Regional Report: Nigeria/Angola

Although Africa is the world’s poorest and least-developed continent, it is rich in natural resources and home to several up-and-comers in global E&P. In particular, the offshore sectors of Nigeria and Angola—its top producers—continue to be prolific drilling locations in the region.

NIGERIA

As Africa’s largest oil producer, Nigeria’s E&P sector plays a leading role in the growth of its economy. Petroleum accounts for approximately 40% of the country’s GDP, and about 90% of its foreign income. However, war and disruption in the Niger Delta, Nigeria’s main oil-producing region, continues to impede output, particularly onshore.

Following his re-election, Nigerian President Muhammadu Buhari is facing an uphill battle to keep his promise to end Nigeria’s addiction to oil. The West African nation is aiming to be self-reliant in meeting its fuel demand and cutting imports, which are straining foreign reserves. “Oil revenue is still what dictates government spending, and they will need to keep production going,” Lagos-based analyst Jubril Kareem, Ecobank Energy Research, told Bloomberg. “Buhari has to be very smart in handling the situation, because any disruptions will impact government revenue.”

Regional strife. Last year, environmental and human rights controversies deteriorated to the point that Shell initiated talks to offload Licenses 11 and 17. Sale of the two blocks was a move that the company made in an effort to reduce its exposure to the region’s turmoil. It wasn’t the first, however, as Shell reportedly has sold billions worth of Niger Delta assets in the past decade amid local opposition, civil conflict and militant attacks. The sale also would allow the company to focus more on its assets offshore Nigeria, where risks are significantly lower.

However, in March 2019, Nigerian President Muhammadu Buhari ordered state firm Nigerian National Petroleum Corporation (NNPC) to hand over operatorship of OML 11 to Nigerian Petroleum Development Company (NPDC). And Buhari instructed NPDC to proceed with reopening oil production in Ogoni area of OML 11 after a 29-year hiatus. NPDC has identified six fields with 118 wells that could be restarted, albeit in a field-by-field manner.

Shell has been operating in the West African nation since the 1950s and remains among its largest oil producers. The company even announced plans in April to invest another $15 billion in the country’s oil and gas sector. Bloomberg reported that Shell’s 2017 share of total production in Nigeria was 266,000 boed, which was up from 258,000 the year prior. In its annual report, however, Shell said that “security issues, sabotage, and crude oil theft in the Niger Delta” continue to be its biggest challenge.

Offshore. Meanwhile, other operators are moving offshore in search of safer oil development. Early this year, the largest offshore production vessel ever delivered to Nigeria started pumping crude from Total’s Egina field, about 93 mi off the coast of Nigeria. The project is expected to boost the country’s oil output by approximately 10%. One of the most ambitious projects in Nigeria’s history, Egina also is expected to help push the country’s production to a record level by 2022.

The FPSO unit used to develop Egina field is the largest ever built by Total. According to the company, the field is the second development to begin producing on OML 130, following start-up of Akpo field in 2009. At plateau, Egina reportedly will produce 200,000 bopd, representing approximately 10% of Nigeria’s total production.

The block also produced the Preowei discovery, which likely will see an investment decision sometime this year. Total operates OML 130 with a 24% interest, Fig. 1. Its partners include NNPC, South Atlantic Petroleum (15%); CNOOC E&P Nigeria Limited (45%) and Petrobras Oil and Gas BV (16%). In addition to OML 130, Total operates OML 99, which holds the Ikike discovery, as well as OML 100 and OML 102, which is where the Ofon 2 project was completed in 2016.

Fig. 1. OML 130, situated in the deepwater Niger Delta, contains the onstream Akpo gas-condensate field, the giant Egina field, and the undeveloped Preowei field. Source: Total.

LNG expansion/Production. Nigeria also is joining nations, like the U.S. and Australia, in increasing LNG output to meet rising demand in China and the Middle East. It took steps last year to expand its LNG capacity by a third, outlining a $12-billion program to help it keep up with competitors. In July 2018, Nigeria LNG—a JV involving NNPC (49%) and three oil majors (Shell Gas BV, 25.6%; Total LNG Nigeria Ltd., 15%; and Eni International, 10.4%)—signed engineering and design contracts for a seventh facility on Nigeria’s Atlantic coast. The existing six trains reportedly produce about 22 MMtpa, which amounts to roughly 10% of the world’s LNG consumption.

“Our vision is to be a global player that helps to build a better Nigeria,” Tony Attah, Nigeria LNG’s CEO, told Bloomberg. “We are looking forward to the growth. When I am talking about growth, I am talking about Train 7. We have the support we need, we have the support from the shareholders, from the government, from the board of directors.”

Shell agrees that gas is the answer in Nigeria, after decades of discord. Bloomberg reported that Nigeria’s gas reserves are thought to be the largest in Africa at 5.2 Tcm, according to BP data, and domestic gas production has been rising steadily over the last decade. Last year, it reached 47.2 Bcm, which is up from the 35 Bcm reported back in 2007. Ed Ubong, managing director of Shell Nigeria Gas, told Bloomberg that the oil major was seeking to develop the country’s domestic energy market around natural gas, because it is abundant, more difficult to steal, better for the environment, and can fortify a robust industrial sector that could potentially employ thousands.

Oando Plc, one of Africa’s largest energy companies, also has been working to expand in Nigeria. In August 2018, the company announced its plans to boost crude output after curbing the $2.5-billion debt it had built up since 2014. CEO Wale Tinubu told Bloomberg, “We have purchased enough reserves and our job should really be to exploit those reserves.” Oando reportedly has more than 450 MMbbl of reserves, and has interests in 14 oil exploration licenses in Nigeria. Its Oando Energy Resources unit aims to boost production to 75,000 bopd by 2023, up from 40,000 bopd. Tinubu said that the company also will seek acquisition opportunities, to help exceed that goal.

ANGOLA

Situated on the west coast of south-central Africa, Angola is the continent’s seventh-largest country and its second-largest oil producer. Of late, the country’s sizeable and expanding oil and gas sector is becoming more appealing to E&P companies around the world. It is working hard to attract foreign investors, prompting its South African neighbors to do the same.

A new strategy. Angola recently released a new oil licensing strategy through 2025. It also reportedly is about to launch a bidding round for the first time, which will include marginal oil fields with an attractive fiscal framework. The tenders for nine offshore blocks are part of Angola’s strategy to lure back explorers who cut spending after the 2014 oil price crash and, in turn, caused the oil-dependent nation’s output to decline.

According to Angolan Oil Minister Diamantino Azevedo, the nine blocks are in the Namibe basin. The basin reportedly is home to prospects comparable to those so prolific in the Santos basin, offshore Brazil, according to a 2013 white paper from PGS. Both pre- and post-salt petroleum plays have reportedly been proven in the Angolan offshore. In addition to the Namibe basin, the frontier Kwanza and Benguela basins of Angola are also believed to hold incredible potential for hydrocarbons.

Bloomberg reported in April that Angola’s government is offering tax concessions for companies developing smaller fields, while also cutting bureaucracy and selling parts of state-owned Sonangol EP to help draw in investors.

Because Angola is still in recovery mode after the oil price collapse, as well as years of low investment and aging fields, the country’s oil concessions are now being overseen by the National Agency for Petroleum, Gas and Biofuels (ANPG),
a new and independent agency that took over from state-owned Sonangol.

The African Energy Chamber claims that Angola is emerging as an African hub of foreign direct investments, particularly for oil and gas. The ambitious reform agenda of Azevedo and President Joao Laurenco already has resulted in increased investment from the country’s biggest European operators. Over the past few months, alone, Angola’s energy sector reportedly has attracted well over $1 billion of new investment.

Production. Despite its new investment strategy, Angola’s crude output is still expected to fall to 1.434 MMbpd this year, down from 1.479 MMbpd last year. As global E&P companies enter Angola in search of their next big find, Italian company Eni already has been a leading operator in the region since 1980.

In March 2018, Eni and Sonangol reported the start-up of oil production from the Ochigufu project, on Block 15/06. The field, situated in Angola’s deep offshore, is in 4,265 ft of water, about 236 mi northwest of Luanda. Its subsea wells are connected to the Sangos production system and, from there, tied into the N’Goma FPSO vessel, which is in the West Hub of the block. Ochigufu followed other multiple start-ups on the block—including that of Sangos field in 2014, Cinguvu in 2015, Mpungi and Mpungi North in 2016, and East Hub in 2017. Less than two months after start-up, Eni announced the ramp-up of Ochigufu. With a production plateau of 24,000 bopd, operated production from Block 15/06 reportedly was stabilized above 150,000 bopd.

Eni also announced start-up of production from Vandumbu field in Block 15/06 last December. According to the company, first oil from Vandumbu was achieved in late November 2018, three months ahead of schedule. This, along with the start-up of a subsea multi-phase boosting system in early December, improved the block’s overall oil production by 20,000 bopd via West Hub’s N’Goma FPSO. The company said that ramp-up of Vandumbu was expected to be completed during first-quarter 2019 with peak output at 170,000 bopd.

Just one month later, Eni successfully launched an additional production well at Vandumbu. The start-up of the VAN-102 well took place through the FPSO and reportedly achieved a rate of about 13,000 bopd. The company reported that start-up of the well, as well as that of another production well at Mpungi, brought the block’s production to a peak of about 170,000 boed.

Exploration. Of late, Eni has led the way in exploration success offshore Angola. Block 15/06 continued to reap rewards for Eni last year, yielding several new discoveries, Fig. 2.

Fig. 2. Since the Block 15/06 JV launched its exploration efforts over a year ago, its five discoveries make up an estimated 1.8 Bbbl of light oil-in-place, with possible upside. Source: Equinor.

In June 2018, Eni reported that the Kalimba-1 NFW well, just 31 mi southeast of the Armada Olombendo FPSO (East Hub, Fig. 3), proved over 75 ft, net, of high-quality oil pay contained in Upper Miocene sandstones, with excellent petrophysical properties. The company reported that data acquired from the drillsite indicated a production capacity in excess of 5,000 bopd. The discovery—which was estimated to contain between 230 MMbbl and 300 MMbbl of light oil in-place—was important to exploration in the block, because it reportedly opened up new opportunities for oil exploration in the southern portion.

Fig. 3. The <i>Armada Olombendo FPSO</i>, which operates on the East Hub of Block 15/06, can handle production of 80,000 bopd, 120,000 bpd of water injection, and 120 MMscf of gas handling, and has net storage of 1.7 MMbbl. Photo: Eni.

Eni reported another discovery on Block 15/06 in December, when the Afoxé-1 NFW well, nearly 12.5 mi west of the Kalimba-1 discovery, proved more than 65 ft, net, of high-quality oil pay in Upper Miocene sandstones. The well had been drilled to a TD of nearly 5,653 ft, in approximately 2,559 ft of water. The discovery was estimated to contain between 170 MMbbl and 200 MMbbl of light oil-in-place. Eni said that the Kalimba and Afoxé finds accounted for up to 400 MMboe to 500 MMboe of high-quality oil-in-place and represented a new cluster that can be jointly developed.

In a release, Eni CEO Claudio Descalzi said, “Eni is committed to developing this discovery, leveraging its best-in-class time-to-market, whilst at the same time launching an intense exploration campaign that will fully support the company’s mid-term organic growth in the country.”

By March, Eni reported its third commercial find on Block 15/06. The Agogo-1 NFW proved a single oil column of approximately 666 ft, with nearly 394 ft of net pay of high-quality oil contained in a sub-salt diapirs setting in Lower Miocene sandstones. It was drilled by the Poseidon drillship in a water depth of more than 5,367 ft, and reached a TD of nearly 14,600 ft. Data acquired from the drillsite indicated a production capacity of more than 20,000 bopd. According to Eni, the Agogo discovery is estimated to contain between 450 MMbbl and 650 MMbbl of light oil-in-place, with further upside.

Block 15/06 produced its fourth discovery during
May 2019. Eni reported that its Ndungu-1 NFW, situated just a few miles from the West Hub facilities, proved a single oil column of about 213 ft, with nearly 148 ft of net pay of high-quality oil. It also was drilled by the Poseidon drillship, reaching a TD of more than 13,287 ft, in a water depth of about 3,530 ft. Data collected reportedly indicated a production capacity in excess of 10,000 bopd. Overall, the discovery was estimated to contain up to 250 MMbbl of light oil-in-place, with further upside.

According to Eni, Ndungu was the first significant oil discovery in Angola inside an already existing development area. Because it is so close to Mpungi field, Ndungu will likely be fast-tracked to production, which will then be routed to the N’Goma FPSO. This is expected to further extend the West Hub’s production plateau.

In June, Eni reported its fifth oil find on Block 15/06. The Agidigbo-1 NFW, drilled by the West Gemini drillship, reached a TD of 12,467 ft and proved a single hydrocarbon column composed of a gas cap of nearly 197 ft and 328 ft of light oil. The company reported that hydrocarbons were contained in the Lower Miocene sandstones. With further upside, the discovery will undergo a appraisal that is planned for early 2020. Production from Agidigbo will likely be fast-tracked, Eni says, due to its proximity to East Hub’s facilities and subsea network, extending the Armada Olombendo FPSO production plateau further.

Since Block 15/06 JV—which consists of Eni (operator, 36.8421%), Sonangol P&P (36.8421%) and SSI Fifteen Limited (26.3158%)—launched its exploration efforts over a year ago, the block’s five discoveries altogether make up an estimated 1.8 Bbbl of light oil-in-place, with possible upside.

Exxon Mobil and BP are among other majors investing in Angola’s offshore sector. In June, Exxon—which holds interest in three deepwater blocks covering nearly 2 million gross acres—announced that it intends to invest further in Block 15, to increase production. “This renewed collaboration will enable Angola to optimize recovery and add production from mature fields,” said Hunter Farris, senior V.P. of Exxon’s upstream business.

Under terms of the new agreement with ANPG, Exxon and its partners will complete a multi-year drilling program on Block 15 and install new infrastructure technology to increase capacity of existing flowlines. The project is expected to produce about 40,000 additional bopd, once it is online. Block 15, which is operated by Esso Angola (36%), reportedly has produced more than 2.2 Bbbl of oil since 2003. WO