has cut its forecast for global oil demand growth by 0.1 million barrels per day to 1.3 million in 2020. Tit-for-tat tariffs have hurt China, where economic data shows signs of slowing growth, which could have a direct impact on demand for African crude.

Notwithstanding this risk, however, China’s trade war with the U.S. is also creating opportunities for African producers to replace U.S. oil exports, which have fallen dramatically following the introduction of tariffs. Data from the EIA shows that exports of crude and petroleum products have fallen by more than 60 percent year-on-year in the period from January to July. At the same time, in October 2018 Chinese refiners bought around 1.71 million barrels of west African crude per day, the highest level since 2011.

DAWN OF AfCTAIn July, Nigeria formally joined the African Continental Free Trade Area (AfCTA) paving the way for the creation of the world’s largest free trade area. The agreement will

be a major facilitator for increasing intraregional trade. Just 16 percent of international trade by African countries takes place between African countries, according to research by the African Development Bank. The new agreement will reduce trade barriers, and African Union estimates that this will boost intra-African trade by 60 percent within three years.

Mineral products, chemicals, machinery and transportation currently dominate intra-African trade. Increased trade and industrial activity will have a knock-on effect on energy demand, particularly for power generation purposes. As Africa struggles to leverage on regional cooperation to execute critical energy and infrastructure projects, the industry hopes that the AfCTA can provide a boost to multi-billion-dollar opportunities that could be unlocked by transnational energy cooperation and projects, such as Equatorial Guinea’s African LNG network and the proposed Trans-Saharan Gas Pipeline.

SECURING ENERGY INFRASTRUCTURE September’s drone attack on a Saudi Aramco facility and its impact on global oil prices underscored the relentless challenge of securing energy infrastructure. Producers throughout the Sahel are well accustomed to this reality, with a diverse range of threats affecting the region, from vandalism in the Niger Delta to violent unrest in Libya and community disputes in Kenya.

Senior IHS Markit Country Risk Analyst Dr Theo Acheampong argues that piracy is a major concern heading into 2020. “Piracy in the

Gulf of Guinea and Somalia pose more immediate risks to the sector compared to Islamic Terrorism.” However, he also contends that both energy companies and government are working effectively to mitigate the impact on supply. “Governments are resourcing their navies and adopting a regional approach to the issues,” he says.

In Nigeria, the NNPC’s most recent data shows a 77 percent increase in pipeline sabotage incidents between May and June 2019. According to S&P Global Platts, in August, Paul McGrath, Chairman of the Oil Producers’ Trade Group of the Lagos Chamber of Commerce of Commerce and Industry, told fellow industry professionals that high security costs are “escalating as peculiarities of the business environment require additional resources be deployed to secure our people and assets.”3 NNPC officials say they are working closely with the government and relevant security agencies to prevent further rises. Despite the spike in incidents, however, total monthly production increased by 2.7 million barrels during the May to June period.

Nigeria Pipeline Breaks and Total Montly Crude & Condensate Production(million barrels)

Source: NPPC

Source: U.S. EIA

Source: Clipper Data

19%

3%

3%

3%

72%

Latin America

Northwest Europe

Pacific

Other

West Africa

Total461,000 bpb

0

5,000

10,000

15,000

20,000

25,000

30,000

Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

OCT-18:CHINESE IMPORTS OF WEST AFRICAN CRUDE REACH 7-YEAR HIGH OF 1.7 MMB/D

174204

86125

219 197

264230

137111 125

60106

53

57

6259

62

54

59

61

56

63

60 60

63

Jun-

18

Jul-

18

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Pipeline Breaks Oil Production (million barrels)

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African Energy Outlook - Business Environment | 1716 | African Energy Chamberwww.energychamber.org

WITH CORRUPTION AND POOR GOVERNANCE STILL PLAGUING AFRICA’S HYDROCARBON SECTOR AND PROFITABILITY SQUEEZED BY LOWER PRICES, GOVERNMENTS HAVE STARTED TO RECOGNIZE THE IMPORTANCE OF PROVIDING INVESTORS WITH MORE STABLE AND COMPETITIVE REGULATORY ENVIRONMENTS, COMBINED WITH EFFICIENT MARKET OVERSIGHT. FROM MAJOR PRODUCERS TO FRONTIER MARKETS, SYSTEMATIC REFORMS ARE RE-SHAPING AFRICA’S ENERGY SECTOR FOR 2020 AND BEYOND.

THE PIB IS MAKE OR BREAK FOR NIGERIAIn Nigeria, focus remains on the implementation of the the Petroleum Industry Bill (PIB). Multiple versions of the bill have been developed and abandoned since 2008. However, it has now been disaggregated into four parts, including a Petroleum Industry Fiscal Bill [PIFB]. In July, Ahmed Lawan, the new Senate President, promised that Senate committees would re-start consultation work on the PIB before the end of the year. Following

the February election, President Buhari’s allies have assumed leadership of both the Senate and House of Representatives. Mele Kyari, Group MD of NNPC, believes that this political alignment ensures that passing the PIB “will not be difficult,” according to a recent Reuters interview.4 With operators and investors becoming impatient, the African Energy Chamber supports the industry view that the passing of the PIB will make or break future investment in Nigeria’s hydrocarbons sector.

IOCs will be paying special attention to the final provisions of the PIFB, specifically tax credits and allowances for exploration

Regulatory Outlook

by the same legislation used for the mining sector6. They argue that a new legislative framework is necessary and should focus on providing greater transparency, especially in the licencing regime. In August 2018, the government stated its intention to develop a separate legal framework for the hydrocarbons sector, following consultations with industry. As Total moves ahead with a potential billion-barrel project, the need for regulatory clarity will only grow.

ANPG TAKES CONTROL In Angola, 2020 will see President Lourenço’s energetic reform agenda move into a new implementation phase. The National Agency for Petroleum, Gas and Biofuels (ANPG) was created in December 2018 to take over Sonangol’s mission as market regulator. CEO of the ANPG Paulino Jerónimo has said that his organisation will be focusing on optimisation throughout 2020. That will include offering ten blocks in the Congo and Kwanza basins through public tender as well as taking on new responsibilities, such as managing abandonment funds.

FRONTIER MARKETS REFORMED AND READYFrontier countries, like Senegal, Benin and Cameroon, have already implemented structural reforms in 2018/19 which they hope will attract

new investment in 2020. Benin has seen very little exploration activity in recent years. In January, it adopted a new petroleum code which, among other things, provides a research authorisation period of up to 11 years.

Senegal also implemented substantial reforms of its hydrocarbons code in January. The new code promotes public interest in the sector, with increased participation rights for the NOC, higher royalty rates, and provisions to grant exploration rights exclusively to Senegalese-incorporated entities. A new campaign to promote offshore exploration blocks available for tender is expected in 2020.

Gabon is a more established market but there has been virtually no new investment since 2014. In July, the country enacted significant reforms to the fiscal code, including eliminating corporate tax and reducing state profit and royalties. And in August, Malaysia’s Petronas acquired the first exploration licence awarded in the country for five years (offshore Blocks F12 and F13), which have the potential to increase output by 200,000bpd, according to government estimates. In total, Gabon stood out by signing as many as 9 PSCs in 2019 alone..

LOCALISATION AGENDAMany countries have also focused on introducing more robust local

content policies. Senegal, Gabon, Cameroon and Equatorial Guinea have all taken important action in this area. South Sudan could be next. In June, South Africa-based Centurion Law Group led a review of its localisation policies, with a view to replicating regional best practice. And in Nigeria, Simbi Wabote, Executive Secretary of the Nigerian Content Development & Monitoring Board is pushing to expand the Local Content Act into new sectors of the economy, including power, construction and ICT, which could affect businesses further down the hydrocarbons value chain7.

Following the election, President Buhari now has key allies in place to help deliver the PIB in 2020.

Senegal, Benin, Cameroon & Gabon have all reformed their hydrocarbons codes since 2018, with a particular emphasis on encouraging local content.

4. Reuters – August 20195. Bloomberg Tax – June 2019 (Ayo Luqman Salami & Funke Oladoke, KPMG)6. Herbert Smith Freehills – June 2019 (Peter Leon, Paul Morton and Patrick Leyden) 7. The Guardian (Nigeria) – August 2019

investment. Analysis from KPMG shows that replacing investment tax credits with a graduated production allowance would lead to a significant increase in the short-run tax liabilities of E&P companies, especially those with large deep-water acreage. Furthermore, they point out that incentives related to upstream gas operations are less generous in the new fiscal bill5.

BRULPADDA TO SPARK REFORM IN SOUTH AFRICA?Systematic reform is also on the agenda in South Africa following Total’s Brulpadda offshore gas discovery in February. Industry watchers point out that oil and gas are currently regulated

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STREAMLINING NOCsThe Nigerian government is seeking to encourage more foreign investment in the upstream sector by reducing its stake in joint ventures with IOCs, such as Shell, Exxon and Chevron. The NNPC currently holds majority positions in these entities (ranging from 55 to 60 percent) which it wants to reduce to 40 percent. Such a move could be advantageous for all parties. For the government, it would lower its share of the cash cost in upstream operations. Nearly 60 percent of total crude oil and gas sales revenue in 2018 was directed toward Joint Venture (JV) cash calls and the government is in arrears on some payments. For the IOCs, it would mean increased control. However, the extra responsibility may not be desirable at a time of regulatory uncertainty and capital rationing. If NNPC can implement

Finance & Trading

its new Incorporated Joint Venture (IJV) model in 2020, this could encourage greater participation from IOCs. The IJV model will create independent entities which can raise capital through debt or equity, with dividends paid to shareholders.

In Angola, 2020 will see Sonangol push ahead with its reform agenda as the company divests from a large number of joint ventures and investments that are extraneous to its new core mission being a high impact E&P company. Sonangol plans to sell 50 subsidiaries across the globe, from Cape Verde to Singapore and back home, in sectors as diverse as real estate, health and banking. Chairman Sebastião Gaspar Martins believes that the move will make the company “financially more robust”8 – potentially enabling it to be a more effective upstream partner for IOCs.

IOCs RATIONALISE NIGERIA PORTFOLIOSNigeria is a multifaceted hydrocarbons market with a range of local, regional and global firms adjusting their posture based on unique strategic priorities as well as wider trends. In 2020, there is likely to be a continuation of major IOCs rationalising their footprint in Nigeria, in some cases as part of a broader divestment strategy or as a more limited portfolio adjustment based on project economics or specific risk assessments.

In October 2018, semi-nationalised Brazilian firm Petrobras agreed a $1.5 billion sale of its minority stakes in OML 127 and OML 130 to Canadian firm Africa Oil Corp. That was followed by widespread reports in April 2019 that Exxon Mobil is exploring a $3 billion divestment from several fields it partially owns through its JV with NNPC. Analysis from Wood Mackenzie suggests that Exxon’s sell-off is likely to be focused on small to medium-sized fields that the company is unwilling to develop due to a lack of JV funding or unfavourable project economics. Currently, Petrobras and Exxon are offloading global assets worth a combined $36 billion.

Shell could seek to adjust its Nigerian portfolio to focus on deep offshore, away from the operational risks associated with the Delta region following a renewal of these licences over the summer. And Chevron could also offload assets, according to analysis from Wood Mackenzie.

Whatever the reason, these divestments create opportunities for specialised indigenous companies with lower

cost infrastructures to acquire valuable licences. However, with the NNPC looking to reduce its cost exposure, these smaller firms will have significant financing needs in order to move projects forward. They could prove to be an attractive prospect for regional banks and finance corporations; or joint venture options with other international independents and even international private equity. For example, in July, Norwegian upstream independent firm, Aker Energy secured $100 million in convertible bond notes from Africa Finance Corporation to help develop its ultra-deepwater Pecan field offshore Ghana. Further, Boru Energy, a new London-based venture backed by global private equity giant Carlyle Group, is looking to build a portfolio of non-operated stakes in producing oil and gas assets across sub-Saharan Africa, in deals worth up to $1 billion.

For potential investors, Nigeria’s independent sector can demonstrate a strong track record of production growth averaging 15 percent a year since 2009. Over the same period, output from international majors including Shell, Chevron, Eni and Total and others has fallen by an average of 4 percent per annum due in part to a lack of new projects coming on stream.

8. Macau Hub – September 2019

Nigeria Yearly Crude Oil Production by Contractual Arrangement (million barrels)

Exxon is reportedly exploring a $3 billion divestment programme in Nigeria

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Marginal FieldsIndependent/Sole Risk

41.43.9

42.03.8 44.5

8.146.3

18.1 64.6

19.4

58.4

19.7

56.5

22.2

92.7

21.9

54.8

23.3

32.1

16.9

Key Deals & Developments in 2019

COUNTRY

Angola

Chad

CongoBrazzaville

EquatorialGuinea

Kenya

Mozambique

Namibia

Nigeria

NEWS

Maurel & Prom acquires Angola Japan Oil Co 20% stake in Blocks 3/05 & 3/05A for $80m

Glencore has puts its Chad oilfields up for sale. Currently producing 7,700 bpd

Lukoil acquires 25% stake in Marine XII from NewAge for $800m

Medco Energi acquires Ophir Energy for $512m following Fortuna FLNG disappointment

Qatar Petroleum farms into Eni deep offshore blocks

Total completes $3.9bn acquisition of Anadarko 26.5% interest in Mozambique LNG project

Qatar Petroleum farms into Total’s deepwater blocks

Panora Energy sells Nigerian assets to Petro Nor E& P for up to $35m

Seplat acquires UK independent Eland for $486m

Lekoil acquires 45% stake from- Newcross in OPL 276

Savannah Petroleum (UK) completes acquires 80% stake in Seven Energy

Source: NNPC

THERE HAS BEEN A LOW LEVEL OF UPSTREAM MERGERS AND ACQUISITION (M&A) ACTIVITY ACROSS THE AFRICAN OIL AND GAS SECTOR SINCE THE OIL PRICE DOWNTURN. YET, AS MAJOR IOCs SLOW DOWN, THERE ARE EMERGENT OPPORTUNITIES FOR SMALLER, MORE FOCUSED COMPANIES TO ACQUIRE PERIPHERAL AND MARGINAL ASSETS AND INCREASE THEIR FOOTPRINT. THESE ARE SOME OF THE KEY FACTORS DRIVING THAT TREND.

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China’s Africa Energy Strategy

CHINA’S ENERGY FUTURE The urbanisation and industrialisation of Chinese society will continue to shape the global natural resources market over the next decade. According to forecasts by the IEA, China and India will consume 44 percent of the 7.1 mmbpd in global

In Focus

CHINA IS A HIGHLY INFLUENTIAL PLAYER ACROSS AFRICA’S HYDROCARBONS VALUE CHAIN, ON BOTH THE DEMAND AND SUPPLY SIDES. THIS SECTION EXPLORES CHINA’S EVOLVING ENERGY NEEDS AND HOW THIS SHAPE ITS INVESTMENT ON THE CONTINENT.

oil demand growth expected by 2024. On its own, China will account for about 40 percent of total gas demand increase to 2024.

China will rely on foreign energy imports for the foreseeable future due to its domestic sector having performed poorly over the last decade. Between 2008 and 2018, crude production fell from 3.8 mmb/d to 3.7 mmb/d. The government has liberalised the upstream sector in order to attract CAPEX investment and replace depleting reserves. Since July, foreign firms can operate independently, whereas previously they required a Chinese partner or JV.

The government is driving a rapid

SSA ENERGY FOOTPRINTSub-Saharan Africa has been a prominent focus of Chinese foreign direct investment (FDI) into the global oil and gas industry since 2009. According to data from the China Global Investment Tracker (CGIT), produced by the American Enterprise Institute (AEI), total investment is valued at $17 billion, which is just under 12 percent of China’s global total12. That is a comparable share to other geographically distant regions such as South America (15 percent) and MENA (13 percent).

Chinese NOCs have acquired a range of energy assets across the value chain in at least 10 SSA countries. Most of the upstream assets were acquired in the boom period from 2003 to 2009. Though managed in different ways, all these investments are underpinned by a common geostrategic aim: securing resources. In higher-risk frontier markets like South Sudan, Chad and Niger, CNPC dominates the entire industry with

a full spectrum of investments. This includes full ownership of the 20,000 bpd Soraz refinery in Niger, where it is also involved in the construction of a new 1,829-kilometre pipeline (capacity 90,000 bpd) that will enable the landlocked country to export its oil through Benin. In South Sudan, CNPC operates two JV’s that are responsible for producing all of the country’s oil. In Chad, in addition to producing fields, it also owns a 60 percent stake in the N’Djamena oil refinery (capacity 2.5 mtpa). Beijing’s engagement with African governments enables Chinese NOCs to manage the political risks in these countries in a way their international peers cannot match.

By contrast, in Angola, there are no concessions operated by Chinese ventures14 despite the fact China consumes at least 65 percent of the country’s crude exports. Chinese NOCs have consistently proven their willingness to complete multi-billion-dollar deals to acquire non-operated stakes in ready-to-produce licences in premium basins

with top-tier partners. These include CNOOC/Sinopec’s joint agreement with Marathon Oil to enter Angola’s ultra-deepwater sector back in 2009 for $1.2 billion (Block 32, operated by Total) and CNPC’s acquisition of a non-operated 20 percent stake in Eni’s Area-4 licence offshore Mozambique for $4.2 billion in 2013. More recently, CNPC unsuccessfully tried to increase its acreage in the very promising Lake Albert basin in Uganda through a $1 billion joint-bid with Total. According to CGIT data, Chinese entities have completed 11 farm-in agreements over the last decade with an average value of $1.3 billion. Overall, Chinese engagement with the African energy sector (including coal and renewables) is predominantly executed through M&A activity and project financing rather than greenfield investment, as analysts at European think-tank Bruegel point out. Nearly 60 percent of Chinese M&A activity in Africa is focused in the energy sector compared with just 13 percent of greenfield investment14.

Chinese Global FDI in Oil & Gas (USD billion) China Greenfield Investment in Africa by Sector Chinese M&A in Africa by Sector

9. BP Statistical Review 201910. International Gas Union – Wholesale Gas Survey 201911. Offshore Energy Today – February 2019

12. China Global Investment Track data retrieved 14/10/201913. http://www.sonangol.co.ao/English/AreasOfActivity/Concessionary/Documents/GAD201901-DMC0001-I.pdf14. Bruegel – China’s investment in Africa: What the data really says, and the implications for Europe, by Alicia García Herrero and Jianwei Xu (July 2019)

Source: China Global Investment Tracker (AEI) Source: Bruegel * Includes coal, oil, gas, alternative & renewable

shift away from coal to natural gas. Domestic gas production increased by nearly 25 percent in the five years to 2018, while imports are also rising fast. In 2017, the government allowed third parties to access LNG terminals and gas pipelines with privately acquired feedstock. LNG imports increased by 39 percent in 20189.

African exports are an important component of China’s diversified energy acquisition strategy. In 2017, African countries supplied around 20 percent of Chinese crude imports, behind only the Middle East.

Gas is still a relatively regional commodity. Thus, in 2018, China accounted for just 8.7 percent of sub-Saharan African LNG exports, though it was the fastest growing destination (223 percent year-on-year increase)10. In February, China National Offshore Oil Corporation (CNOOC) agreed a 13 year offtake agreement for 1.5 million tons per annum (mtpa) of LNG from the Area 1 Mozambique development (capacity 12.8 mtpa)11.

South America

MENA

SSA

Total Global O&G FDI

0.5 1.14.0

7.9

0.2 0.6 0.1 2.8

8.9

3.7

1.3

1.0 2.71.2

1.1

11.7

0.3 1.0

2.9

2.03.0 0.1

1.2

19.9

23.2

10.3

19.5

22.3

11.1

9.6

11.5

6.2

10.2

5.1

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Real Estate43%

Transportation11%

Energy*13%

Other33%

59%

31%

7%3%

Energy

Infrastructure

Materials & Metals

Other

Chinese investment predominantly

executed through M&A. Light operational

footprint compared to peers, especially

upstream.

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African Energy Outlook - Business Environment | 2322 | African Energy Chamberwww.energychamber.org

WHERE NEXT?Poly-GCL (a JV between state-owned China POLY Group Corporation and privately-owned Hong Kong-based Golden Concord Group) is heavily involved in developing Ethiopia’s nascent gas sector. Poly-GCL has three gas fields (Dohar, Calub and Hilala) in the eastern Ogaden Basin which it believes are ready to provide feedstock for a 3

mtpa LNG facility. With continued exploration of the basin, they expect that to increase to 10 mtpa within 10 years. The company is financing a $4 billion 700km gas pipeline that will run to a new Chinese-built port in Djibouti.

In west Africa, CNOOC is increasing its exposure in the MSGBC Basin. The offshore specialist owns a 65 percent operating stake in the AGC Profond Block offshore Senegal. In August, the company moved into

Guinea-Bissau with the acquisition of a 55 percent stake of Svenska’s share in the Sinapa (Block 2) and Esperança (Blocks 4A/5A) concessions. Svenska will drill exploration wells scheduled for early 2020 but CNOOC could assume operatorship after that. In Congo, Southernpec, a subsidiary of Sinopec, is operating the $4 billion Banga Kayo field, which is expected to come on-stream early 2020, with peak production forecast at 50,000 bpd by 2023, according to Global Data.

JESS

YU

On average, China consumes around 42 % of crude exports by value across the sub-Saharan Africa region. South Sudan and Congo Brazzaville are most dependent on China, while Angola exports the largest volume of crude to China. Chinese NOCs are forecasted to invest $15 billion in African oil & gas by 2023.

China is a critical export market and important upstream investor

China’s Africa Oil Spend

China Share of Crude Exports (by value US$, 2017)

South Sudan

Congo Brazzaville

Angola

Ghana

Gabon

Sudan

Congo (DRC)

South Africa

EQ Guinea

Chad

Cameroon

Ivory Coast

Nigeria

95%

82%

67%

51%

47%

42%

42%

34%

29%

25%

17%

10%

1%

National companies to invest over $15 billion in five years

$4Bn

$3Bn

$2Bn

$1Bn

$0Bn

Source: Observatory of Economic Complexity

CNPC

Sinopec

CNOOC

Source: Global Data

Africa’s role in Chineseenergy imports

Africa

Europe

South America

North America

Asia

China Crude Imports by Value (2017)

21%17%11%3%48%

Africa

Australia

Malaysia

Papa New Guinea

Indonesia

Other

Chinese LNG Imports by volume (2018)

7%58%15%6%11%4%

Africa supplies around 21% and 6% of Chinese crude and LNG imports respectively. Imports of African LNG increased by 223% in 2018.

Source: Observatory of Economic Complexity

Source: International Gas Union

20202019 2021 2022 2023

In late September, the U.S. introduced sanctions on Chinese shipowners who were transporting Iranian oil. The move caused a sharp rise in the price of super tanker chartering rates as traders tried to find alternatives to Chinese vessels. The price of shipping west African crude to China increased from around $2.50/bbl to $10, according to Bloomberg. These extra costs are squeezing profits and could have a medium-term impact on demand from Chinese refineries. Unravelling the sanctions could become part of wider trade negotiations.

U.S. Sanctions on Chinese Shipowners

Chinese NOCs are behind the development of two new pipelines that will enable Niger and Ethiopia to become exporters of crude oil and natural gas respectively. These projects will lay a combined 2,500 km of pipeline to provide export routes via Benin (for Niger) and Djibouti (for Ethiopia).

New pipelines for new exporters

In September, Chinese officials announced that the country has around 80 days of oil in storage, close to the IEA-recommended level of 90 days. Analysts estimate that China has been adding around 630,000 bpd to its reserve since July 2017*. Depending on how much further officials decide to go and at what speed, this could have negative implications for future demand.

Strategic Petroleum Reserve

Outlook 2020

* Reuters (Tom Daly) – September 20th 2019

China in AfricaState of Play

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PRODUCTIONOUTLOOK2019 - 2025

Africa Energy Outlook | 24

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26 | African Energy Chamberwww.energychamber.org

Production Outlook | 27

NIGERIANigerian energy production is forecasted to grow by 4.71 percent between 2019 and 2025. That period includes a fall of nearly 6 percent between 2019 and 2021, from 3.09 million boe/d to 2.90 million boe/d, before recovering to 3.23 million boe/d in 2025. Total’s Egina deepwater field came on stream at the beginning of 2019 and has boosted crude production by nearly 10 percent (just over 200,000 bpd). The development of the offshore Anyala (OML 83) and Madu (OML 85) fields has been slower than expected – they will come on-stream in 2020. At their peak, the fields are expected to yield 50,000 bpd and 120 million standard cubic feet per day respectively. FID for the Bonga South West project is expected by 2022, with production starting in 2024. The field could add 225,000 bpd at peak flow.

There is growing momentum in Nigerian gas but delays in the FID on the Train 7 liquefaction facility is holding up other projects which could provide feedstock to the facility, for example Shell’s offshore OML-77. However, following FID in December 2018, Shell’s onshore Assa North Gas Project could add up to 600 million scf/d once fully developed, with the capacity to expand to 1.2 billion scf/d (around 200,000 boe/d).

ANGOLACurrent forecasts estimate that Angola’s oil and gas output will fall by nearly 6 percent between 2019 and 2025. The low oil price, combined with Angola’s high cost environment and challenging business environment, led to a steep decline in upstream investment in recent years, with production falling by more than 300,000 bpd. However, President Lourenço’s new administration is implementing an ambitious reform agenda which is rekindling interest. BP is expected to start drilling wells in its deepwater Platina field (Block 18) by mid-2020 with first oil expected in 2021/2022. The government plans to award 50 blocks over the next five years.

SENEGALSenegal could establish itself as an important rival to west African markets like Ghana, Equatorial Guinea and the Ivory Coast. Total energy production is forecast to reach 181,000 boe/d by 2025. Offshore LNG will underpin this growth. BP’s ultra-deepwater Greater Tortue Ahmeyim development (which straddles Senegal and Mauritania) is expected to produce first gas by 2022, with at least 15 trillion cubic feet of gas resource. Cairn Energy and partners will also be aiming to get the SNE Deepwater Oil Field onstream by 2022; initial production is forecast at 100,000 bpd15. The project is currently awaiting FID.

West Africa

Total’s deepwater Egina field adds

200,000 bpd in 2019

West Africa Total Oil & Gas Production Outllook (boe/d)

15. Woodside Energy | Oil Review Africa – February 2019

Outlook

WEST AFRICAN PRODUCERS, SPECIFICALLY NIGERIA AND ANGOLA, WILL DOMINATE THE SUB-SAHARAN AFRICAN [SSA] ENERGY LANDSCAPE OVER THE NEXT FIVE YEARS.

However, these two countries’ share of total SSA daily production will fall from 73.9 percent in 2019 to 58 percent in 2025. That represents more than a one-fifth loss of market share.

Mozambique’s growth is the key driving force behind this shift. The south-eastern African nation is one of the least economically developed on the continent. However, it also holds nearly 3 trillion cubic feet of gas reserves – the third largest on the continent, behind only Nigeria and Algeria. Over the next five years, IOCs, including Eni and Total, will be working to bring more than 30 million metric tons of annual gas production online, catapulting Mozambique into a significant global LNG supplier.

Nigeria is still the pre-eminent SSA oil and gas market, both in terms of production and

proven reserves. Converting this potential into increased capacity, however, will require a more stable policy environment and the development of key infrastructure projects, including the Dangote Refinery and Train 7 LNG plant. Current forecasts suggest a 4.71 percent growth in oil and gas daily production between 2019 and 2025.

Senegal and Mauritania (gas) and Kenya (oil) are small but noteworthy growth markets that should see commercial levels of production come online in the next few years. Ghana and South Africa will also see increased levels of exploration activity.

Nigeria and Angola’s share of total SSA daily production will fall from 73.9% in 2019 to 58% in 2025.

Sub-Saharan Africa Total Oil & Gas Production Outllook 2019-2015 (thousand boe/d)

20252019

Nigeria

Angola

Congo Republic

Ghana

Equatoria

l Guinea

Chad

Cameroon

Cote d'Iv

oireNiger

Other

South Sudan

Mozambique

20252019

3,091

3,237

1,600

1,506

383

238

256

318

253

196

154

148

117

161

87

49

50

81

47

1,066

217

246

85

901

Source: Global Data

2019

2020

2021

2022

2023

2024

2025

Angola

Cameroon

Equatorial Guinea

Ghana

Nigeria

Senegal

Other

0

1M

2M

3M

4M

6M

5M

Source: Global Data

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African Energy Outlook - Production Outlook | 29

REPUBLIC OF CONGO (BRAZZAVILLE)The Republic of the Congo is the third largest oil producer in SSA. Claiming a production of over 380,000 bopd in October 2019, the Government is expecting to raise output to 400,000 bpd in the near future. And, there is an optimistic mood in the country as investments from China and Russia flow in. The $4.3 billion Banga Kayo project is under construction – led by Wing Wah Petrochemical – and is expected to yield 50,000 bpd by 2023. Looking offshore, the Marine XII licence has significant medium-term upside. In September 2019, Russian energy company Lukoil completed a $800 million farm-in to the Eni-operated asset which holds 3.5 billion boe in subsalt reservoirs. The licence currently has two producing fields (Nene and Litchendjili) which yield 28,000 barrels of oil and gas condensate per day. With further development, these assets could yield over 140,000 boe/d according to Eni. Maixent Raoul Ominga, head of the SNPC, expects to see a new cycle of exploration drilling in 2020, following the award of offshore PSCs to Total, Kosmos Energy and Perenco. As a relatively small producer, it is unlikely that Congo will be asked to contribute to any future OPEC production cuts.

16. World Oil – July 2019

East & Central Africa East & Central Africa Total Oil & Gas Production Outllook (boe/d)

KENYAKenya is currently producing around 2,000 bpd from the South Lokichar basin under its Early Oil Pilot Scheme, led by Tullow Oil. In August, the country achieved an important landmark in exporting its first consignment of crude oil (around 200,000 barrels) to ChemChina. FID on the Turkana development is expected in the second half of 2020, with commercial production scheduled to begin in 2023, once a $1 billion pipeline to the Port of Lamu is completed. Current forecasts suggest that production will reach around 90,000 bpd by 2025. Successful engagement between IOCs and local communities will be essential to ensuring that Kenya is able to maintain this timeline.

UGANDAUganda is facing a challenging road to reach first oil by 2022 due to disagreements between project partners. In August, a proposed $900 million farmout by Tullow Oil to Total and CNOOC in the stalled Lake Albert development broke-down due to a tax dispute with the government. Total subsequently announced that it was stopping technical work on the field and pipeline. In a September statement to the Financial Times, the company said it was waiting for a “clear and stable legal framework and clarity on the project shareholders”16. However, Ugandan officials are keen to maintain progress and reach FID in Q4-19. A lack of regional cooperation combined with President Museveni’s disputes with IOCs, particularly over domestic refineries, have also slowed the development of Lake Albert.

GHANAThere is a positive outlook for Ghana’s energy sector with forecasted growth of nearly 25 percent by 2025, to 317,000 boe/d. In February, Norwegian independent firm Aker Energy confirmed a significant offshore resource in the Deepwater Tano Cape Three Points block, with potential recoverable reserves of nearly one billion barrels, according to the country’s Ministry of Finance. Aker Energy submitted a $4 billion development plan for

IAN SIMMONDS

the Pecan Field in March 2019. The firm is currently evaluating options for the FPSO ahead of an FID. First oil is expected 35 months after FID. Tullow Oil has experienced technical challenges in completing production wells in the Enyenra field, leading to a 10 percent decline in its forecast for 2019 daily production (from around 100,000 bpd to 90,000). However, CEO Paul McDade insists that the 2020 outlook will be more positive, with several new wells planned.

2019

2020

2021

2022

2023

2024

2025

Congo Republic

Ethiopia

Kenya

South Sudan

Tanzania

Uganda

0

0.2M

0.4M

0.6M

0.8M

1.2M

1.0M

Source: Global Data

Nene and Litchendjili fields (Marine XII) could yield over

140,000 boe/d at peak production (Eni)

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African Energy Outlook - Production Outlook | 31

LIFE

OF

PIX

SOUTH AFRICATotal’s Brulpadda gas discovery in February has sparked interest in South Africa’s upstream sector. Early reports claimed that there could be up to 1 billion barrels of oil equivalent in the play, though IHS analysts subsequently suggested that the figure could be closer to 200 to 250 million boe. This would still represent an unprecedented discovery for South Africa, according to Nial Kramer, CEO of the South African Oil & Gas Alliance19. However, analyst Heidi Vella points out that development costs are likely to be high, due to Brulpadda’s location in extreme water depths amidst strong currents that could make using an FPSO unfeasible20. Africa Energy, one of the project partners, says that the minimum commercial field size would be 350 million barrels (priced at $60 per barrel). There are plans to drill up to four more wells before the end of the year.

MOZAMBIQUEMozambique is poised to realise the potential of its estimated 3 trillion cubic meters of natural gas reserves17. In June, then operator, Anadarko Petroleum Corp and its partners reached FID on the onshore Area 1 LNG project, which has a production capacity of 12.88 million tons per annum (mtpa). While FID is expected on the 15.2 million mt/year Eni-Exxon Rovuma LNG project in early 2020, Eni’s Coral South FLNG project is expected to come on stream by 2022, with production capacity of 3.4 mtpa. At full capacity, these three projects alone would represent 81 percent of total African LNG exports in 201818.

17. S&P Global Platts – 18 June 201918. S&P Global Platts – 18 June 201919. Bloomberg – February 201920. Offshore Technology – May 2019

Southern Africa

IAN

SIM

MO

ND

S

2019

2020

2021

2022

2023

2024

2025

South Africa

Mozambique

Madagascar

0

0.2M

0.4M

0.6M

0.8M

1.0M

Southern Africa Total Oil & Gas Production Outlook (boe/d)

Source: Global Data

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African Energy Outlook - Production Outlook | 33

African LNGState of Play Facilities

LIQUEFACTION

Angola

Angola LNG (Soyo)Capacity: 5.2 mtpa2018 Utili sation: 80%

Cameroon

Hilli Episeyo FLNGCapacity: 2.4 mtpa2018 Utilisation: 43%

Congo Brazzaville

Congo FLNG Capacity: 1 mtpa

Djibouti

Damerjog LNGCapacity: 3 mtpaCost: $4bnStart: 2021

EQ Guinea

EQ Guinea LNG (Bioko Island)Capacity: 3.7 mtpa2018 Utilisation: 96%

REGASIFICATION

Benin

FSRUCapacity: 0.5 mtpaStart: 2021

EQ Guinea

Akonikien Terminal

Ghana

Tema FSRUCapacity: 2 mtpaCost: $0.35bnStart: 2020

Ivory Coast

FSRUCapacity: 3 mtpaStart: 2021

Namibia

Walvis Bay FSRU

South Africa

Richards Bay FSRUCapacity: 1 mtpaStart: 2024

Status: Proposed Projects Under construction Operational

Mozambique LNG Offtakers OFFTAKERS SALES* PERIOD

Tokyo Gas & Centrica

2.60 Until early 2040s

Shell 2.00 13 years

CNOOC 1.50 13 years

EDF 1.20 15 years

Tohoku 0.28 15 years

Bahrat 1.00 15 years

Pertamina 1.00 20 years

JERA & CPC 1.60 17 years

Total Volume 11.18*(million mt/year)Source: “S&P Global Platts”

Regional Share Global LNG Exports (2018)

Key SSA LNG Export Markets 2018 by MT

India

5.98France

2.76Poland

1.82Turkey

1.70

Kuwait 1.03

Pakistan

1.21

Spain

3.17 China

2.52Portugal

1.82+223% YoY

+17% YoY

+63% YoY

IGU

Wor

ld L

NG

Rep

ort (

2018

/201

9)

IGU World LNG Report 2019

U.S. OtherNorthAfrica

MiddleEast

AsiaPacific

SSA

4% 29% 38% 7% 13% 9.1%

20.5 mt

4.1 mt

Nigeria

Angola

3.5 mt

0.6 mt

Eq. Guinea

Cameroon

Mauritania/ Senegal

Tortue Ahmeyim FLNGCapacity: 2.5 mtpaCost: $1.3bnStart: 2022

Mozambique

Mozambique LNGCapacity: 12.9 mtpaCost: $20bnStart: 2024

Coral South FLNGCapacity: 3.4 mtpaCost: $9.9bnStart: 2022

Rovuma LNGCapacity: 15.2 mtpaCost: $30bnStart: 2025

Nigeria

Bonny Island LNG FacilityCapacity: 22 mtpa2018 Utilisation: 94%

Bonny Island Train 7Capacity: 8 mtpaCost: $7bnStart: 2024

Tanzania

Tanzania LNGCapacity: 10 mtpaCost: $30bnStart: 2028

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FLNG operations have proved popular in Africa for early monetisation of large resource. For example, in Senegal/Mauritania, BP and Kosmos sanctioned the Tortue FLNG project (in December 2018) less than four years after the 15 tcf discovery. Phase 1 of the development involved a 2.5 mtpa facility. There are plans to green light a further two vessels in 2020 at a total cost of $10 billion. This would increase output capacity to 10 mtpa.

In frontier markets, operators are using FLNG to exploit smaller plays that do not justify investment in an onshore plant. Cameroon is a prime example and this trend is set to continue in 2020. In Ethiopia, a Chinese-sponsored 3 mtpa near-shore FLNG project is expected to commence in 2020. While the 2 mtpa Fortuna FLNG project in Equatorial Guinea – which was FID-ready before Ophir Energy failed to secure financing – could be sanctioned in 2020. Similar floating solutions are being mooted for projects in Gabon, the Republic of Congo and Nigeria, to develop smaller stranded gas fields instead.

Looking out to the long-term, Tanzania is one to watch. The

country has tremendous resource potential with some 50 tcf of gas discovered the coutry’s offshore by majors including Exxon, Shell and Equinor but political mismanagement has slowed the development of these projects.

In Mozambique, both the Rovuma (Exxon) and Afungi (Total) projects have the capacity to double annual production from the huge resources available, adding a further 30 mtpa of supply. Mauritania has the potential to develop its own 10 mtpa FLNG project at the Birallah Hub. While in Senegal, the Yakaar and Teranga discoveries could be developed through a 10 mtpa onshore plant. Nigeria has strong growth potential but the Brass (10 mtpa) and Olokola (10 mtpa) LNG projects do not look likely to progress.

There are also opportunities in the mid and downstream sectors. Plans for a Nigeria-to-Morocco gas pipeline would increase interconnectivity between west and north Africa. However, the political and financing challenges of such a project could be prohibitive. The existing West Africa Gas Pipeline (Nigeria-Benin-Togo-Ghana) has been plagued by supply and

payment problems. As a result, some countries

in Africa without substantial gas resources are turning to LNG imports. Ghana, for example, will install a new floating regasification unit in 2020 . Other countries such as Ivory Coast, Morocco and South Africa have also looked at installing such units. In the power sector, there is also great potential to substitute gas for burning fuel oils – Nigeria, for example, spends an estimated $30 billion on diesel-generated power.

FLNG DEPLOYMENTIN AFRICA

• Rapid monetisation of large resources (e.g. Senegal/Mauritania)

• Exploiting smaller gas plays in markets without existing liquefaction plants (e.g. Cameroon)

The Rise of African Gas

investment, two-thirds of which will go to Mozambique.

In part, that investment has been made possible due to the availability of competitive project financing. There was a dearth of new major SSA projects after Angola LNG in 2007. Since 2018, however, a significant number have been pushed forward. The oil supermajors are big believers in African LNG, with Exxon, Shell and Total as the key equity sponsors of the largest projects. Despite higher costs, these firms are committing capital to Africa at a time when there are huge opportunities in the United States. African projects, especially on the east coast, have the advantage of proximity to key Asian LNG import markets.

In December 2017, the Coral FLNG Project was Africa’s largest ever project financing (at $5 billion). Since then, Anadarko (whose stake is being acquired by Total) sanctioned the $15 billion Afungi mega project in mid-2019. And Exxon is due to sanction an even bigger LNG plant by year end. These projects will see Mozambique’s LNG export capacity reach 30 mtpa by 2025, with total investment upward of $50 billion.

Mozambique’s LNG export capacity will reach 30 mtpa by 2025, with $50 billion of investment

In Focus: African Gas

African LNG Supply Growth (mtpa)

Source: AKap Energy

Angola

2018Supply

2025Capacity

Cameroon

Equatorial Guinea

Nigeria

Mozambique

Mauritania/Senegal

4

1

4

5

2

6

29

32

10

20

-

-

Sub-Saharan Africa (SSA) has plentiful gas resources. Over the last decade, huge discoveries in Mozambique, Tanzania, Senegal and Mauritania have delivered a combined total of around 200 trillion cubic feet of recoverable gas. That Is enough to provide two thirds of current global supply for around twenty years. On top of this, Nigeria alone has 200 tcf of proven reserves.

Currently, SSA has the capacity to produce 34 million tonnes of LNG per annum. In 2018, throughput was at 28 million tonnes (or an 83 percent utilisation rate), which was around 10 percent of global supply. By 2025, Akap Energy expect capacity to increase by 150 percent, to 84 mtpa, with global market share rising to 15–20 percent, depending on demand growth. Assuming the utilisation rate can increase to 90 percent, achieving this extra market share will require regional production of 10 billion cubic feet per day. That will require $75 billion worth of

Ghana will install a floating regasification unit in 2020 to increase LNG imports

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INFRASTRUCTUREOUTLOOK2019 - 2025

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LOKICHAR-LAMU PIPELINE, KENYA Kenya exported its first consignment of crude oil in August. A fleet of trucks delivered 200,000 barrels of Lokichar light sweet crude to Mombasa Port as part of an Early Oil Pilot Scheme before commercial production can begin in 2023/24. British firm Tullow Oil expects an FID on the project in the second half of 2020, eight years after oil was first discovered in the Turkana region of Kenya.

The $1 billion, 820km Lokichar-Lamu Crude Oil Pipeline is essential for enabling commercial production. According to Tullow’s 2019 half year

report, they still need to secure funding and acquire land rights on the pipeline route. That could be challenging. Analysts point out that disputes between the oil company, government and local communities have repeatedly disrupted the project. They argue that establishing adequate mechanisms to address community concerns is essential to avoid stoppages, leading to expensive downtime and project delay. The current projection for completion of the pipeline is set for 2022.

South Sudan could benefit from a new east African pipeline, as it seeks

INCREASED INFRASTRUCTURE CAPACITY IS ESSENTIAL TO AFRICA’S LONG-TERM INDUSTRIAL DEVELOPMENT.

At a time when the low oil price is squeezing treasury revenues, private capital is developing key oil and gas infrastructure projects which could have a significant impact on the African energy and power landscape over the next decade.

Key Projects

• Completion projected for Q4-20. Could be late 2021

• Nameplate capacity of 650,000 bpd enough to supply domestic fuel demand

• More investment opportunities in existing refineries

DANGOTE REFINERY – NIGERIA At a projected cost of $12 billion, the Dangote Refinery is a hugely challenging construction project to undertake in any country. Nigeria’s patchy infrastructure has made this challenge even greater. The project was initially slated for completion in 2019. In August, however, this was pushed back to Q4-20. Some industry figures see late-2021 or early 2022 as a more likely scenario. They cite a variety of technical and logistical challenges, including unpredictable weather, according to Reuters21. Dangote Group officials rejected this analysis.

On a more positive note, the refinery’s tank farms are set for completion in Q4-19 and they may be used as a depot before the refinery’s production starts. This would provide an immediate increase to fuel storage capacity.

Nigeria aims to triple its refining capacity to 1.5 million bpd by 2025 in order to reduce its dependence on fuel imports. At full capacity the Dangote Refinery will process 650,000 bpd. Mele Kyari, Group MD of the NNPC, has said that he wants the NOC to be supplier of “first resort” to the Dangote Refinery22. However, it will be difficult for the government to achieve this while it maintains a price cap policy which mandates retailers to sell fuel at around 40 U.S. cents per litre.

In February, Mr Dangote made clear that his company would not sell its fuel at that price, according to local reports23. The fuel subsidy is a very sensitive political issue but with President Buhari not seeking re-election in 2023, he could have the political freedom to abandon the costly policy. Some analysts suggest that the NNPC should

also abandon its old refineries and focus on the Dangote refinery, which could comfortably supply domestic demand. That is not Mr Kyari’s view. He wants to revamp the old refineries and engage new operators. There are opportunities for private sector investors to fund this work.

21. Reuters – August 201822. Reuters – 7 August 201923. The Nation – February 2019

MA

RTI

N D

AM

BO

LDT

Mombasa

Lamu

Nairobi

SOUTH LOKICHARDEVELOPMENT AREA

PIPELINE ROUTETO LAMU

KENYA

TANZANIA

UGANDA

SUDAN ETHIOPIA

SOMALIA

• Projected completion for 2022

• $1 billion in CAPEX• 820km in length• Potentially opening up

export route for South Sudan

to avoid relying on neighbouring Sudan to export its product.

East African regional integration has faltered in recent years, with multiple transnational pipeline and railway projects failing to make progress.

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AJAOKUTA-KADUNA-KANO GAS PIPELINE, NIGERIANigeria is pursuing a long-term strategy to reduce gas flaring and increase domestic power generation capacity. The Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline is a project which helps to further both these aims by creating the infrastructure to supply gas to industrial hubs in the north and south of the country, thereby reducing the need for gas flaring, which is environmentally damaging. Nigeria generates around 3,000 megawatts (MW) of power per month from gas-fired power plants, which is approximately 77 percent of total generation,

according to NNPC data. The pipeline will run for 614

kilometres featuring a diameter of 40 inches with the capacity to transport 3.5 billion standard cubic feet of gas per day. Dehydrated wet gas sourced from various sites in the southern region will be fed into the pipeline. The gas will predominantly be used as feedstock for power plants and new petrochemical facilities planned for Abuja, Kaduna, Kano, and Katsina. However, there will be some further processing of hydrocarbon liquids at Ajaokuta to produce liquefied

petroleum gas. NNPC announced the project

in 2013. Proposals were submitted and approved in 2017 with a total estimated cost is $2.8 billion. The pipeline is being funded through a public-private partnership, in which the contractor assumes 100 percent of the funding cost, but the government leases the asset back under a long-term agreement. There is widespread reporting that CNPC is providing most of the funding for the project. In April 2019, then-MD of NNPC Maikanti Baru announced that the project would be completed by 2022.

PHASE

Phase 1

Phase 2

Phase 3

DESCRIPTION

200km pipeline between Ajaokuta and Abuja Terminal Gas Station (TGS)

193km pipeline between Abuja and Kaduna

221km pipeline between the Kaduna TGS and Kano TGS.

COST

$855m

$835m

$1.2bn

CONTRACTOR

OilServe/Oando Consortium

-

Brentex/China Petroleum Pipeline Bureau Consortium

Fuel Prices for Ghana’s Thermal Plants (2018, per mmBTU)*

Ghana to diversify gas imports away from Nigeria, which has consistently failed to provide the agreed level of supply since the West African Gas Pipeline started operating in November 2011. The emergence of offshore storage and regasification technology is enabling smaller, lower-risk, rapid LNG solutions that could be replicated elsewhere in the region in countries without substantial gas reserves.

TEMA LNG PROJECT

• Add 250 mmscf/d to Ghana’s gas supply – 25 percent of power generation capacity

• Cheaper option to diesel • Reducing reliance on

Nigerian gas

TEMA LNG TERMINAL, GHANA Ghana is set to become sub-Saharan Africa’s first LNG importer in 2020 as the Tema LNG terminal project reaches completion.

Ghana National Petroleum Corporation has secured a 12-year contract with Rosneft to supply 1.7 mtpa of LNG (or 250 mmscf/d). Tema LNG Terminal Company – which is controlled by London-based Helios Investment Partners (HIP) – has engaged China Harbour Engineering Company and Jiangnan Shipyard to construct an offshore regassification terminal at a reported cost of $350 million.

According to HIP, the facility will combine a purpose-built Floating Regasification Unit twinned with an existing LNG carrier, to receive, store and re-gasify the LNG. German firm TGE Marine Gas Engineering is designing an innovative small scale regassification unit for the project. The terminal will be transferred into government ownership after 12 years.

The Tema LNG project will be able to cover 25 percent of Ghana’s total electricity generation capacity, with gas providing a cheaper alternative to oil. The deal with Rosneft enables

* 2018 FORECASTS FROM ENERGY COMMISSION GHANA (2018), BASED ON AVERAGE WEIGHTED GAS PRICE BY PURC (2018)

Source: Energy Commission Ghana 2018

DieselGas

$14.00

$7.29

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INVESTMENTOUTLOOK2019 - 2025

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Despite major recent FIDs in the gas sector, exploration activity in SSA is heavily dominated by the oil sector. The number of active monthly gas rigs has averaged just two since September 2015. Between January 2013 and September 2014, the average was four. Some of the gas projects starting-up now were discovered during this period - particularly in the Rovuma Basin. Nigeria has averaged fourteen active oil rigs since January 2018. The data suggests that there is a marginal preference for onshore drilling operations, perhaps a reflection of the low-price environment and the importance of smaller operators in mature fields.

Across the region, however, offshore dominates, both in terms of recent drilling operations and the pipeline of major projects. Angola and Congo Brazzaville have both seen significant levels of sustained offshore drilling activity since July 2018. In Angola, this could reflect positive investor sentiment following recent reforms. Ghana also averaged nearly three active rigs throughout the first half of 2019, the highest levels of activity since 2012. In August, two rigs were activated offshore Equatorial Guinea. This exploration activity proved successful, delivering Noble Energy’s Aseng 6P discovery, following offshore drilling at depths of over 4,000 metres.

SSA Avg. Monthly Active Rigs by Type

Source: Global Data

SSA Planned & Announced Projects by Terrain (2019 - 2025)

Projects by Water Depth

22

10

14

Shal

low

Dee

pU

ltraD

eep

Onshore

Offshore 46

24Source: Global Data

Rig Count NORTH DOMINATES, SSA GROWS The average number of monthly active rigs across Africa has increased significantly above the global trend since the beginning of 2018 (41 percent to 15 percent). North Africa dominates the continent, with 54 percent of active rigs at the end

As of August 2019, there are 52 active rigs across SSA. Nigeria and Angola account for 48 percent of that total, a reflection of their dominance in the region. Kenya and Chad are also particularly active markets, with seven active rigs each. Kenya has averaged eight monthly active rigs over the last eighteen months, as Tullow Oil continues to ramp up toward commercial production in the Turkana Lokichar Basin. In Chad, exploration activity has

Avg. Active Monthly Rig Count, Africa (2018–2019)

of Q2-19. However, sub-Saharan Africa is growing more quickly than the North, with 69 percent increase over the 18-month period, compared with a 21 percent in the North. Overall, Africa retains a very small share of the global total rig count (just 3.7 percent at the end of Q2-19).

re-started since August 2018 following a four-year hiatus. There are two projects currently under development in the small country, with committed CAPEX of nearly $4 billion and total production capacity of 73,000 bpd. Gabon saw a spike in the number of active rigs at the beginning of 2019, from four to , by June the number had reduced slightly to 6. Other active rigs are in Cameroon, Equatorial Guinea, Ethiopia, Djibouti, Ghana, Niger and Congo Brazzaville.

Source: Baker Hughes GE Source: Baker Hughes GE

SSA Active Rig Count - August 2019

THE OIL PRICE DOWNTURN SEVERELY IMPACTED UPSTREAM INVESTMENT IN AFRICA.

Exploration spending fell by 71 percent between 2014 and 2017 across the continent. While that downward trend was reversed in 2018, Africa’s investment outlook is not uniform depending on where one looks. Despite upstream investment being on-course for CAGR of 18 percent until 2030 (according to Rystad Energy), resource nationalism, insecurity and uncertain fiscal terms

Outlook

still jeopardize investments in East and West Africa. Meanwhile, world-class discoveries in Senegal, Mauritania, South Africa or Ghana are generating interest in new African frontiers, onshore and in deep water. Nigeria and Angola have a pipeline of nearly $100 billion worth of projects which could be delivered over the next decade. This section looks at key trends in upstream developments across sub-Saharan Africa, including profiles and analysis of influential markets and projects, and identifying opportunities in the service sector.

Source: Baker Hughes GE

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

East & Central

North

Southern

West

Q1-

18

1214

1923 23 22

55

56

59

60 61

67

1

1

119

23

2523

32

32

12

1516

14

17

21

19

22

2730

31

31

24

3131

37

47 46

12 2 2

1 1

Q2-

18

Q3-

18

Q4-

18

Q1-

19

Q2-

19

Offshore

Onshore

Oil Rigs

Q1-

18

Gas Rigs

Nigeria Chad Kenya Gabon Angola Other

15 7 7 6 4 13

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Planned Projects

COUNTRY

Nigeria

Congo Republic

Chad

Madagascar

Nigeria

Chad

Nigeria

Nigeria

Nigeria

PROJECT

Anyala-Madu

Banga Kayo

Daniela Complex

Tsimiroro

Ororo

Oryx

Ubima

Gbetiokun

Omerelu

TERRAIN

Offshore

Onshore

Onshore

Onshore

Offshore

Onshore

Onshore

Onshore

Onshore

OPERATOR

First Exploration & Petroleum Development Co.

China Congo Wing Wah Petrochemical

CNPC

Madagascar Oil Ltd.

Sirius Petroleum Plc

OPIC Africa Corp.

Wester Ord Oil & Gas

NNPC

Niger Delta Petroleum Resources

START

2020

2019

2019

2019

2019

2019

2019

2019

2019

CAPEX

$4,418

$4,377

$3,081

$2,769

$756

$608

$541

$366

$103

PEAK FLOW (BPD)

49,843

50,370

62,464

32,518

8,689

10,800

3,498

35,527

2,672

CURRENT STATUS

Feb 2019: First E&P signed a $900 million 15-year agreement with Yinson Holdings for bareboat charter and operational maintenance ($165,000-day). FPSO due to be operational in Q4-2019

Peak flow expected in 2023

Peak flow expected in 2023

Nov 2019: Madagascar Oil signs sales agreement with SOEs to truck crude from Q2-20

Aug 2019: Sirius Petroleum awaiting confirmation of extension to its licence on the field in order to continue development

Jan 2019: Chinese HBP Group expected to complete commissioning by January 15 2020

Sept 2019: Extended well tests expected in H2-19. Successful drilling in H1-19 increased 1P reserves to 6.2 million barrels

Sept 2019: Output from three wells expected to increase to 16-17,000bpd in Q4 2019

Peak flow expected in 2020

Source: Global Data

Source: Global Data

Crude and Condensate Production from Major Planned Projects by Key Companies, 2019–2025 (bpd)

Investment Outlook: Oil

As of the end of H1-19, there were 46 oil projects under development across SSA. Nine of these are planned (i.e. reached FID), the rest (37) have been announced, with varying prospects for reaching FID in the near term. Nigeria accounts for half of all these projects, with Angola being the second most active market, followed by Chad.

A combined total of $17 billion worth of CAPEX has been committed to the planned projects. The largest of these is the Anyala-Madu fields offshore Nigeria, at a cost of $4.41 billion and due to come on stream in 2020. In the Republic of Congo, the Banga Kayo project is of a similar scale ($4.37 billion), with funding from Chinese investors.

Source: Global Data

Source: Global Data

Key Planned & Announced Oil Projects SSA (2019-2025)

Crude and Condensate Production from Major Planned Projects by Key Countries in SSA, 2019 –2025 (bpd)

At their combined peak flow, these projects will add 256,000 bpd in extra crude production capacity across SSA. All nine projects are expected to commence operations in 2019/20; by 2023, 68 percent of forecasted extra production capacity will be at peak flow.

Nigeria

Announced (pre-FID)

Planned (post-FID)

Angola Cameroon Chad Rest ofCountries

5

17 7 102 1

2-- 2

0

50,000

100,000

150,000

200,000

250,000

300,000

2018 2019 2020 2021 2022 2023 20252024

Nigeria Chad Congo Republic Madagascar Mozambique Rest of Countries

0

50,000

100,000

150,000

200,000

250,000

2019 2020 2021 2022 2023 2024 2025

Rest of companies

StarCrest Nigeria Energy

Societe Des Hydrocarbures Du Tchad SA

Shell

Eland Oil & Gas

SPDCP

FEPDCL

SPGCL

CNPC

NNPC

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1. Angola$37.9 billion404,000 bpd

CameiaTerrain: OffshoreCAPEX: $6.2bnStart: 2025Peak Flow (bpd): 76,984

LucapaTerrain: OffshoreOperator: CabindaCAPEX: $5.8bnStart: 2023Peak Flow (bpd): 79,224

OrcaTerrain: OffshoreCAPEX: $8.1bnStart: 2023Peak Flow (bpd): 76,035

PAJ ComplexTerrain: OffshoreOperator: BP CAPEX: $12.2bnStart: 2022Peak Flow (bpd): 97,999

PCC ComplexTerrain: OffshoreOperator: BP CAPEX: $5.6bnStart: 2022Peak Flow (bpd): 74,205

PROJECT TO WATCH

BP is demonstrating its commitment to Angola through multiple new agreements with Sonangol. Most notably, in December 2018, the company announced that it was moving ahead with the deep offshore Platina project in Block 18, in which it owns a 50 percent stake. This marks phase 2 of the asset development: phase 1 started in 2007, with the Greater Plutonio FPSO. The Platina project will consist of a subsea tieback to the FPSO. FID was scheduled for the first half of 2019, with first oil planned for late 2021. It now seems likely that these milestones will be delayed until 2020 and 2022 respectively.

2. GhanaPecanTerrain: OffshoreOperator: AkerCAPEX: $4,400Start: 2022Peak Flow (bpd): 123,898

PROJECT TO WATCH

Norwegian firm Aker Energy is reviving Ghana’s upstream sector with the Pecan discovery in Deepwater Tano Cape Three Points (DWT/CTP) block. In March, the firm submitted a $4.4 billion phase 1 development plan for the ultra-deepwater project (around 8,000 ft). The company also recently completed its appraisal drilling programme. The Pecan South well could yield an additional 5-15 million boe. The field has total reserves of approximately 334 million bbl. Africa Finance Corporation provided $100 million of financing to Aker in July through convertible bond notes, with an intention to participate in follow-on fundraising activities.

24. Total – Company Presentation 25. Rystad Energy / Global Data

3. SenegalSNETerrain: OffshoreOperator: WoodsideCAPEX: $7bnStart: 2022Peak Flow (bpd): 87,034

PROJECT TO WATCH

The deepwater SNE field was discovered in 2014 by UK independent Cairn but is now operated by Woodside Energy. In January 2019, Senegalese authorities approved a multiphase technical development and exploitation plan. Phase 1 will see the drilling of 23 production, gas and water injection wells and recover up to 230 million bbl using a FPSO facility (contracts for which have been awarded to Subsea Integration Alliance and MODEC International Inc). The partners, which also include FAR Ltd. (15 percent) and Petrosen (10 percent), are completing financing in 2019 before reaching FID in late-2019/early-2020, with first oil expected in 2022.

Announced Oil Projects

$96.9 billion in CAPEX

1.3 million bpd

1

24

3

Break-even Oil Price (US$/bbl)Planned & Announced Projects by Country

Nigeria

Angola

Uganda

Ghana

Kenya

Rest of countries

SSA Average

$54

$59

$38

$57

$34

$31

$38

Source: Global Data

4. Nigeria$54.6 billion837,000 bpd

Bonga South West/AparoTerrain: OffshoreOperator: ShellCAPEX: $9.7bnStart: 2024Peak Flow (bpd): 143,274

PROJECT TO WATCH

Bonga Southwest/Aparo (BSWA) has the potential to boost Nigeria’s daily production by nearly 10 percent. It would be the largest major deepwater project since Egina, which started in 2013 and came on stream in 2019. In February, Shell invited technical bids for phase 1 of the project. The development will include a new FPSO vessel and 20 deep-water wells, with a production capacity of 150,000 bpd. However, the $10 billion project has encountered difficulties. The tendering process has been delayed twice already. While Shell and its partners are still in on-going negotiations with the government over the PSC. FID is therefore unlikely before the second half of 2020.

BosiTerrain: OffshoreOperator: ExxonCAPEX: $6.2bnStart: 2022Peak Flow (bpd): 126,784

NsikoTerrain: OffshoreOperator: Star Ultra Deep PetroleumCAPEX: $8.2bnStart: 2023Peak Flow (bpd): 95,685

Owowo WestTerrain: OffshoreOperator: EssoCAPEX: $8.2bnStart: 2024Peak Flow (bpd): 138,301

PROJECT TO WATCH

Owowo West is an offshore field operated by Exxon and situated next to the Usan field FPSO, which produces around 180,000 bpd. Owowo West was discovered in 2004 and holds around one billion barrels of oil equivalent, according to Exxon. A field development plan is progressing. Analysts expect the asset to be developed as a subsea tie-back to the Usan FPSO – project partners say they want to leverage existing facilities to exploit the resource24. FID is expected by 2020 with first oil produced by 2024. Break-even oil price is estimated between $45–5625.

Uge-OrsoTerrain: OffshoreOperator: EssoCAPEX: $6.1bnStart: 2023Peak Flow (bpd): 99,532

Zabazaba Terrain: OffshoreOperator: EssoCAPEX: $9.2bnStart: 2023Peak Flow (bpd): 146,739

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Gas Production from Major Planned Projects by Key Companies (mmcf/d), 2019–2025

Planned Gas Projects

COUNTRY

Mozambique

Senegal

Mauritania

Nigeria

Nigeria

Nigeria

Mozambique

Tanzania

Mozambique

PROJECT

Coral South

Tortue

Tortue

Ohaji South

Assa North

Southern Sawmp fields

Inhassoro-Temane East Complex

Ntorya

Golfinho-Atum Complex (Area 1)

TERRAIN

Offshore

Offshore

Offshore

Onshore

Onshore

Onshore

Onshore

Onshore

Onshore

OPERATOR

Eni

BP

BP

Seplat Petroleum

Shell

Shell

Sasol

Ndovu Resources

Total

START

2022

2022

2022

2020

2020

2019

2020

2021

2024

CAPEX ($ US, MIL)

9,937

2,540

2,676

2,431

1,825

1,027

766

485

22,284

PEAK PRODUCTION

(MMCF/D)

450

400

400

300

226

243

116

93

1,423

CURRENT STATUS

Sep-19: Projected expected to reach 60% completion by end of 2019. Smit Lamnalco wins $200m contract to provide marine services

Sep-19: Contracts awarded for EPCIC of FPSO, SURF and SPS. Project partners add a ‘world class resource’ discovery at nearby Yakaar-2 (Senegal)

Apr-19: Project partners raising $700m to fund part of the $2.4bn project

Apr-19: Project under construction (linked to Forcados Yokri Integrated Project)

Peak flow expected in 2021

Sep-19: Majority stakeholder Aminex (75%) completing a $40 million farm out with Ara Petroleum. Preparing to drill Ntorya-3 (Chikumbi-1)

Sep-19: Total completes $3.9bn takeover of Anadarko

Investment Outlook: Gas

The investment outlook for gas is very positive. There are currently 24 projects under-development across sub-Saharan Africa, ten of which have achieved final investment decision. Moreover, IOCs have committed $44 billion in capital expenditure to the region. Mozambique accounts for nearly 80 percent of that investment, as the country’s gas sector finally kicks into production gear after years of

delay. Nigeria will see more modest investment of around $1.7 billion but there are multiple projects worth nearly $5 billion (led by Eni/Shell) that could achieve FID in the coming years and expand its production capacity.

Of the 14 announced projects, the Mamba Complex LNG project in the Rovuma Basin in Mozambique is the most significant. Development CAPEX is projected at over $30 billion, with production capacity of

Source: Global Data

Source: Global Data Source: Global Data

Major Planned and Announced Gas Projects by key contries in SSA (2019-2025)

Total Gas Production from Major Planned Projects by Key Countries in SSA (mmscf/d, 2019 - 2025)

$43.9 bn in CAPEX3,651 mmcf/d

15.2 mtpa; FID is expected in early 2020. Other announced projects cover Tanzania, Congo Brazzaville, South Africa, Cameroon, and Mauritania with a combined CAPEX value of $53 billion.

Nigeria

Announced (pre-FID)

Plannned (post-FID)

Mozambique Cameroon Rest ofCountries

3 3 4

4 1 81

-

0

2,000

4,000

6,000

8,000

10,000

12,000

2018 2019 2020 2021 2022 2023 20252024

Mozambique Nigeria Tanzania Mauritania Senegal Rest of Countries

0

500

1,000

1,500

2,000

2,000

2019 2020 2021 2022 2023 2024 2025

Rest of companies

Sasol Ltd

ENH EP

Exxon Mobil

SPDCP

Eni SpA

Shell

Kosmos Energy

BP

NNPC

Source: Global Data

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26. ESI Africa | August 201927. The facility capacity is a minimum 3.6mtpa of LNG, 1.3mtpa of natural gas condensate, and 0.4mtpa of liquefied petroleum gas, according to Offshore Technology

PROJECT

PLNG

Prelude FLNG

Coral South FLNG

Golar Hilli Episeyo

LEAD

Petronas

Shell

Eni

Golar

STATIONED

Malaysia/Indonesia

Western Australia

Mozambique

Cameroon

ESTIMATED CAPEX

$10 billion

$11.7 billion26

$9.9 billion

$1.2 billion

CAPACITY (MTPA)

1.2

3.627

3.4

2.4

COST PER MTPA

$8,333

$3,250

$2,920

$500

Source: Offshore Technology. Global Data. Author analysis

This is currently the case in Equatorial Guinea, where the administration wants to utilise offshore pipelines to develop Fortuna as part of a regional hub. However, the availability of capital can act as a limiting force on political priorities.

Aside from CAPEX, key considerations for potential FLNG developers include technical implementation risk and long-term LNG prices. By being late adopters of gas monetization strategies and early adopters of unproven technologies, countries like Cameroon and Mauritania find themselves with the unexpected upside of evolving into highly competitive global producers. The table below shows how rapid innovation in SSA is driving down the $/mtpa ratio relative to other regions.

OPTIMISTIC OUTLOOKFLNG is not without its operational and strategic challenges but it has a bright future as the key to unlocking the dollar potential of offshore, stranded gas reserves and monetizing associated natural gas.

Looking out to 2020 and beyond, the successful launch of Golar’s FLNG technology has the potential to raise the upper limit of short-term export growth forecasts in Africa. The project has significantly de-risked the technology while demonstrating a route to market which is realistic for fiscally challenged host governments and mitigates a substantial portion of the cost risk for field developers.

Floating Gas Makes Waves

not to renew the firm’s licence, which led to a $300 million impairment and subsequent takeover .

Golar LNG, on the other hand, was able to secure 80 percent of the construction financing from Fortune Lianjiang Shipping (a subsidiary of China State Shipbuilding Corporation) using a sale and leaseback structure. The arrangement effectively positions Fortune Lianjiang as lessor and Golar as bareboat charterer, with oil firm Perenco and Cameroon’s state-run Societe Nationale des Hydrocarbures (SNH) as final clients. As a bareboat charterer, Golar LNG assumes the operational costs of the vessel, which were $29.1 million in Q4-2018.

Golar’s management has said that tolling receipts from the Cameroon facility will generate $164 million in EBITDA per year, with approximately $45 million in operating cash flow, subject to oil price changes. And that every additional dollar in Brent Crude prices between $60.00 per barrel and the contractual ceiling will yield additional annual operating cash flows of approximately $3 million.

POLITICAL SUPPORTIt must be acknowledged, however, that political will is foundational for these projects to flourish. As a result of the lower CAPEX associated with FLNG, governments seeking the more impactful optics and local content opportunities of onshore LNG might be deterred from FLNG.

In Focus: African Gas

The Hilli Episeyo is the world’s first converted floating liquefied natural gas (FLNG) vessel. Located offshore Cameroon, it was transformed from a 1970s-built tanker at a cost of $1.2 billion. It has four liquefaction units and is operated by Golar LNG, who receive an operator (or tolling) fee based on output.

Hilli Episeyo is a much smaller project – in terms of cost and output – than traditional onshore green- or brownfield LNG facilities, such as the upcoming Mozambique LNG project ($20 billion; 12.9 mtpa) or Nigeria LNG Train 7 ($10 billion; 8 mtpa). The leasing model is also a departure from that of first generation FLNG projects, such as ENI’s Coral Sul, which had an approximate 60:40 debt-to-equity ratio on $8-9 billion in CAPEX. AGILE BUSINESS MODELGolar LNG is planning to push its toll-operator model aggressively in 2020. Through liquefaction tolling agreements (LTA), the company supplies and operates refitted FLNG facilities, rather than developing them as assets to be purchased. This agile business model helps to de-risk the CAPEX element of the FID for project stakeholders. Compare Cameroon’s Hilli Episeyo with the Fortuna FLNG project in Equatorial Guinea. In the latter case, Ophir Energy failed to secure $1.2 billion to build its own offshore vessel. As a result, the government decided

Cross Continent Comparative FLNG Costs

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28. S&P Global Platts – February 2019

Announced Gas Projects

1. MauritaniaBirAllahOperator: BPStart: 2025CAPEX: $18.5bnPeak Flow (mmcf/d): 660

PROJECT TO WATCH

According to BP estimates, the Greater BirAllah discovery offshore Mauritania is thought to hold up to 60 tcf of gas (initially in place). In February, BP’s upstream chief Bernard Looney emphasised the impressive potential of the region to develop into a “major new LNG hub”28. He also pointed out that there was no visible cost inflation in the global LNG sector despite a slew of recent FIDs. Following a 2019 appraisal programme, these are all positive indications that will feed into BP’s long-term strategic planning in 2020. Kosmos Energy is reducing its stake in the adjacent Greater Tortue Anheyim discovery in order to focus on developing BirAllah (and Yakaar-Teranga, offshore Senegal).

2. Congo RepublicNkala MarineOperator: Eni Start: 2022CAPEX: $0.7bnPeak Flow (mmcf/d): 109

3. EthiopiaHilala ComplexOperator: POLY GCL PetroleumStart: 2023CAPEX: $3.6bnPeak Flow (mmcf/d): 398

4. CameroonEtindeOperator: New Age Cameroon Offshore PetroleumStart: 2022CAPEX: $2.7bnPeak Flow (mmcf/d): 231

PROJECT TO WATCH

The Etinde permit includes multiple hydrocarbons, including oil, condensate and gas. In 2018, British operator New Age (37.5% stake) conducted an appraisal drilling programme in the area which delivered 2P resource of 1 tcf of wet gas. Drilling data has been evaluated throughout 2019 to determine the optimal development strategy. Current plans lean toward a liquids-focused development with lower gas production volume, possibly used for domestic power generation and LNG exports. The current $2.7 billion CAPEX projection is also likely to be lower. In September, New Age completed a $800m sale of its stake in the Marine XII permit (Congo Brazzaville), which should generate extra cash to fund its Cameroonian operations.

5. Equatorial Guinea

Alen Gas ProjectOperator: Noble EnergyStart: TBCCAPEX: $0.35bn

PROJECT TO WATCH

In April 2019, EQ Guinea signed the Definitive Agreements for the monetization of gas from its Alen Unit. Under the agreements, Noble Energy, Atlas Oranto Petroleum, Marathon Oil, Glencore and Guvnor, are investing close to $350 million on pooling supply from stranded gas fields in Equatorial Guinea and the Gulf of Guinea and replace declining output from the Alba field. The development of the Alen offshore gas hub is the first step towards Equatorial Guinea’s vision to become a gas mega-hub for the sub-region.

6. MozambiqueMamba ComplexOperator: Mozambique Rovuma VentureStart: 2024CAPEX: $30bnPeak Flow (mmcf/d): 1,000

PROJECT TO WATCH

Exxon and Eni are collaborating on the Mamba LNG project offshore Mozambique. At $30 billion, it is set to be the biggest ever private investment in Africa. FID was expected in late-2019 but this has been pushed into early-2020. Despite the delay, all indications point toward a positive outcome. In October, Exxon awarded the main EPC contract to a consortium made up of U.S. firm Fluor, Japan’s JGC and France’s TechnipFMC. The agreement is reportedly worth $9.2 billion and will include the construction of two trains providing an overall nameplate capacity of 15.2 mtpa. The developers have also committed to spend $520 million on the project. First gas is expected in 2025.

7. NigeriaGbaran Phase 3Operator: ShellStart: 2022CAPEX: $1.5bnPeak Flow (mmcf/d): 249

Samabri-BiseniOperator: EniStart: 2020CAPEX: $1.1bnPeak Flow (mmcf/d): 285

UzuOperator: ShellStart: 2022CAPEX: $1.2bnPeak Flow (mmcf/d): 286

8. South AfricaIbhubesiOperator: Sunbird EnergyStart: 2020CAPEX: $1.9bnPeak Flow (mmcf/d): 82

Sources: Global Data, AEC analysis

2

4

3

1

6

5

7

8

9

Break-even gas price (US$/mcf)Planned & Announced Projects by Country

Mozambique

Tanzania

Nigeria

Mauritania

Senegal

Rest of countries

SSA Average

$3.90

$6.70

$3.00

$9.30

$4.80

$3.10

$4.20

Source: Global Data

9. TanzaniaBlock 1Operator: ShellStart: 2024CAPEX: $13.3bnPeak Flow (mmcf/d): 1,027

Block 4Operator: ShellStart: 2024CAPEX: $9bnPeak Flow (mmcf/d): 513

PROJECT TO WATCH

Royal Dutch Shell owns a 60 percent stake in Blocks 1 and 4, offshore Tanzania. Following its acquisition of Ophir Energy in 2019, MedcoEnergi holds a 20 percent stake in both blocks, along with Pavilion Energy. Several IOCs are locked in ongoing negotiations with the government to agree commercial terms for the development of major projects to proceed. Upwards of $30 billion worth of investment is riding on these negotiations. Talks were meant to be finalised in September but could continue throughout Q4-19. Assuming a positive resolution of these negotiations, FIDs are unlikely before the end of 2020.

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Market Access

Market access is increasingly on the agenda of existing and upcoming African producers of oil and gas, with several cross-country oil and natural gas pipelines in the works to unlock billions of dollars.

In September, the State of Niger signed the Transport Convention on the construction and exploitation of the Niger-Benin Export Pipeline, key to Niger significantly increasing its crude oil production over the next five years to as high as 100,000 bpd. The 1,894 km pipeline will cost $4.5bn and should be exporting first crude oil from Agadem to the Atlantic Coast by 2021. It will be Africa’s longest oil pipeline.

While Niger’s oil export pipeline moves forward, on the other side of the continent the East African Crude Oil Pipeline has stalled, and the delay is holding up Uganda’s ambitious vision to become a significant oil producer by 2022. Several opportunities for developing East Africa’s oil sector remain uncertain due to the lack of export infrastructure. The resolving of such issues will be key to the future of several energy industries, including South Sudan, Kenya, Uganda and Tanzania.

Gas infrastructure is also expanding. While the West African Gas Pipeline has remained plagued by lack of supply and distressed finances, other projects are bringing hopes to see successful

transnational gas pipelines being commissioned in the future and supporting the growth of African-based gas economies. Nigeria and Morocco have intensified talks over their planned 5,660km pipeline that could supply gas to as many as 15 west African countries. In east Africa, Ethiopia and Djibouti have reached an agreement on a gas pipeline that will offer an exit route for Ethiopia’s gas fields and help unlock tremendous value in gas export potential.

The value that such projects bring to the continent is undisputable. For instance, the Chad-Cameroon oil pipeline is the only infrastructure enabling the production and export of crude oil from Chad, a country which would otherwise be unable to develop its resources and grow its economy. Lessons have to be learned on how to negotiate such transnational infrastructure deals and 2020 will show if African nations have learned how to cooperate better for the benefit of all.

The value that new pipelines bring to the continent is indisputable. These projects could open new oil and gas export markets in Niger, Uganda, and Ethiopia.

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Services Outlook

GLOBAL E&P OUTLOOKThe short-term outlook for the oilfield services sector is challenging. E&P firms are rationing capital and demanding competitive rates from suppliers as the oil price recovers slowly. The sector has grown modestly in 2019 (by two percent, to $647 billion in service purchases) but is expected to contract by 4 percent in 2020 (to $621 billion) if Brent remains at $60 per barrel, according to forecasts by Rystad Energy. They expect significant contractions in the shale sector (six percent) as well as onshore (five percent), which will be affected by continued supply cuts from OPEC members29. Beyond 2021, however, the prospects are more positive as firms seek to replace dwindling reserves. Growth in service purchases is forecast at five percent that year. The offshore sector stands out as a bright spot, with a compound annual growth rate (CAGR) forecasted at seven percent for subsea purchases, construction and installation, and equipment, due to an influx of large projects (including in the LNG sector).

The low oil price environment is encouraging competition which

is causing the services sector to innovate and push outside of its comfort zone, especially in Africa.

As competition for marginal CAPEX is fierce, several established African services players are seeking regional expansion and giving a new meaning to the African content. Similarly, the quest for cost-efficient solutions is pushing operators and contractors to rely more heavily on the local industry for services and supplies, on the back of increasingly stringent local content regulations across the continent.

The services sector, globally and in Africa, is adjusting to the competitive environment through diversification and expansion. While big services players like Baker Hughes and Saipem are moving into the renewables energy sector, other African services companies are making deals and seeking JV’s with their peers across West and Central Africa notably.

Source: Rystad Energy ServiceCube, September 2019

Purchases of Oilfield Services(USD billion)

AFRICAN EXPLORATION RETURNSBetween 2014 and 2017, total exploration spending in Africa fell by 71 percent to under $5 billion. However, the forecast for the long term is much more positive. Rystad forecasts CAGR at 18 percent between 2018 and 2030, with east Africa the fastest growing region.

For now, however, west Africa continues to dominate. Baker Hughes rig count data shows that 79 percent of the 52 active rigs across SSA’s in August were in west Africa. In late October, BP and partner Kosmos Energy announced a major

OIL AND GAS SERVICES COMPANIES HAVE BEEN AFFECTED BY THE DOWNTURN IN E&P SPENDING SINCE 2014. HOWEVER, THE SECTOR HAS PROVED ITSELF RESILIENT WITH POSITIVE SIGNS OF GROWTH AND INNOVATION SINCE 2018. THIS SECTION LOOKS AT WHY ITS TIME TO CONSIDER THE AFRICAN CONTINENT AND HOW THE SERVICES SECTOR IS AN OPPORTUNITY TO INCREASE INPUT OF LOCAL AND REGIONAL CONTENT.

29. Offshore Energy Today – September 2019 30. Oil & Gas Middle East – October 201931. Offshore Energy Today – October 201932. Westwood Energy – April 2019

discovery at their Orca-1 well offshore Mauritania. Rystad Energy estimates that Orca-1 holds around 1.3 billion boe, making it the largest discovery of 201930. In addition to the initial Marsouin-1 discovery well, Kosmos believes that Orca-1 de-risks up to 50 tcf of gas initially in place within the wider BirAllah region, making it a clear focus for future investment31.

OFFSHORE GROWTH FOR AFRICAN SERVICESThe offshore sector is dominating SSA E&P. Global Data analysis of 70 projects across the oil and gas sector (including post and pre-FID)

Africal Oil and Gas Exploration Spend by Region, 2010–2030 ($ million)

Source: Rystad Energy, PWC Strategy

2017

2016

2015

2018

2019

2020

2021

2022

2023

Maintenance and Operations

Well Services and Commodities

Drilling Contractors

Subsea

EPCI

Seismic

0

100

200

500

400

300

600

700

800

4%

0

10,000

20,000

30,000

40,000

50,000

60,000

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

CAGR2018-2030

16%

19%

22%

15%

Southern Africa

North Africa

East Africa

West Africa

+18%

shows that 66 percent are located offshore, with more than half of those in deep or ultradeep waters. However, the industry has faced a challenging few years. Analysis from Westwood Energy shows that utilisation rates in the west African offshore jackup market fell from 81 percent to 37 percent between January 2014 and October 2016. The floating rig market was hit even more severely. Between August 2014 and July 2018, the overall fleet was reduced from 60 to 37. Despite this, the utilisation rate still fell from 82 to 51 percent32. According to Westwood data, utilisation in both sectors was above

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50 percent at the end of Q1-2019, with the jackup market showing more consistent growth than floating rigs. Day rates were around $60,000-$70,000 for jackups and in the range of $130,000-$170,000 for floating rigs. In February, First E&P agreed a $617m, 7-year contract with Malaysian firm Yinson Holdings to charter an FPSO vessel offshore Nigeria (Anyala/Madu field). IHS Markit calculates the average day

rate at around $165,000. Yinson plans to upgrade and redeploy its Allan FPSO which was previously located offshore Gabon33. And in October, Eni extended its contract for Vantage Drilling’s Sapphire jackup rig offshore Congo until Q2-2021 at an estimated $92,500 per day rate34. Looking toward 2020 and beyond, offshore – particularly in the subsea sector – will be the bright spark of the African services sector.

ORANGE BASINDespite disappointment for the Cormorant (Tullow) and Prospect S (Chariot Oil & Gas) wildcat wells in 2018, there is still significant international interest in the Orange Basin, offshore Namibia/South Africa. In April, Exxon acquired seven million net acres in the region (blocks 1710, 1810, 1711, 1811A). Seismic data acquisition was expected in the second half of 2019. Qatar Petroleum is also farming into Total’s acreage (blocks 2913B/2912). The French supermajor’s Venus-1 well is expected in the first half of 2020. A successful campaign could de-risk adjacent acreage owned by Shell. Namibia offers an attractive investment climate, with potential breakeven prices in the $40-$50 range, according to Wood Mackenzie estimates. Following the success of the billion-barrel Brulpadda discovery offshore South Africa, Total is expected to continue gathering 3D seismic

and drill exploration wells on up to four more prospects in the area (blocks 11B/12B).

ANGOLAUltra-deepwater operations are also on the rise in Angola. Total is preparing to drill at depths of up to 3,600 metres in Block 48. Earlier this year, UK-based Seadrill established a JV with Sonangol (Sonadrill) to operate two new state-of-the-art drillships (Libongos and Quenguela) which will be able to support high-spec operations within the region. The venture is a vote of confidence for the long term.

Eni has enjoyed three discoveries in block 15/06 offshore Angola over the last twelve months. The most recent of these is the Agogo prospect (following Kalimba and Afoxé), which delivered 450-650 mmbbl of light oil in place using Ocean Rig’s Poseidon drillship. Appraisal drilling and development could be conducted in 2020.

FLNG Floating liquefied natural gas (FLNG) platforms are being deployed across SSA in order to exploit small-to-medium gas reserves in countries with insufficient domestic markets to justify high-cost onshore LNG infrastructure. Cameroon’s Hilli Episeyo, operated by Golar LNG, was the first of these projects, followed by Eni’s Coral South offshore Mozambique. In September,

33. IHS Markit – February 201934. Offshore Energy Today – October 2019

Sub-Saharan Africa Frontier Exploration Outlook

REGION

South Africa

Namibia

Mauritania

Gabon

Gambia

Congo Brazzaville

KEY PLAYERS

Total, Shell

Total, Qatar Petroleum (QP), Exxon, Maurel & Prom, Tullow Oil, Shell

BP, Kosmos Energy, Total

Vaalco Energy, Petrosen

FAR

Eni, NewAge, Lukoil

2019 MILESTONES

• Total’s 1 billion boe Brulpadda discovery (offshore, Block 11B/12B)

• Exxon acquires 7 million net acres • QP farms into Total acreage• Tullow acquires 56% stake in PEL-90

from Calima Energy

• BP’s 1.3 billion boe Orca-1 discovery

• Vaalco makes new discovery with Etame-9P well (2.5-10.5 mmbbl gross recoverable reserves)

• Malaysian Petronas acquires exploration permits in Blocks F12 and F13

• Australian FAR secures operated 50% stake in offshore Blocks A2/A5 (adjacent to SNE field, Senegal)

• Lukoil completes $800m farm-in to Eni-operated Marine XII

2020 OUTLOOK

• Brulpadda appraisal drilling• Odfjell Drilling executing $145-190 million

contract for more exploration wells in 11B/12B. Starting Q1-2020 for 180-280 days

• Shell acquired 40% interest in deepwater blocks 5, 6 and 7 from Anadarko in May. Could begin developing these assets

• Total to drill ultradeep Venus-1 well• Maurel & Prom expected to start drilling in

PEL-44 licence following 3D seismic data acquisition in 2019

• Tullow evaluating seismic data from Cormorant-1 to decide next steps in PEL-37

• Eco Atlantic & AziNam looking for farm-in partners to drill Osprey Prospect in PEL-030

• Appraisal drilling for Orca-1; further exploration in the BirAllah region

• Exploration well anticipated from Total in block C-9

• U.S.-based Vaalco continuing its drilling campaign with up to $10 million in further expenditure in 2020

• Licencing round completed in Q3-19 could start new wave of exploration activity

• 3D seismic survey conducted Q4-19 with drilling expected to commence in 2020

• NewAge will execute exploration/appraisal drilling in offshore Marine III licence

African Service Segment Growth (CAGR, 2018–2022)

Source: Rystad Energy

5%

7%8%8%

5%

10%

Mai

nten

ance

& O

pera

tions

Wel

l Ser

vice

s &

Co

mm

odi

ties

Dril

ling

Co

ntra

cto

rs

Sub

sea

EP

CI

Sei

smic

Dutch firm Smit Lamnalco (50 percent owned by Boskalis) secured a $200 million contract to provide integrated marine services to the FLNG vessel (delivered by TechnipFMC, JGC Corporation and Samsung Heavy Industries). The

contractor will deploy three 95-ton bollard pull tugs provide escort, berthing, and unberthing services for LNG carriers on site. Their work will begin in 2021, once Saipem has completed drilling multiple wells at 3,000 meter depths using the 12000

drilling rig. There are more FLNG projects in the pipeline awaiting FID. These include BP’s Greater Tortue field (offshore Senegal/Mauritania, 2.4 mtpa) and New Age’s BLNG field (1.0 mtpa) offshore Congo Brazzaville.

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5. DR. DIAMANTINO PEDRO AZEVEDO

MINISTER OF MINERAL RESOURCES AND PETROLEU, ANGOLA

Dr. Diamantino oversees Angola’s ongoing reforms of its oil and gas sector. Priorities for 2020 will include Sonangol’s sale of non-core assets, a bid round for nine blocks in the Congo and Kwanza basins, and the gas monetization programme. Angola LNG is com-mitting $2 billion to the Quiluma and Maboqueiro fields, which are expected to provide feedstock to the 5.2 mtpa Soyo LNG facility by 2022, ensuring its continue oper-ation. Will Dr. Diamantino be able to steer the path through 2020 and meet Angola’s ambitious tar-gets for its industry and economic revival?

1. ALIKO DANGOTECHAIRMAN, DANGOTE GROUP

The Dangote Group is nearing the completion of its $12 billion, Lagos-based refinery. At a ca-pacity of 650,000 bpd – enough to supply Nigeria’s domestic fuel demand – it is truly a game-changing downstream addition to the continent’s largest oil producer. All eyes will be on Mr Dangote in 2020 as details emerge about the group’s distri-bution plans for refined products and his ability to navigate logistical challenges to complete the refinery on time. Similarly, the father of Africa’s modern private sector could have a new landmark project in the pipeline next year.

6. NOËL MBOUMBAMINISTER OF MINES, PETROLEUM, HYDROCARBONS AND GAS, GABON

Gabon is the comeback kid in the African oil and gas scene in 2019. The passing of the new Hydrocarbons Code was accompanied by the signing of no less than nine PSCs in Gabon, along with renewed exploration, and new discoveries! How will Minister Mboumba maximize the country’s new regulatory frame-work to attract new investment into Gabon? How will he support the development of local com-panies and create opportunities for gas monetization across the value-chain? Producing about 200,000 bpd, Gabon had the second highest number of rigs in sub-Saharan Africa at the end of 2019, suggesting a very promising 2020.

2. KEVIN OKYEREFOUNDER & CEO, SPRINGFIELD GROUP, GHANA

Springfield’s deep-water dis-covery in Ghana’s West Cape Three Points Block 2 at the end of 2019 has put Founder and CEO Kevin Okyere on the map of the leaders to follow over the coming years. The discovery marks the first deep water oil discovery made by an African oil company and could even be a bigger find than Ghana’s Jubilee Field. What Kevin Okyere does in 2020 and beyond to further assess the block and get a field development plan approved will be a defining factor in the future of Ghana’s local content and economy at large.

7. KOLA KARIMCHAIRMAN, SHORELINE ENERGY

Mr Karim has made a name for himself over twenty years of successful entrepreneurship in Nigerian oil and gas. He has built an impressive empire, which includes Shoreline’s 45 percent interest in OML-30, currently pro-ducing around 75,000 bpd. Recent expansion over the past few years across the gas value chain though an agreement with Shell, and the EPC and services sector through a 51 percent acquisition of Entrepose DBN in 2018, could result in further diversification and expansion for Shoreline in 2020. Meanwhile, plans are in place to double output from OML-30 over 2020/21, making Shoreline one of the key independents to watch next year.

3. DONALD J. TRUMPPRESIDENT OF THE UNITED STATES

President Trump has been an aggressive supporter of the American oil and gas sector. In 2020, with an election on the ho-rizon, his administration is likely to continue rolling back regulations in order to encourage even more investment in America. Africa will be closely watching to see whether Trump’s ‘Prosper Africa’ initiative can enhance America’s relationship with the continent. Equally, will Trump continue to support Power Africa and its effort to develop Africa’s power sector? How will President Trump’s relationship with OPEC affect the price of crude given that most African producers are dependent on these revenues?

8. IRENE MULONI MINISTER OF ENERGY AND MINERAL DEVELOPMENT, UGANDA

On paper, Uganda is one of the most promising and upcoming African petroleum countries. The challenge is, oil was discovered over ten years ago, almost at the same time as the Jubilee fields in Ghana. While Ghana is now pro-ducing, Uganda’s oil is still laying still in the ground. Will Minister Muloni be able to find a compro-mise on reviving the stalled East African Crude Oil Pipeline and give Total and CNOOC an export route for their oil? 2020 will either entrench uncertainty in Uganda’s oil sector or bring a definitive action plan for the country to join the club of African producing countries.

4. MOHAMMAD SANUSI BARKINDO

SECRETARY GENERAL, OPEC

Since assuming the top job at OPEC in 2016, Mohammad Sanusi Barkindo has been a flagbearer for African oil and gas. Under his leadership, OPEC has welcomed African producers like Equatorial Guinea in 2017 and the Republic of Congo in 2018. As the organ-ization increases its outreach to Africa in 2020, who will be the next African producer to join OPEC? Can Barkindo continue to expand the OPEC/Non-OPEC outreach across Africa to find consensual solutions to market stability while assisting upcoming producers like Senegal, Uganda or Mauritania to manage their newly-discovered natural resources?

9. MUSTAFA SANALLACHAIRMAN, NATIONAL OIL CORPORATION, LIBYA

Mr. Sanalla has survived it all. He has been a rare and pre-cious figure of calm in Libya’s turbulent oil sector since civil war erupted in 2011. With production increasing from 800,000 bpd in 2017 to about 1.2 million bpd at the end of 2019, Mr. Sanalla now hopes to reach 1.5 million bpd in 2020. Only his ability to attract investment and manage the decline in maturing fields will tell whether he is able to bring back production to its 2012 levels. With oil revenues on the rise and persisting security issues, Mr. Sanalla’s actions in 2020 could confirm whether Libya is on a track to recovery.

African EnergyOutlook 2020

PresentsTwenty-Five Movers and Shakers to Watch

At the African Ener-gy Chamber (AEC), we believe that deal-making is all about relationships. The AEC boasts an unmatched capability to bring together key stakeholders in indus-try, government and with a clear focus on forging new ground in africa’s energy sec-tor. in this feature, we profile some of the key individuals and organisations that we expect to see at the forefront of our indus-try in 2020.

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10. DR OMAR MITHÁ CHAIRMAN & CEO, ENH MOZAMBIQUE

Dr. Mithá has led Mozambique’s national oil company as Chair and CEO since August 2015. He sits as the interface between tens of billions of dollars of investment and the Mozambique government and economy. How will Dr. Mithá ensure that Mozam-bique’s gas boom translates into significant input of local content and knowledge transfer for the long-term? His ability to impact the local economy will start with his own leadership over ENH and the steps he takes to build a financially strong national com-pany able to participate in the growth of the local economy.

14. GUIDO BRUSCOEXECUTIVE VICE PRESIDENT SUB-SAHARAN AFRICA, ENI

Since being promoted to head Eni’s Sub-Sahara African busi-ness in 2018, Guido Brusco has overseen an increase in the Ital-ian major’s exploration and M&A activity on the continent. This has resulted in significant finds in An-gola and Nigeria. Recent agree-ments, negotiated by Mr Brusco, have also strengthened the company’s position in the west African power and renewables sector – it will supply over 20 per-cent of Nigeria’s national elec-tricity production in 2020. What will be Mr. Brusco’s next step to position Eni as a true partner of Africa’s energy transition?

22. MEDARD KALEMANIMINISTER OF ENERGY, TANZANIA

Minister Kalemani has set 2022 as a start date for the construction of Tanzania’s $30 billion LNG export terminal by Equinor, Shell, Exxon-Mobil, Ophir Energy and Pavilion Energy. With a capacity of 10 mtpa of LNG, the terminal is ex-pected to add another 2 percent growth to Tanzania’s economy once online in 2028. In 2020, Minister Kalemani will have to ensure talks and negotiations with the project shareholders succeed, amidst rising investors concerns over resource nationalism. Failure to do so would further postpone an already-delayed project while construction works have started on similar infrastructure projects in Mozambique and Senegal.

11. PATRICK POUYANNÉCHAIRMAN & CEO, TOTAL

Around 25 percent of Total’s global production is concentrat-ed in the Gulf of Guinea, much of it deep offshore. However, with the $8.8 billion acquisition of Anadarko’s African assets, the French supermajor has diversified its SSA portfolio with significant positions in Mozambique, Ghana and South Africa. The company has more exploration wells planned in the Orange Basin for 2020 (including Venus-1, Namibia), following the Brulpadda discovery in South Af-rica in February 2019. With other ongoing developments in Angola (Block 17) and Nigeria (OML-99), how will Mr. Pouyanné assert To-tal’s position as the most active super-major in Africa in 2020?

15. CATHERINE NORMANMANAGING DIRECTOR, FAR LTD

Australian independent FAR has staked out an impressive position in the MSGBC basin over the last decade. The firm has five deep water blocks across Senegal and Guinea Bissau, plus acreage in The Gambia and Kenya. The firm’s priorities for 2020 include moving the SNE project towards FID as well as beginning explora-tion drilling offshore Gambia. FAR is continuing to enhance its portfolio through strategic acqui-sitions of exploration acreage. With its activities concentrated in the hottest African frontier basin, FAR could be the maker of world-class discoveries in 2020.

23. AUSTIN AVURUCEO, SEPLAT PETROLEUM DEVELOPMENT CO, NIGERIA

Austin Avuru retires in 2020 after a decade of leading Seplat Pe-troleum, one of Nigeria’s leading independent energy companies. Though retired, it is highly unlikely that Avuru will be completely out of the industry in the future. With vast experience across Africa’s oil sector, a wide network and strong industry recognition, Mr. Avuru could well become a strong influencer on the future of Africa’s energy sector.

12. MACKY SALLPRESIDENT OF SENEGAL

A lot of African frontier markets see the production of their first oil and gas delayed. Can the 2019 Africa Oil Man of the Year, President Macky Sall, deliver on expectations to see Senegal join-ing the club of African hydrocar-bons producers as early as 2021? Fast-tracking activity at the Tor-tue gas field and finalizing FID for the SNE block will be crucial for Senegal. Further, will Senegal’s 2020 licensing round confirm the country as a prime exploration hotspot in the MSGBC basin? Will Senegal be able to get more projects off the ground while leveraging its new resources to push for even greater economic diversification?

16. ANDREW G. INGLISCEO, KOSMOS ENERGY

Inglis’ six-year tenure atop one of Africa’s most dynamic deep water independents has delivered production offshore Ghana and Equatorial Guinea, world-class gas development offshore Mauritania and Sen-egal and exploration activity in South Africa, Namibia, and Côte d’Ivoire. Kosmos has a 100 percent success rate from nine gas-targeting wells, augmenting its estimates of gas to beyond the 50 Tcf mark. Where is the next discovery going to come from in 2020? Is Mr. Inglis going to deliver on the opening of São Tomé and Príncipe and its Joint Development Zone as a brand new African petroleum frontier?

24. CATHERINE UGU IFEJIKA

CHAIRMAN/CEO, BRITANNIA-U GROUP

The Britannia-U Group is a Nigerian oil and gas company with operations in E&P, oilfield services and consultancy. Under the leadership of CEO Catherine Ifejika, Britannia-U will be one of 15 contractors supplying the Ni-gerian government with refined petroleum under the DSDP pro-gramme in 2020. The company currently has a production facility of 10,000 bpd with an expansion capacity of up to 20,000 bpd. Mrs. Ifejika is also part of a new generation of female oil leaders and could be a driver of the women’s empowerment agenda across the industry in 2020 and beyond.

13. GABRIEL MBAGA OBIANG LIMA

MINISTER OF MINES AND HYDROCARBONS, EQUATORIAL GUINEA

Minister Obiang Lima’s new policy to push licence holders to “drill or drop” is helping Equatorial Guinea renew its exploration and production activity. Recent discoveries by Noble Energy and Kosmos Energy have created a bullish environment. Securing FID into the Alen gas monetization project and expanding the coun-try’s gas sector make Equatorial Guinea an attractive destination for investments. In 2020, the country launches its Year of Investment initiative. Will Minister Obiang Lima be able to secure investment and translate it into concrete projects?

17. AIDAN HEAVEYFOUNDER, BORU ENERGY

Aidan Heavey is looking to rep-licate his extraordinary success as founder and former CEO of Tullow Oil with a new venture: Boru Energy. Backed with $1 billion from the Carlyle Group (and looking to raise more funds), Boru will be looking to acquire stakes in producing fields (most likely offshore) across West Africa. How will this new London-based firm differentiate itself from other PE-backed players such as Trident Energy or Assala Energy? Will Boru Energy’s strategy focus on exploring or simply acquiring assets? Expect Heavey and his team, including CEO Tom Hickey, to be prominently featured in M&A chatter throughout 2020.

18. DR. BENEDICT OKEY ORAMAH

PRESIDENT AND CHAIRMAN, AFREXIMBANK

In the first half of 2019, Afreximbank provided $2.28 billion in loans to the energy and mining sector – more than it provided in all of 2018. Dr. Oramah is overseeing a significant increase in the bank’s financing activities. Projects in the downstream sector – such as the Dangote Refinery, to which the bank provided $650 million – are especially well aligned with the bank’s mission to support intra-Af-rican trade and industrialisation. What deals will Dr. Oramah, alongside with Director of Client Relations Rene Awambeng, be executing next year? With an entire value-chain hungry for cash, Afrex-eimbank’s next big move could be anywhere.

19. KAMEL EDDINE CHIKHI

CEO, SONATRACH, ALGERIA

The new CEO of Africa’s biggest corporation has a lot planned for 2020. In October 2019, Algeria passed a new Hydrocarbons Law expected to boost foreign investment, notably by offering new ways for international com-panies to work with Sonatrach. Mr. Chikhi’s ambitions include ex-panding Algeria’s upstream activ-ities and boosting exploration. He has also outlined that he wants to boost export of key commodities, support local content devel-opment and SME growth, and develop a strong petrochemicals industry. His ability to execute this mighty vision amidst an unstable political climate throughout 2020 will be key for the future of Alge-ria’s energy sector.

20. PRINCE ARTHUR EZECHAIRMAN, ATLAS ORANTO INTERNATIONAL/ORANTO PETROLEUM

Through Prince Arthur Eze’s lead-ership, Atlas Oranto continues to be one of the boldest inde-pendent players on the continent. In 2020, Atlas Oranto’s next big move could be coming from anywhere. With IOCs’ divesting in Nigeria and acreages on offer across new African frontiers, Prince Eze has a large menu to choose from. With licences in 11 countries across SSA – including some of the most highly prospec-tive basins, such as Uganda’s Lake Albert – Prince Arthur Eze’s firms are positioned for a busy year with significant growth potential.

21. TOPE SHONUBIMANAGING DIRECTOR, SAHARA ENERGY

Nigeria-based Sahara Energy is looking forward to a packed 2020. Negotiations are ongoing with Total to acquire its stakes in refineries in Cameroon, Ivory Coast and Senegal, all which Sahara plans to upgrade. In Zambia, Sahara has committed to build a hydrocracker at the 25,000 bpd Indeni refinery. But beyond its pipeline of upcoming deals, its Sahara’s ability to rep-licate its success across sectors and geographies, and solve key challenges such as electricity access and fuel shortages that needs to be looked out for. They will be an indicator on whether Sahara is well-positioned to seize Africa’s future opportunities.

25. ABDEL FATTAH AL-SISI

PRESIDENT OF EGYPT

How will President Abdel Fattah al-Sisi’s ambition to transform Egypt into a regional oil and gas centre translate into business opportunities for investor and growth for the Egyptian econo-my? Egypt has announced no less than 60 discoveries this year alone, and ongoing exploration could yield a few more surprises in 2020. As Egypt strengthens its position as a solid upstream des-tination, will the commissioning of the Egyptian Refining Co. in 2019 and ongoing expansion of Egypt’s downstream sector con-firm the country’s dominant po-sition as a top African refiner and petrochemical manufacturer?

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