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African Oil: OPEC+ on the Ropes, Non-OPEC+ (Hopefully) to Rescue

Africa’s OPEC+ countries will see oil production decline through 2028. Even as non-OPEC+ countries will see production rise, it will not be enough to revert the continent’s overall declining production profile over the period, according to the IEA.

Africa will see oil production fall around 9% by 2028, the International Energy Agency (IEA) said in a new report, even with non-OPEC+ countries pulling the weight of production increases.

Production from the African continent will reach 5.8 MMbbl/d in 2028 compared to 6.4 MMbbl/d in 2023, the IEA said June 14 in its Oil 2023: Analysis and Forecast to 2028 report.

“Apart from Libya, African OPEC+ members are expected to suffer significant losses over the six-year period as producers fail to lure enough investment to halt declines,” the IEA said.

“Non- OPEC+ African supply is set to steadily increase…as projects ramp up in Ghana and Cote d’Ivoire, while Senegal and Uganda also join the producer’s club,” the Paris-based agency said. “Recent mega discoveries in Namibia have brought a sense of optimism to the region after years of delays catalyzed by the COVID-19 pandemic.”

Africa, like Latin America, is home to large oil, gas and mineral resources but continues to struggle to commercialize them due to ongoing struggles with social unrest, political uncertainties and corruption.

OPEC+ production set to fall

Angola’s oil production will reach 820,000 bbl/d in 2028, down 350,000 bbl/d due to operational and technical issues. Angola’s production was around 1.1 MMbbl/d in 2022, but off a peak of 1.8 MMbbl/d in 2015.

Libya’s oil sector has contended with civil war, militant attacks and a lack of maintenance. But there is hope international oil companies (IOCs) will invest in relatively low-cost production, the IEA said.

Libya’s production was around 1.15 MMbbl/d in mid-2023, up from around 995,000 bbl/d due to a cessation of civil unrest in 2022. “Libya will rely on its el-Sharara oil field, the country’s largest, which is pumping near full capacity of 300,000 bbl/d, in order to maintain production, the agency said.

“As for [Libyan] capacity, we expect levels to hold broadly steady at around 1.2 MMbbl/d [through 2028], the IEA said. “This of course depends on political stability and investment to fund infrastructure repairs.”

Nigeria reclaimed its top ranking as Africa’s largest producer due to a recovery and stabilization in exports after losing its bragging rights in 2022 when production reached 40-year lows. But the rebound will be short-lived.

This as “chronic underinvestment and sabotage [continue] to take a toll on capacity and production,” the IEA said, adding that Nigerian oil sector “officials have repeatedly set, and missed, targets for the country to overcome production issues.”

As a result, the IEA forecasts Nigeria’s production will reach 1.1 MMbbl/d in 2028, flat with levels in 2022.

“The battle to reverse declines and repair aging infrastructure underscores the chronic underinvestment in Nigeria’s crucial oil sector. A poor regulatory framework and sabotage of oil facilities are deterring needed spending,” the IEA said. “Additionally, new discoveries in other African countries are offering viable alternatives to investors whose decisions now incorporate emissions intensity and faster returns as critical metrics.”

The future of Nigeria’s oil industry will depend to a great extent on the success of the Petroleum Industry Act to trigger new investments, according to the IEA, which said recent signals from IOCs weren’t promising.

Non-OPEC Africa to the rescue

In Egypt, output has continued to slide, but higher oil prices have allowed the government to renegotiate production sharing contracts. Also, bid rounds have led APA Corp. and Eni to boost investment. APA Corp. expects gross oil production in Egypt to rise at an annual growth rate of 5%-10% through 2025—helping to stop declines, but not enough to reverse the overall African trend.

In Ghana, the Mahogany-Teak-Akasa (MTAB) project will start production in 2024 and add 30,000 bbl/d of production. According to the IEA, Ghana’s total production will reach 200,000 bbl/d in 2028.

Aker Energy’s Pecan project in Ghana remains in pre-FID status. Field development plans for the project have been submitted to the regulatory agency. Pecan will have a capacity of 100,000 bbl/d, representing a 50% increase over the IEA’s current forecast should the development proceed.

In Kenya, Tullow’s South Lokichar project remains in pre-FID status because of delays caused by legal disputes, protests and the pandemic. Field development plans have been submitted to the regulatory agency. South Lokichar could add 120,000 bbl/d from 2026 if sanctioned in 2023, as FEED has been completed on a new 800 km export pipeline for the field, the IEA says. “Yet that looks less likely with the recent exit of Tullow’s non-operating partners from the project,” the agency said.

In Namibia, TotalEnergies, Shell and QatarEnergy are partners in the recent Orange Basin mega discoveries offshore. Development plans have yet to be submitted to exploit the resource base, but the discoveries could direct Namibia’s producer status along a similar path as South America’s Guyana by the end of the decade.

Senegal is on track to become an oil producer in 2023 when Woodside’s 100,000 bbl/d Sangomar FPSO unit is commissioned, while in Cote d‘Ivoire, Eni’s Baleine project could see first oil in 2023. A large expansion of the project is envisioned, although not yet sanctioned.

“Baleine will be Africa’s first net zero oil and gas development (Scope 1 and Scope 2). It is a pioneering step for the industry to FID a major capital project with a full life cycle net zero intent,” the IEA said.

In Uganda, TotalEnergies and CNOOC approved development of the $7 billion Ugandan Lake Albert project in late 2021. First oil will flow in 2025 and production from the project’s Tilenga and Kingfisher fields could eventually reach 230,000 bbl/d.

Source : Hart Energy