Over the past five years, the largest independent oil and gas company in the United States, Exxon Mobil (NYSE: XOM), has primarily focused its exploration activities in South America. Last month, the oil major announced that it had makes two new discoveries at the Sailfin-1 and Yarrow-1 wells in the Stabroek block offshore Guyana, potentially adding more barrels to one of the most closely watched new oil discoveries. ExxonMobil has now made more than 30 discoveries on the block since 2015 and has accelerated offshore development and production at a rate that far exceeds the industry average. By contrast, Exxon’s exploits in Africa have been rare, with its last discovery on the continent dating back nearly two decades. But Exxon has just announced that it has, with its partners, discovered hydrocarbons in block 15 offshore Angola in the prospect Bavuca Sud. It was the block’s 18th discovery, but the first since 2003. According to Exxon, the Valaris DS-9 The drillship drilled the Bavuca South-1 well 365 km northwest of the coast at Luanda in 1,100 m (3,608 ft) of water, encountering 30 m (98 ft) of good quality sandstone containing hydrocarbons . Exxon holds a 36% stake in the block, with BP Exploration Angola (24%), ENI Angola Exploration (18%), Equinor Angola Block 15 (12%) and Sonangol P&P (10%) being its partners.
Oil and Gas Opportunities in Africa
The last major fossil fuel discovery on the continent was in 2010 after the Texas-based company Anadarko Corp. (now a subsidiary of Occidental Petroleum Corp.) and Italian energy giant Eni SpA. (NYSE:E) discovered about 180 trillion cubic feet of natural gas reserves, equivalent to about 29 billion barrels of oil, in Mozambique’s supergiant Rovuma offshore basin, immediately catapulting the South African nation into a potential global LNG superpower. Predictably, there was a rush of oil and gas majors, including ExxonMobil, TotalEnergies (NYSE: TTE), Shell (NYSE: SHEL), and China National Petroleum Company. (NYSE: SNP)) coming to claim their rights.
Unfortunately, widespread terrorism and the growing threat of piracy have steadily held back progress, with Mozambique quickly joining the league of African nations struggling with a ‘resource curse’. The security crisis in the northern region of Cabo Delgado has displaced hundreds of thousands of people, created a humanitarian crisis and even forced TotalEnergies to to declare force majeure on its massive investment in natural gas in the country. But the tide has now turned and Mozambique have managed to pull themselves together just in time. The country is now prepares to ship its first cargo of liquefied natural gas (LNG) overseas in November at a time when Europe is desperately trying to cut energy ties with Russia. Experts have estimated that Mozambique can earn more than $100 billion from its natural gas assets over the next 30 years.
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BP has already signed an agreement for buy everything of Eni’s $7 billion production Coral-Sul project, capable of producing 3.4 million metric tons of LNG per year, for the next 20 years. Meanwhile, TotalEnergies has announced plans to resume its huge $20 billion project towards the end of the year, with the terminal expected to produce 13.1 million tonnes of LNG per year. Additionally, ExxonMobil says it will make a final decision on an even bigger project in the near future. Meanwhile, the European Union has planned to increase its financial support fivefold $15 million to fight militants near Mozambique’s gas projects. The EU has already pledged to provide the country’s military with additional financial support of €45 million ($45 million) and has so far granted a SADC mission in the country 2, 9 million euros of financing.
For its part, Mozambique has developed plans to create a sovereign wealth fund towards the end of 2022, 50% of the fund’s revenue to be reinjected into the fund while the remaining 50% will go to the state budget for the first 20 years of LNG production. Mozambique has the potential to climb the ladder and become a middle-income nation over the next two decades if it plays its cards right.
Vijaya Ramachandran, director of energy and development at the Breakthrough Institute, says Germany and Europe should turn to Africa, if they really want to ensure energy security. Ramachandran notes that the continent is endowed with significant natural gas reserves and new discoveries being exploited. Very little African gas has been exploited, either for domestic consumption or export.
Algeria is already a major established gas producer with significant untapped reserves and is connected to Spain by several undersea gas pipelines. Germany and the EU are already working on expanding the capacity of the gas pipeline linking Spain to France, from where more Algerian gas could flow to Germany and elsewhere. The Libyan gas fields are connected by gas pipeline to Italy. In both Algeria and Libya, Europe should urgently help to exploit new fields and increase gas production. New pipelines under discussion currently focus on the proposed Eastern Mediterranean Pipeline, which would bring gas from Israel’s offshore gas fields to Europe.
But Africa’s biggest sources are south of the Sahara, including Nigeria, which has about a third of the continent’s reserves, and Tanzania. Senegal recently discovered large offshore deposits.
Ramachandra says Europe should not ignore these opportunities. For example, the proposal Trans-Saharan pipeline will transport gas from Nigeria to Algeria via Niger. If the project is completed, the new pipeline will connect to the current one Trans-Mediterranean, Maghreb-Europe, Medgazand galsi gas pipelines that supply Europe from transport hubs on the Algerian Mediterranean coast. The Trans-Saharan Gas Pipeline would be over 2,500 miles long and could provide up to 30 billion cubic meters of Nigerian gas to Europe per year, which is equivalent to approximately two-thirds of Imports from Germany in 2021 of Russia (for comparison purposes, the Yamal-Europe Gas Pipeline, one of the main routes for transporting Russian gas to Europe, is 2,607 miles long). On his side, Nigeria is enthusiastic on exporting some of its 200 trillion cubic feet gas reserves, with Nigerian Vice President Yemi Osinbajo arguing in favor of the essential role of natural gas, both as a relatively clean transition fuel and as an engine of economic development and a source of foreign exchange.
Unfortunately, the Trans-Saharan pipeline will likely take a decade or more to complete, and LNG shipments to Europe would bring quicker relief.
Unfortunately, Europe’s largest gas importer, Germany, has not built a single LNG import terminal as part of its policy to make the country dependent on Russian gas and, in turn, to make Russia more dependent on Germany. But there is hope: Berlin has already given up on its old ways and says it will now build LNG infrastructure.
Fortunately for Germany and other stranded EU countries, Ramachandran says LNG loading ports can be built in Africa relatively quickly, with the Field of the Great Ahmeyin Turtle, an offshore gas field straddling the maritime border between Senegal and Mauritania, is a perfect example. When the field goes live next year, it will place the two West African countries among Africa’s leading gas producers. Floating liquefaction plants above the offshore gas field produce, liquefy, store and transfer the gas to LNG carriers which ship it directly to importing countries. Although initial production from this field is small, it is expected to double in a few years and the field is located in a larger natural gas basin with significantly larger reserves.
Elsewhere in Africa as well, gas production will continue to grow as projects in Tanzania, Mozambique and other countries come on stream over the next few years.
The development of a gas pipeline as large as the Trans-Saharan Gas Pipeline is likely to present many challenges as it crosses regions plagued by conflict and insurgencies. But such projects could ease Europe’s energy crisis while helping Africa develop and integrate economically.
By Alex Kimani for Oilprice.com
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