Oil & Gas Exploration in Emerging African Markets

Improving Political Scenario and Infrastructure Developments in Africa Will Encourage Oil and Gas Exploration Activities
Oil and gas exploration in Africa is gaining momentum due to improving political conditions and developments in infrastructure in the region.
The initial hydrocarbon exploration activities in Africa started in the early 20th century. Due to the First and Second World Wars, the exploration activities in the region were severely affected. After the Second World War, exploration activities continued. In the 1970s and 1980s, the exploration and development activities were hampered due to the political instability and inadequate infrastructure. The inaccessibility of several parts of Africa was also a deterrent in attracting investment for the development of the oil and gas industry in the region.

Since the early 1990s, efforts from the United Nations and other countries have helped to stabilize political conditions in African countries such as Mozambique and Namibia. Financial and military assistance from global organizations such as the UN and International Bank for Reconstruction and Development (IBRD) has helped to maintain peace in the region. With improving political stability, African countries are witnessing a steady increase in the participation of foreign companies in their upstream sectors. Many foreign companies have formed joint ventures (JVs) with domestic companies for exploration and production activities by providing technological and infrastructural enhancements. ENI, an Italian oil and gas company, is carrying out exploration activities in Ghana and Mozambique in collaboration with the countries’ respective National Oil Companies (NOCs).

Emerging Oil Exploration Countries in Africa Have High Potential for Oil and Gas Resources
The continent’s huge potential for petroleum reserves has made Africa a lucrative region for oil and gas exploration activities. The results of preliminary geological studies suggest that emerging investment destinations in Africa such as Ghana, Mozambique, Madagascar, Namibia and Tanzania are estimated to hold large amounts of oil and gas resources. Ghana’s Jubilee oil field, which started production in December 2010, is expected to produce 120,000 barrels of oil per day (bopd) by 2012. The field is also expected to produce approximately 12 million cubic feet per day (MMcfd) of natural gas. In Mozambique, four gas fields in the Rovuma basin have been discovered, which have huge oil and gas potential. In Madagascar, it is estimated that out of the 600,000 square miles that make up Madagascar, half of the island covers the heavy oil-rich sedimentary basins of Morondava, Majunga and Ambilobe. Tanzania has been establishing itself as a major gas producer in East Africa through the development of its two gas fields – Songo Songo and the Mnazi Bay.

Offshore Exploration Blocks Account for Around 60% of the Total Exploration Blocks in Emerging African Markets
In Africa, about 57.9% of the total active and planned exploration blocks are offshore. Exploration in offshore blocks requires more complex technology than exploration in onshore blocks. Due to the need for advanced technologies in offshore exploration, the role of foreign companies in Africa has increased. The collaboration of African countries with foreign oil and gas exploration companies will help to attract financial investments and advanced technologies.
Emerging Oil and Gas Exploration Market, Africa, Share of Offshore and Onshore Exploration Blocks (%), 2010
Source: GlobalData, Oil and Gas eTrack, Exploration Database

Foreign Companies Lead the Way for Hydrocarbon Exploration in Africa
Oil and gas exploration activities in Africa are carried out by both the NOCs of the respective countries and also by many International Oil Companies (IOCs) and other foreign companies. Due to technological and financial constraints on their NOCs, the licensing authorities in many African countries have granted exploration licenses to foreign companies.

The involvement of foreign companies in exploration projects brings in financial assistance and advanced technology. Foreign companies have equity stakes in most of the exploration blocks in Africa. The equity stakes for an exploration block are granted for a limited period. After the term of exploration is over, the companies have to relinquish the blocks. During the exploration period, the government, may or may not have an equity stake in the exploration blocks. In fact, only 30.5% of the total active exploration blocks in Africa have equity stakes owned by NOCs.
Emerging Oil and Gas Exploration Market, Africa, Equity Stake of National Oil Companies in Active Exploration Blocks (%), 2010
Source: GlobalData, Oil and Gas eTrack, Exploration Database

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