Over
the next five years, capital expenditure is to be cut by US$100 bn in
Sub-Saharan Africa, including exploration cuts will contribute to 46% oil
production decline by 2030.According to Wood Mackenzie’s latest report on
upstream activity in the region, capital investment in the oil and gas industry
in Sub-Saharan Africa has been cut by US$100 billion over the next five years. Major
oil companies are heavily invested in Sub-Saharan Africa and account for the
bulk of cuts. Governments in Sub-Saharan Africa need to revive the industry
with attractive fiscal terms but so far, East Africa’s emergence as a major
global gas region is the industry’s biggest recent success in Sub-Saharan
Africa. Femi Oso, senior research manager for Sub-Saharan Africa at Wood Mackenzie,
says: “Exploration cuts in the region will also contribute to a longer-term
production slump as explorers have shied away from greenfield prospects, in
favour of appraising known discoveries. However, the confirmation of the giant
Owowo discovery in deepwater Nigeria shows the quality of resources Sub-Saharan
Africa still has to offer.” Wood Mackenzie expects a slow recovery for
exploration. Operators will benefit from cost deflation and will improve
efficiency through streamlining project design.
Governments
in Sub-Saharan Africa need to revive the upstream oil and gas industry by
offering attractive fiscal terms rather than look to increase state revenues in
the current climate,” says Oso.Mozambique
and Tanzania. The biggest upstream success story in Sub-Saharan Africa is East
Africa’s emergence as a gas region of global importance. With over 168 trillion
cubic feet of gas found and limited regional demand, East Africa is on track to
become a major global LNG supplier and various export projects are awaiting
final investment decision.According to Wood Mackenzie’s research, Mozambique
and Tanzania gas project economics are resilient and will “transform the global
LNG market”.“Mozambique and Tanzania’s LNG projects have remained relatively
unscathed by cuts and will be timed to align with global LNG demand growth to
achieve a better price,” explains Oso. “The projects will appeal to buyers
looking to diversify their portfolios and BP has already committed to offtake
all volumes from Eni’s Coral FLNG,” he adds.“The expected increase in gas
production in Sub-Saharan Africa, from 6 bn cubic feet a day (bcfd) currently
to 13 bcfd next decade, is very good news for the region.”
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