Exploration activity in Africa undeterred by low oil prices

Exploration activity in Africa undeterred by low oil prices

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Falling oil prices afre not hindering exploration activity in Africa
Companies like Statoil continue to attest to the high exploration success rate
Companies like Statoil continue to attest to the high exploration success rate

The current downturn in oil prices has not slowed down exploration activity in sub-Saharan Africa. Although several firms have cut back on their global exploration budgets, the region continues to attract activity, led by emerging oil and gas hotspots in Kenya, Tanzania and Uganda in the East African Rift system.
The west coast of Africa is also being actively explored, with great attention to the West African Transform Margin area consisting of Ghana, Guinea, Ivory Coast and spanning to Senegal. ‘Despite current oil prices, these areas have proven attractive due to recent discoveries, high exploration success rates, and relatively low operating costs,’ says Young Okunna, upstream analyst at research and consulting firm, GlobalData. ‘Continued activity is further supported by the less significant drop in rig count in comparison to other regions as of February 2015, which indicates significant ongoing drilling operations,’ he adds.
In East Africa, the emerging countries of Kenya and Tanzania have seen companies, such as Tullow Oil focus their exploration objectives onshore. Tullow’s drilling plan focuses on low-risk acreage rather than exploration operations in the capital-intensive offshore. The South Lokichar and West Turkana Basin in onshore Kenya are the focus of these planned exploration drilling operations. A portion of the South Lokichar Basin was recently explored and an estimated reserve of 600 million barrels of oil equivalent (Mmboe) discovered.
This rift system also spans to the Lake Albertine Rift basin in Uganda, where recently discovered deposits are estimated at 3.5 boe, as well as Tanzania. These major discoveries in East Africa have seen exploration operations continue in the region despite falling oil prices, and the discovery of more reserves is anticipated due to under exploration of the area.

Falling oil prices afre not hindering exploration activity in Africa
Falling oil prices afre not hindering exploration activity in Africa

In contrast to the onshore exploration focus of most international oil companies in East Africa, offshore exploration operations are largely planned for the west coast of Africa, as well as the West African Transform Margin. Countries in the Margin, such as Ghana, Guinea, Ivory Coast, and up to Senegal and Mauritania, are being actively explored owing to recent discoveries in offshore Ghana, which have highlighted the area’s potential.

With a high exploration success rate of 65 percent, the Transform Margin is seen as a key exploration area in Africa, hence the initiatives by companies, such as Chevron, Tullow, and Cairn Energy, to explore the region despite low oil prices. Additionally, some mature producers, such as Congo Republic, Cameroon and Gabon, are planning exploration, which in most cases is supported by low operating costs and affordable labour.
The falling price of drilling operations is another reason why exploration activities have continued in the region. Offshore exploration well-drilling costs were previously around $100 million/well in East Africa and $60–70 million in frontier West Africa, but have fallen due to the drop in oil prices. Operators have also adopted strict cost-control mechanisms to mitigate against unwarranted expenses and therefore maintain these operations.
Okunna says Sub-Saharan Africa can expect to see substantial investment in its oil and gas resources, as recent discoveries continue to attract companies to explore its vast deposits despite the low oil price environment. ‘Companies currently operating in the region continue to attest to the high exploration success rate. This is backed by the most recent discovery made by Statoil in offshore Tanzania in March 2015, with the drilling of the Mdalasini-1 exploration well, which discovered 1.0–1.8 tcf of gas. The region has shown resilience to falling oil prices, with exploration activities being planned and executed, due to its lower cost environment and supported by recent commercially viable discoveries.’

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