Page 5 - AfrOil Week 10 2022

AfrOil COMMENTARY AfrOil

To be noted, it was previously estimated that SP: One way for sub-Saharan African gas
BirAllah would see a delayed timeline of devel- producers to go about taking advantage of the
opment, especially after the [Greater] Tortue situation, [in which] some European nations are
Ahmeyim (GTA) scheme [offshore Senegal] looking to end/minimise their gas supply trade
was downsized from the initially planned 10mn relations with Russia, would be to showcase
tonnes per year capacity to 5mn tpy. [their] large natural gas potential and secure
Shell and Equinor’s exits from Russia can long-term LNG supply contracts – and then
mean increased focus on the currently less spo- focus on accelerating the upstream development
ken about Tanzania LNG. ExxonMobil’s exit and LNG export infrastructure development to
from Russia can mean acceleration of [the] cur- fulfil these contracts.
rently phased-out development of Mozambique Many upstream gas developments are
LNG. delayed in sub-Saharan Africa, and LNG
Europe has been one of the two main import- export infrastructure plans are [being] phased
ers of Nigerian LNG, with the other being Asia. out. [Demonstrating the capacity] to develop
Nigeria is bumping up its LNG export capacity potential and transform as a long-term supplier
from 22mn tpy to 30mn tpy, and this can mean should be the focus if sub-Saharan African gas Natural gas
increased focus on natural gas development in producers want to replace Russia as an LNG/
the country to feed the Nigeria LNG plant. natural gas exporter to Europe. developments in
As such, the natural gas developments in the
region can seem more attractive to the investors Frontier provinces Africa may seem
now as this not only helps fill the possible void Q: Will higher oil prices make relatively high-
of supply to Europe but is also in line with the cost projects (such as, perhaps, ultra-deepwater more attractive to
energy transition strategy to focus more on nat- development offshore Namibia) a more attrac- investors now
ural gas developments compared to crude oil. tive long-term proposition?
Derek Boulware: Put in simple terms, the SP: The Venus and Graff discoveries offshore
events of the last month make sub-Saharan Namibia have definitely opened up a new explo-
Africa’s upstream more attractive. Of course, ration play, where more exploration activity can
the same argument applies to other regions, but pick up. But as far as development of these or the
some of the countries in sub-Saharan Africa other sub-Saharan African deepwater discover-
had been making good progress in drawing in ies is concerned, it still remains to be seen if the
investment. These countries can continue to current high oil prices will act as an accelerator
pull in the dollars as long as they stay on that or have long-term implications.
path. From an M&A [mergers and acquisitions] The current oil prices are driven by a crisis,
perspective, the current market may suppress which when solved will eventually lead to a more
deal-making. Producing assets will be generat- stabilised market at a relatively lower oil price.
ing substantial cash flow right now, a disincen- There are many other factors – fiscal, adminis-
tive to sell. trative and other above-the-surface factors that
Furthermore, the current high prices and either drive development or act as deterrents to
extreme market uncertainty in the near to deepwater development in sub-Saharan Africa.
medium term make asset valuations and closing So it cannot be said that the current high oil
the buyer-seller gap very tough. price environment will have a long-term pos-
itive impact on the cost-intensive deepwater
Seeking advantage developments off sub-Saharan Africa.
Q: Is there a way for oil and gas producers in DB: Sustained higher prices will indeed
sub-Saharan Africa to take advantage of some make higher-cost projects more attractive.
Western countries’ desire to disengage with Rus- However, it’s important to note that invest-
sian suppliers? ment in new greenfield developments, espe-
DB: Russia is the world’s second-largest oil cially in remote areas like Namibia, which will
exporter. Companies no longer purchasing Rus- take some years to get to first oil, are based on
sian crude will need to source it from elsewhere, long-term oil price assumptions, not what is
which could increase competition for sub-Saha- happening now or forecasts over the next 12-24
ran African crude. months. ™

Angola LNG plant (Photo: Chevron)

Week 10 09•March•2022 www. NEWSBASE .com P5