Demand for new reserves is stronger
Saturday, 24 November 2007
Dino Mahtani
WITH the world's big oil companies locked out of Saudi Arabia and unlikely to invest in the near future in Iran or Iraq, many oilmen look at Africa as the most attractive oil frontier, especially given the nationalist fever sweeping Russia and Venezuela.
The continent, which has an estimated 10 per cent of proven global oil reserves and 8 per cent of its gas, has attracted more intense interest in recent years from oil explorers who see that figure increasing.
Certainly, the continent's biggest oil producers, Nigeria, Algeria, Libya and Angola, which account for roughly three-quarters of the continent's oil production, also account for a significant proportion of the world's "light" and "sweet" crude oil - easier to refine and lower in sulphur content than "heavy" and "sour" types.
With a favourable geographic position near US and European markets, producers such as Nigeria and Angola have also been known for the preferential terms given to oil companies investing in their countries.
The Gulf of Guinea, west Africa's hydrocarbons-rich offshore basin, has in recent years become an exploration hotspot, with companies pouring billions of dollars into some of the world's biggest deepwater projects. Even in countries such as Libya, once a pariah state under international sanctions, oil companies are muscling to get in, typified by BP's $900m deal struck with Tripoli this year.
Africa's position with the US, the world's largest consumer of energy, has also grown in strategic importance.
Analysts expect the US to import about 25 per cent of its oil from the Gulf of Guinea within a decade, up from 15 per cent now. Such facts go some way to explaining increased US military co-operation with African states, marked by the creation of Africom, a US military command structure that will be devoted solely to Africa in recognition of the continent's "strategic and economic" importance in global affairs.
An inexorable Chinese appetite for raw materials has also coincided with a big diplomatic offensive on the continent, with China starting to win exploration or drilling licences in many energy-producing countries accompanied by the promise of soft loans, infrastructural development and even military assistance.
In such a context, many analysts have posited a new scramble for Africa's resources, with Thabo Mbeki, South Africa's president warning the continent's leaders to avoid falling into a "colonial relationship" with China.
Human rights activists condemn both China's oil interests in Sudan, the government of which is accused by the US Congress of perpetrating genocide in Darfur, and western countries' support of despotic oil-producing regimes in west and central Africa. Even in Somalia, a failed state prone to violent confrontation, Chinese companies are considering stepping up their activities in spite of a lack of proven reserves. That is partly because the oil and gas sweet spots of Africa are showing signs of closing up as the phenomenon of resource nationalism creeps into the continent.
"No one doubts that the demand to build reserves in Africa has got stronger, and new and often difficult frontiers continue to open up, but, with a handful of exceptions, we are not seeing the sort of irrational exuberance of five years ago," says Jon Marks, editorial director of African Energy, a specialist newsletter.
Last month, Nigeria, Africa's biggest oil producer, announced it would reconsider the terms of some contracts signed in the 1990s, which cover some of the biggest offshore developments in the Gulf of Guinea.
The ramifications of Algerian oil legislation that last year gave Sonatrach, its state-owned oil company, powers to take a 51 per cent stake in any oil project, are still being felt in the industry. The Algerian government showed its teeth again this year when it revoked Repsol's licence to develop a big liquefied gas export project on the grounds that it was being delayed.
Libya, which threw its doors open again only a few years ago, has already tightened the terms on offer for new exploration licences, but companies are still lining up to get in. Angola, Africa's most rapidly expanding oil producer, may also play a part in a tightening oil market. Last year it joined the Organisation of the Petroleum Exporting Countries(Opec) cartel, and will at some stage set a quota for its oil production.
Oil explorers face some daunting conditions and disappointing results. Much of the oil and gas produced outside Africa's four biggest producers is either not light and sweet, or is found in reserve basins that are less commercial for development.
Important finds, such as Tullow Oil's discovery in Ghana, have been offset by increasing pessimism regarding the finding significant oil off the coast of São Tomé, where companies, including ExxonMobil, have sold on their stakes.
In Lake Albert, straddling the border between Uganda and the Democratic Republic of Congo, recent drilling success by Tullow has served only to heighten tensions between the two countries, which have in the past been embroiled in a regional war over control of natural resources.
........................................
FT Syndication Service
WITH the world's big oil companies locked out of Saudi Arabia and unlikely to invest in the near future in Iran or Iraq, many oilmen look at Africa as the most attractive oil frontier, especially given the nationalist fever sweeping Russia and Venezuela.
The continent, which has an estimated 10 per cent of proven global oil reserves and 8 per cent of its gas, has attracted more intense interest in recent years from oil explorers who see that figure increasing.
Certainly, the continent's biggest oil producers, Nigeria, Algeria, Libya and Angola, which account for roughly three-quarters of the continent's oil production, also account for a significant proportion of the world's "light" and "sweet" crude oil - easier to refine and lower in sulphur content than "heavy" and "sour" types.
With a favourable geographic position near US and European markets, producers such as Nigeria and Angola have also been known for the preferential terms given to oil companies investing in their countries.
The Gulf of Guinea, west Africa's hydrocarbons-rich offshore basin, has in recent years become an exploration hotspot, with companies pouring billions of dollars into some of the world's biggest deepwater projects. Even in countries such as Libya, once a pariah state under international sanctions, oil companies are muscling to get in, typified by BP's $900m deal struck with Tripoli this year.
Africa's position with the US, the world's largest consumer of energy, has also grown in strategic importance.
Analysts expect the US to import about 25 per cent of its oil from the Gulf of Guinea within a decade, up from 15 per cent now. Such facts go some way to explaining increased US military co-operation with African states, marked by the creation of Africom, a US military command structure that will be devoted solely to Africa in recognition of the continent's "strategic and economic" importance in global affairs.
An inexorable Chinese appetite for raw materials has also coincided with a big diplomatic offensive on the continent, with China starting to win exploration or drilling licences in many energy-producing countries accompanied by the promise of soft loans, infrastructural development and even military assistance.
In such a context, many analysts have posited a new scramble for Africa's resources, with Thabo Mbeki, South Africa's president warning the continent's leaders to avoid falling into a "colonial relationship" with China.
Human rights activists condemn both China's oil interests in Sudan, the government of which is accused by the US Congress of perpetrating genocide in Darfur, and western countries' support of despotic oil-producing regimes in west and central Africa. Even in Somalia, a failed state prone to violent confrontation, Chinese companies are considering stepping up their activities in spite of a lack of proven reserves. That is partly because the oil and gas sweet spots of Africa are showing signs of closing up as the phenomenon of resource nationalism creeps into the continent.
"No one doubts that the demand to build reserves in Africa has got stronger, and new and often difficult frontiers continue to open up, but, with a handful of exceptions, we are not seeing the sort of irrational exuberance of five years ago," says Jon Marks, editorial director of African Energy, a specialist newsletter.
Last month, Nigeria, Africa's biggest oil producer, announced it would reconsider the terms of some contracts signed in the 1990s, which cover some of the biggest offshore developments in the Gulf of Guinea.
The ramifications of Algerian oil legislation that last year gave Sonatrach, its state-owned oil company, powers to take a 51 per cent stake in any oil project, are still being felt in the industry. The Algerian government showed its teeth again this year when it revoked Repsol's licence to develop a big liquefied gas export project on the grounds that it was being delayed.
Libya, which threw its doors open again only a few years ago, has already tightened the terms on offer for new exploration licences, but companies are still lining up to get in. Angola, Africa's most rapidly expanding oil producer, may also play a part in a tightening oil market. Last year it joined the Organisation of the Petroleum Exporting Countries(Opec) cartel, and will at some stage set a quota for its oil production.
Oil explorers face some daunting conditions and disappointing results. Much of the oil and gas produced outside Africa's four biggest producers is either not light and sweet, or is found in reserve basins that are less commercial for development.
Important finds, such as Tullow Oil's discovery in Ghana, have been offset by increasing pessimism regarding the finding significant oil off the coast of São Tomé, where companies, including ExxonMobil, have sold on their stakes.
In Lake Albert, straddling the border between Uganda and the Democratic Republic of Congo, recent drilling success by Tullow has served only to heighten tensions between the two countries, which have in the past been embroiled in a regional war over control of natural resources.
........................................
FT Syndication Service