Page 5 - AfrOil Week 21 2021

AfrOil COMMENTARY AfrOil

Bir Rekaiz (Phase 1) in Algeria and Oryx in of capital in the system, the “question is: how
Chad. much pressure due [to] lack of spending will
Meanwhile, Jersing added that just three catalyse fiscal changes/stability sufficiently to
planned project FIDs – for Block 32 & Agogo re-attract capital in E&P?”
in Angola, plus Cameroon’s Etinde – “comprise
50% of potential reserves additions and 70% of Hotspots
capex spend”. As investors come under increased capital allo-
As access to capital continues to become cation scrutiny, they will likely focus on higher
trickier, he adds that many higher cost/carbon margin, infrastructure-led exploration (tie-
intensity projects are likely to be delayed or backs) and phased developments with shorter
stranded with overarching public market driven cycle times in more ‘liquid’ and stable jurisdic-
ESG requirements influencing capital allocation, tions primarily onshore.
noting that those with breakevens above $40 per Licensing rounds are expected to close in
barrel are particularly under threat. Angola, Egypt, Liberia and Senegal between May
“Continued project delays are likely to limit and August, while numerous other countries will
production increases and lead to the lowest continue to pursue direct negotiations for availa-
reserve additions since the early 1980s and ble acreage. Jersing notes that only a few of these
around 50% lower than in 2015,” Jersing said. are likely to “be successful due [to] acreage qual-
However, there is light at the end of the tun- ity, risk of stranded long-cycle assets and lack of
nel, with economies expected to rebound quickly discretionary capital in the system”.
during the second half of the year despite debt Those he views as more likely to enjoy suc-
vulnerability and limited fiscal flexibility slowing cess are Egypt, which continues to benefit from
the pace of the recovery for some. Jersing notes sustained activity, a flexible fiscal environ-
that “those countries with an ‘open for business’ ment, subsurface success and asset churn; and
approach, stability and bureaucratic flexibility if held, Senegal protection acreage adjacent to
such as Namibia, South Africa, Egypt, Angola, the Grand Tortue Ahmeyin LNG blocks. Libe-
Equatorial Guinea, Gabon, and more recently ria’s regulatory flexibility is unlikely to counter
Uganda and Tanzania, should do better in terms a lack of overseas interest in the Harper Basin
of progressing their oil and gas agendas than blocks, though seven domestic firms have been
their peers”. pre-qualified. Resource materiality will likely be
The willingness of host countries to adapt to a limiting factor in Angola’s onshore.
this new reality is also likely to play a significant Offshore Angola has, however, recently wit-
role in their success. nessed a novel joint venture tie-up between BP
Jersing sees continued fiscally regressive and Eni, in order to efficiently harvest mature
operating environments as “the single most upstream assets. It is likely that IOCs will look to
challenging risk on the continent”. With fewer duplicate this innovative commercial approach
companies focusing on a smaller top quartile elsewhere on the continent. With regards to
producing barrel opportunity set owing to a lack Gabon’s 23 open deepwater blocks, existing gas

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