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Investing in Oil and Gas: West Africa Growth
IP Week, London 2013
Austin Avuru
MD / CEO SEPLAT Petroleum Development Company
Disclaimer
This presentation contains forward-looking statements, particularly those regarding global
and regional energy growth and sources of energy supply. Forward-looking statements
involve risks and uncertainties because they relate to events, and depend on
circumstances, that will or may occur in the future. Actual results may differ depending on
a variety of factors, including product supply, demand and pricing; political stability; general
economic conditions; legal and regulatory developments; availability of new technologies;
natural disasters and adverse weather conditions; wars and acts of terrorism or sabotage;
and other factors discussed elsewhere in this presentation.
1
Introduction
Estimated 2.8% of world oil (68 bn barrels) is in Sub-Saharan Africa
44 bn barrels in the Gulf of Guinea
Oil and gas play strategic role in economies of West African
countries giving them power and influence on world stage
Africa's contribution to world reserves has increased from ~7.0 per
cent in 1995 to ~ 8 per cent in 2011
Growing reserves in Libya, Nigeria and Angola
Trend likely to continue with new discoveries announced in Ghana,
Africa is on an upward
growth curve. This
growth is underpinned
by a longer-term
process of economic
and regulatory reform
that has occurred
across much of the
continent.
Ernst and Young
Egypt, Algeria, Libya, Tunisia, Mozambique, and Uganda in 2011
West Africa is new petroleum province with multi billion barrel
potential
The majors are there, and so are many smaller players
Source: BP statistical review of world energy 2012
2
West African Resources
Reserves, 1/1/2012
Country
Commercial
Discovery
First
prod
Oil, Bbbls
Gas, Tcf
1
NIGERIA
1956
1958
37.2
180.5
2
GHANA
2007
2010
0.7
5
3
MAURITANIA
2001
2006
0.1
1.0
4
COTE D’IVOIRE
1977
1980
0.1
1.0
5
CAMEROON
1972
1977
0.2
4.7
6
EQUATORIAL GUINEA
1984
1991
1.7
1.3
7
GABON
1962
1967
3.7
1.0
3
MAURITANIA
CHAD
GHANA
8
CHAD
1972
2003
1.5
0
9
CONGO
1984
1957
1.9
3.2
10
ANGOLA
1955
1956
13.5
10.9
COTE D’IVOIRE
4
2
8
NIGERIA
1
CAMEROON 5
EQUATORIAL GUINEA 6
GABON
CONGO
7
9
10
ANGOLA
Sources: BP Statistical Review 2012 / US EIA
3
Significant Reserves Growth
Three broad bands of Club Membership
1955 - 1975
Angola, Nigeria, Gabon, Cameroon, Chad
1975 - 1995
Cote d’Ivoire, Equatorial Guinea, Congo
RECENT
Mauritania, Ghana
Sources: BP Statistical Review 2012 / US EIA
4
Significant Reserves Growth
Oil and gas activity in West Africa
West Africa Reserves (1995 - 2011)
95
100
Nigeria and Angola have largest
86
Billion Boe
80
60
extends from Mauritania to Angola
reserves, ~ 86% of the total subregion’s reserves as of January 2012
67
New production countries - Chad,
50
Ghana, Côte d’Ivoire and Mauritania have joined Nigeria, Angola, Cameroon
in sub-region
40
20
Chad, Côte d’Ivoire, Liberia and
0
1995
2000
2005
2011
Mauritania have all discovered oil in
commercial quantities
Sub-Saharan African countries
Mauritania
Eq. Guinea
Cote d'Ivoire
Ghana
Nigeria
Chad
Cameroun
Gabon
Congo
Angola
compete with each other to attract
investment
Sources: BP Statistical Review 2012 / US EIA
5
Where Will Future Growth Come From?
Since 2007, West Africa has seen more success in exploration than other regions of the
world – making it attractive for investment
West Africa Transform Margin, deepwater West Africa, and offshore East Africa are the
areas currently attracting most exploration interest
Since Jubilee discovery in 2007, companies are exploring others parts of region (Ghana
to Mauritania), looking for analogous Cretaceous turbidite prospects
Offshore explorations in Sierra Leone and the Cote D’Ivoire look promising, making
them high potential areas for investment beyond Nigeria and Angola
In Sub-Saharan Africa an estimated 40 bn plus barrels of oil equivalent exist in technical
reserves – most of it in Niger Delta Basin
An estimated additional 55 bn barrels oil equivalent in yet-to-find resources, the second
biggest region in the world after Latin America
Source: Wood Mackenzie
6
Oil and Gas Future Growth
Mid-sized companies hold
about 46,000 sq km of
acreage in the West African
transform margin
Deepwater activities in West
Africa mostly carried out by
majors; circa 80,000 sq km
acreage in their possession
Sources: Wood Mackenzie
7
Opportunities For Investment
Opportunities exist for mid-sized companies to enter a market at the beginning
of its growth story and therefore maximize returns
Companies with position in frontier regions stand to gain as plays mature.
Opportunity for divestment is expected over the coming years as larger
companies give way to smaller independents and indigenous companies due
to local content policies
We expect to see more M&A activity in future, driven by majors
►As
opportunities are further squeezed, consolidation across the sector will
accelerate
►Competition will continue to intensify
►With dwindling opportunities and stronger players, the market will tighten
Sources: Wood Mackenzie / Petroleum Africa
8
Challenges
Investment Mix
►Bid
rounds still cheapest entry into West African market.
►Conventional assets are in decline in mature basins, e.g. Niger Delta, and come with
fiscal tightening
►Focus increasingly on exploration in frontier plays where fiscal terms are less onerous
►Discoveries and existing resources are more expensive limited by financial
conservatism
►M&A appetite not too strong and most expensive
Security risks, war and political tensions are some of the issues preventing growth in the
sector
Business environment
►Market
price constraints
►Lack of enabling business infrastructure for investment to thrive
►Threat of cost inflation
Sources: Wood Mackenzie
9
Summary
Africa’s place as a significant producer and net exporter of oil in the world is forecast to
grow to ~ 15% by 2020 due to new discoveries in West Africa and East Africa
Significant growth potential exists in West African sub-region
According to Wood Mackenzie, there are ~ 40 bn barrels of discovered but undeveloped
reserves plus 55 bn barrels of yet-to-find
Clear opportunities for investment as exploration activities in offshore deepwater West
Africa recorded highest success rate in the world during 2007 – 2012
Investment opportunities exist in sub-region from exploration in frontier areas to the
acquisition of mature assets, where secondary discoveries (deeper plays and bypassed plays) have recorded high success rate
Investment mix of exploration, DROs and M&As are available
Sources: Wood Mackenzie
10
Questions?