Four African countries currently have ongoing licensing rounds with at least six planned to launch later in the year. There are at least another 10 which may be held in the near future and further tenders which closed end-2018 are also currently being evaluated. Simultaneously, many of the majors and supermajors are acquiring, or looking to acquire, new frontier exploration acreage across the continent, including in previously unexplored deep and ultra-deepwater areas. It is anticipated that the independents will follow this trend. However, the volume of acreage available at present is likely to mean that some good opportunities are overlooked; even some of the supermajors have commented that they do not have the capacity to fully evaluate all the available opportunities.
Ongoing Bid Rounds
Of the four licensing rounds currently open for bidding it is probably the 1st Ghanaian Licensing Round that has generated the most interest to date. Fourteen companies have pre-qualified with bids due in May. Six blocks in the Tano/Cape Three Points area are being made available: three via competitive bidding, two via direct negotiations, with one block reserved for GNPC (which is seeking a partner). It is expected this licensing round will be a success; early successes on Ghana’s transform margin triggered Guyanese exploration and the mammoth success of Stabroeck is likely to bring things full circle, reassuring explorers of the opportunity. The main issues are likely to relate to local content requirements. Under the terms of the 2016 Petroleum Law, five percent equity is reserved for indigenous companies, but the government has struggled to find local businesses with the necessary resources to invest in the sector. Following ExxonMobil’s award of the Cape Three Points Deepwater block in January 2018 it took until November before a local partner could be identified.
Figure 1: Ongoing African Licensing Rounds
Gabon launched its 12th Offshore Licensing Round in November 2018, with 35 shallow and deepwater blocks being made available in new and proven oil plays along the margin. A series of roadshows have been held and interest has been high, but it is expected that planned amendments to the 2014 Hydrocarbons Code (especially to the gas commercialization terms) will need to be ratified for this interest to generate high numbers of bids. The new code was to be in place by end-2018 but has not been signed into law due to the ill health of President Ali Bongo and the attempted coup of January 2019. The bid deadline has now been extended from April to September 2019, to allow companies time to assess data and terms thoroughly.
The Congo (Brazzaville) Licensing Round Phase II 2018-2019 is also expected to generate interest. Eighteen onshore, shallow water, and deepwater blocks are being made available, with bids due by June 2019. The launch of this round follows the ratification of several awards made after the Congo Licensing Round 2016 (Phase I), to Perenco and Kosmos with the ratification of a further deepwater block to be awarded to Total expected take place shortly. Despite some of the ongoing issues facing Congo’s oil sector at present, these awards can be seen as a vote of confidence from the industry.
The fourth licensing round currently open is the 1st Somalia Licensing Round, launched in London in February 2019. Fifteen offshore blocks along the Somali Coastal Basin are being made available with bids due in November. Very little exploration work has taken place here to date, but Spectrum’s interpretation of recent seismic has identified carbonate and clastic leads, and basin modelling indicates the area will be prospective for oil, rather than gas. Despite promising geology, there are above-ground risks here that will give potential investors some concerns. Although offshore piracy has largely been vanquished, investors will still have to stomach a high degree of political risk. The round has already generated controversy, particularly in the local press, and protests were held at the launch event. A new Petroleum Bill remains in parliament, although a model PSA has been released. The launch of bidding has also intensified the ongoing maritime border dispute between Somalia and Kenya, although no blocks are being offered within the disputed area.
Planned Bid Rounds
In late-February 2019 a long-awaited announcement regarding the next phase of Angolan licensing was made. From 2019 to 2025 a total of 55 blocks are expected to be offered via a series of Public Tenders, Limited Public Tenders, and direct negotiations, which are outlined below.
Since President João Lourenço was elected in August 2017 numerous changes have been enacted across Angola’s petroleum sector, including the creation of the new national concessionaire, ANPG. Additionally, several new laws relating to E&P were passed in 2018, to make the legislative and fiscal terms more conducive to investment. These changes have been generally well-received by the industry and companies including Total, BP, and ExxonMobil have responded by taking new Final Investment Decisions on field developments, commencing new exploration drilling, and signing new agreements for exploration acreage. Therefore, it is expected that the new planned acreage releases will generate significant industry interest.
The first Public Tender will be launched in June 2019, with acreage offered in the largely unexplored Namibe Basin. Blocks are also expected to be awarded in the ultra-deepwater Lower Congo Basin and the Namibe Basin via direct negotiations.
In 2020, acreage in the onshore Lower Congo and Kwanza Basins is to be made available via a Public Tender. The majority of these blocks were also previously offered in 2014, with bids received from predominately local companies, many of which did not have E&P backgrounds. No licenses were awarded due to the unsuitable fiscal terms on offer and lack of capacity of the companies involved. Further onshore acreage is to be made available in another Public Tender in 2023.
Figure 2: Future Phases of Angolan Licensing
Offshore acreage will be made available in 2021, mostly in the shallow Kwanza and deepwater Lower Congo Basin, via Limited Public Tender. Another Limited Public Tender will take place in 2025 with blocks offered in the deepwater Kwanza Basin. A series of NFWs from 2011-2015 has shown that the Kwanza Basin is largely gas-prospective; one of the new laws passed in 2018 specifically addresses that the ownership of gas and oil companies can now monetize this. There are still questions as to whether Angolan gas will be attractive, with Sonangol unable to complete a planned sale of Block 20/11 and Block 21/09 in 2018 (which contain some 2.6 Bboe gas-condensate resources).
Other Planned Bid Rounds
In April 2019 almost all open acreage in Equatorial Guinea is to be made available in the EG Ronda 2019. Opportunities will include the Fortuna gas complex, previously operated by Ophir. Although Equatorial Guinea does host periodic licensing rounds, the government has been far more successful awarding licenses via direct negotiations, with both ExxonMobil and Kosmos signing for new acreage in 2017. In contrast, after the EG Ronda 2016, seven companies were announced as having submitted successful bids for six blocks but only Ophir signed a PSC.
In East Africa, Uganda is planning to launch its 2nd Licensing Round in May 2019, with acreage to be made available in the Albertine Graben. The basin has an ~87 percent success rate for drilling and some 6.5 Bbo in-place have been discovered to date, so it will generate interest. Until these discoveries can be monetized (via the construction of the planned export pipeline to Tanga, Tanzania) it is unclear whether there will be significant further investments made here at this time. Sudan is also planning to offer acreage in Q3 2019; it is likely that most investments here would be from Asian companies. Following industry consultations, Mozambique may launch its 6th Licensing Round in Q3 2019, with acreage potentially to be made available in the Zambezi and Angoche areas. The country’s ongoing debt issues, and the three-year delay between the 5th Licensing Round awards and ratifications will be off-putting for some, but progress on the Rovuma gas developments is now being made, which may buoy investor confidence here.
Two significant licensing rounds are also anticipated in Egypt. Western Mediterranean acreage may be offered in the EGAS 2019 Bid Round, however EGAS has stated that direct negotiations for its offshore blocks is also now possible. The Western Mediterranean is mostly unexplored and is likely to generate significant interest. Additionally, frontier Red Sea acreage will be made available in the Ganope 2019 Round.
Figure 3: Egyptian Licensing Rounds
Although not a licensing round, Côte d’Ivoire has hosted a series of extremely successful promotions through 2017-2018, with very attractive fiscal terms, and almost all acreage in the Eastern part of the country has been snapped up. Petroci is expected to continue promoting blocks in the western area, which is largely unexplored, through 2019.
Following the expiry of Total’s Technical Evaluation Agreement for the Ultra-Deepwater area in Senegal in March 2019, there will also be acreage opportunities here, both to farm-in to the acreage that Total is to acquire as a full PSC, and also via a potential licensing round that is anticipated to be launched at some point following the passage of the new Petroleum Code. Several other countries have new laws in the pipeline, including South Africa, Nigeria, and Kenya. Licensing rounds may be held in these counties following the ratification of legislation, but realistically these will not take place until 2020 at the earliest. Other countries where licensing may take place includes Liberia, where new blocks have been delineated, and the Nigeria-São Tomé JDZ.
In mid-February 2019, the new President of Madagascar suspended the Morondava Basin Licensing Round. Fiscal terms for the round were to follow the 1996 Petroleum Code, rather than under an updated law which has been under creation. At the time of writing it is unclear whether the President intends to pass a new law prior to re-opening bidding. Sierra Leone also suspended its 4th Licensing Round in September 2018. It was to launch industry consultations before re-launching bidding, which may take place in 2019.
Of the 18 African bid rounds that were held from 2014-2018, very few were successful. Only four saw multiple (ratified) awards made to companies with the technical and financial capacity required to operate without a farm-out (these were the 2015 and 2018 Egyptian EGAS rounds, the 2016 Congo offshore round, and the 2015 Mozambique Round). Many of the others (including the 2016 Gabon Round, the 2014 Tanzanian Round, the 2014 Angolan Round, and the 2014 Liberian Round) did not result in a single award being ratified. The major reason behind this was the unsuitability of the fiscal terms on offer, many of which had been revamped for US$100/bo exactly at the time that this scenario was ending. Where blocks have been awarded through the downturn it has generally been via direct negotiations, in frontier countries where fiscal terms are better.
Legislative uncertainty will remain an issue for many of the 2019 licensing rounds which have been launched before new laws have been ratified. However, it is also important that any ongoing changes to legislation are not rushed through parliament just to meet the requirements of oil companies; if the long-term needs of populations are not being met, the industry’s social license to operate will be further jeopardized. Where countries get it right, they are likely to be rewarded with high levels of investment; Côte d’Ivoire is a good example.
In many countries, simultaneously with legislative changes being made, significant volumes of new seismic data have been acquired. This has taken place as service companies have looked to utilize vessels which were not being awarded contract work through the downturn and has meant that almost all bid rounds now are accompanied by modern, and in many cases expensive, technical data packages. Most licensing rounds are also receiving some degree of support from one or more service companies, who are under pressure to sell data packages to recoup money invested. This will mean that exploration work can take place at a much faster pace on any awarded blocks but has probably contributed to the fact that companies are struggling to assess all the data that is available to them.
Overall it is a very exciting time for exploration in Africa and it is anticipated that most, if not all, of the opportunities on offer will generate interest from the industry.
Want to know what other regions you should be watching? Check out this report for more on 2019 global regions to watch.
On 8 May 2018, Noble Energy signed a Heads of Agreement (HoA) with the Equatoguinean Government, to supply gas to the Punta Europa LNG plant and the Alba Plant LPG facility, both located on Bioko Island. This is the first part of the Government’s gas MegaHub project, announced in May 2018 – which can be viewed as part of its ambition to become a major regional player in oil & LNG in Africa and beyond
Discussions and negotiations surrounding further gas development projects in Equatorial Guinea have been ongoing for a number of years. At present the country produces some 3.4 MMt/a LNG from the Punta Europa plant (also known as EGLNG), which came onstream in 2007, operated by Marathon Oil (60%), with state-owned Sonagas (25%), Mitsui (8.5%) and Marubeni (6.5%). Gas is supplied to the plant via pipeline from Marathon’s Alba gas-condensate field, located some 30 km NW of Bioko Island. According to third party sources, 65 cargoes were shipped from the plant in 2017 to markets including Argentina, China, India, Japan, Jordan, and South Korea. For many years the Government has been eager to see the construction of a second LNG train here, believing that gas reserves from Alba could support a new development. However, there have been repeated questions as to whether this is commercially feasible as reserves at Alba are dwindling and production is expected to fall dramatically after 2019/2020.
Figure 1: Location of Punta Europa LNG plant and Alba & Alen fields
The HoA signed with Noble Energy provides a framework for the development of gas from the offshore Alen gas-condensate field, including the construction of a 65km gas pipeline to the facilities at Punta Europa. Gas from the field is currently reinjected. If the project is sanctioned, Noble will monetise an additional 600 Bcfg and the life of the 3.4 MMt/a Punta Europa LNG facility will be extended; however these additional reserves are not expected to lead to an increase in the volumes of LNG produced at present.
The Alen Field is located on Block O/I, where Noble has made a number of discoveries and produces oil and condensate from the Alen and Aseng fields. Other fields on the blocks include the Diega and Carla South oil & gas fields. Noble had submitted a Plan of Development for these fields in 2015, however the Government was unwilling to approve this. Instead, it signed an agreement with OneLNG (a consortium of Schlumberger and Golar LNG) in May 2017 in order to investigate the technical and commercial feasibility of an FLNG project on these blocks, aiming to reach an agreement at some point in 2018. Whilst it is currently unclear what the status of this agreement is it seems more plausible that gas from these fields will now be developed via the onshore plant, in a future phase of development for the MegaHub project, rather than through any new FLNG development, which would likely be far less cost effective then utilizing in-place facilities.
It is also possible that gas from the YoYo/Yolanda field (which straddles the maritime border between Equatorial Guinea and Cameroon, operated by Noble Energy on both sides) may also be eventually processed at Punta Europa. In mid-2017, Noble Energy signed an agreement with both governments to develop the fields jointly. Resources for Yo Yo are estimated at 47 Bcfg and 18 MMbc, whilst resources for Yolanda have been estimated at 27 Bcfg. However, Cameroon has also brought an FLNG plant onstream; the Golar “Hilli Episeyo” vessel, only the second FLNG vessel in operation globally. It commenced FLNG production from the Perenco-operated Kribi gas fields in March 2018. Therefore, the Cameroonian Government may be keen to see gas from Yo Yo/Yolanda developed at Kribi, instead of at Punta Europa. Keppel (Singapore) converted the “Hilli Episeyo” vessel from a 1975 Moss LNG carrier, which had a 125,000 cu m storage capacity. It is the first such FLNG vessel conversion and took three years to complete. The conversion budget was US$ 1.2 billion. The gas resources earmarked to be tapped are around 500 Bcf (but with future upside), with production expected to reach 1.2 MMt/a. Gazprom has signed to take all the LNG product for an 8-year period. Cameroon had also studied the possibility of constructing an onshore 3.5 MMt/a LNG plant at Kribi (to be supplied with gas from the New Age operated Etinde fields), however, Engie (formerly GDF Suez) suspended the plans for the US$ 5 billion project in 2016, due to unfavourable market conditions. Whilst the Etinde fields are just 35km away from Punta Europa, regional politics means it is unlikely that gas from these fields will be developed via the MegaHub project.
Figure 2: Cameroonian fields
The “Hilli Episeyo” vessel was seen as a forerunner to Ophir Energy’s Fortuna FLNG project, to be located on Block R, in the west of Equatorial Guinea’s maritime area and some 100km west of Bioko Island. Ophir currently operates Block R with 80% equity, GEPetrol holds the remaining 20%. However, after a Final Investment Decision is made on Fortuna, the Fortuna Joint Operating Company (JOC) will hold Ophir’s 80%. The JOC is comprised of Ophir (33.8%) and One LNG (66.2%). The parties signed a detailed Umbrella Agreement in April 2017, establishing the full legal and fiscal framework for the project. Following this, midstream contracts were awarded in May 2017 and upstream contracts in October 2017. In late August 2017, the principal commercial terms for a sales and purchase agreement for 50-100% of the offtake from the project were also agreed with Gunvor Group, and Gunvor was nominated the preferred LNG buyer (it was also rumoured to be in discussions with Sonagas regarding the financing of Sonagas’ potential acquisition of 30% of the project). The final stage required for the project before the Final Investment Decision was taken was for project financing, worth some US$ 1.2 billion, to be completed. Ophir was initially expecting to have completed this by end-2017 and was in discussions with Asian lenders, including the Industrial and Commercial Bank of China (ICBC). However, ICBC was keen that the projects planned LNG output was sold exclusively to CNOOC and that engineering, procurement and construction contracts went to Chinese-state companies. Talks are still ongoing with other Asian lenders; Western banks are said to be less keen on the project due to Equatorial Guinea’s opaque political situation.
The Government has now set a December 2018 deadline for Ophir to complete project financing for Fortuna. Ophir was granted a one-year extension to Block R in November 2017, with the licence now expiring in mid-December 2018. Oil Minister Gabriel Obiang Lima has stated that the Government has a clear idea as to which company would be granted the licence if Ophir is unable to continue with the development. It is possible that if Ophir is unable to complete the financing deals required that gas from Fortuna would then be utilized at the planned MegaHub project – possibly providing enough gas for the much-coveted second LNG train.
Figure 3: Potential other sources of gas for LNG MegaHub
The final potential source of gas for future phases of the MegaHub project is from ExxonMobil’s Zafiro Field. The oil field was discovered in 1996 and brought onstream in 2003. It has produced over 1 billion barrels of oil to date (from an estimated ultimate recovery of ~1.2 billion barrels). Gas is currently flared; however, the Government has been keen to halt this. Given the maturity of this field, it seems unlikely that major new investments will be made here unless significant additional reserves are proven.
The Government is currently in discussions with new potential LNG buyers from Punta Europa; its existing 17-year agreement to sell LNG to BG (Shell) will expire in 2020. For various reasons, the BG deal is widely considered to be one of the most lucrative LNG supply deals ever signed, and the Government is keen to ensure it receives a far higher share of profits in future. Talks are progressing with CNOOC, Lukoil, Total, Vitol, Shell and a Lukoil/New Age JV. Supply deals will be offered for 3-5 years.
The Government is also in talks with a number of Africa countries regarding the supply of LNG via the LNG2Africa initiative, which aims to encourage the use of LNG in Africa, using Africa-sourced gas. A summary of the discussions held so far include:
- In early-April 2018, Togo signed a memorandum of understanding (MoU) with Equatorial Guinea to facilitate the trade of LNG between the two countries. Under the agreement, Togo will assess options for the import and regasification of LNG, and its use for power generation. A framework for Togo to import LNG produced in Equatorial Guinea is also provided.
- Burkina Faso also signed a MoU with Equatorial Guinea in September 2017 under which the two governments aim to negotiate an LNG sale and purchase agreement and a terminal use agreement. A technical study will also be commissioned for the construction of LNG regasification and storage facilities, and associated transportation infrastructure in Burkina Faso.
- Equatorial Guinea also signed a framework agreement for the export of LNG to Ghana in August 2017, which is in the market to import some 250-500 MMcfg/d; despite Ghana having indigenous gas production from the Jubilee Field and the Sankofa Field, the country has struggled to supply enough gas to satisfy its restricted demand. Ghana is also supplied with pipeline gas via the West Africa Gas Pipeline, however, supplies through this source are unreliable.
- Discussions have also taken place with Mali, Morocco, South Africa and Guinea, plus Angola where talks have now ended.
All these discussions should, of course, be viewed in light of the “Africa Unite” theme that Equatorial Guinea is pursuing, under the belief that if the oil producing economies of the continent can work together they will hold much greater sway on the global stage. To this effect, a number of E&P co-operation agreements with various countries have also been signed, including with Angola, Mozambique, Uganda and South Sudan. Equatorial Guinea became the 14th member of OPEC in May 2017; declaring its intentions to become a representative voice for smaller Africa producers. It has been pushing for more African countries to join the cartel. Whilst its oil production is declining, global LNG demand is rising, and a well-planned gas and LNG strategy could well result in the Equatorial Guinea’s increasing dominance in the Africa E&P sphere.
Kenya – Pate 2 – L4 – Operator Zarara plans to start drilling in January 2018
Zarara Oil & Gas is expected to spud the Pate 2 appraisal well in January 2018. The environmental licences for the planned drilling campaign were approved by Kenya’s National Environment Management Authority (NEMA) in October 2017 and will be valid until July 2019. The Great Wall Drilling Company Ltd has been contracted to carry out drilling operations; the GWDC 190 land rig is likely to be utilized. Norwell Engineering is progressing with the planning and design of the drilling programme, which currently involves Pate 2 & 3 and the option of two additional appraisal wells.
Figure 1: Pate appraisal well location
The estimated total project cost stands at approximately US$ 15.7 million. Pate 2 has a 4,600m PTD (to be a vertical well), which Zarara has estimated will take ~120 days to drill, test and complete. The primary target is the Kipini Sand Group; a fluvial and deltaic facies, which has been described as poorly sorted and unconsolidated, but has also been reported to have good net log porosity. A deeper Upper Cretaceous Kofia sand, which was penetrated by the offset Kofia 1 well, may also be a secondary target. The well is appraising the Pate gas discovery, in the Lamu Basin, which was drilled by the Pate 1 well in 1970. Pate 1 reached a 4,175m MD and encountered an over-pressured 10m gas-charged, Lower Eocene-aged sand (Basal Kipini reservoir) at TD. It was targeting a dip closure on the SW extension of the Mararani-Dodori anticlinal trend, with Lower Tertiary and Upper Mesozoic objectives, which had previously been encountered in the Dodori 1 well (1964, small shows and traces of bitumen in the Palaeocene). However, due to technical problems during drilling, Pate 1 was neither logged nor tested and failed to fully penetrate the reservoir section. Zarara is a wholly owned subsidiary of Midway Resources International and holds a 75% WI and operatorship for the L4 and L13 licences; the remaining equity is held by SOHI Gas Lamu Ltd (a wholly owned subsidiary of Swiss Oil Holdings International Inc) (15%) and NOCK (10%). The interest held by these companies is free-carried until final approval of planned commercial production. However, Zarara has negotiated a Heads of Agreement for the eventual acquisition of the 15% interest from SOHI Gas Lamu Ltd.
Figure 2: Planned well locations Q1 2018