THE NEW CRUDE FRONTIER
OTTAWA -- GLOBAL ENERGY REPORTER
As energy sources decline elsewhere, oil firms are turning to the vast potential of Africa. But they must be wary of the 'resource curse' that enriches elites while offering little to local populations
Canadian Natural Resources is spending $260-million to develop its stake in West Africa's growing offshore oil production. And the Calgary company has property off South Africa where it intends to conduct what it calls a high-risk but potentially high-reward exploration.
Known more for its oil sands focus, CNRL has steadily ramped up production in West Africa as part of its strategy to leverage expertise gained in the North Sea, and to replace declining production in that aging field.
The Canadian company began pumping oil last year from its Olowi field, 20 kilometres off Gabon's coast, and is adding additional production platforms this year. It will also do some drilling to replace expected declines on two fields, Baobab and Espoir, off Ivory Coast.
The African projects are among the company's most profitable. Last year, CNRL boosted its West African crude output by 23 per cent to more than 32,000 barrels per day, though it expects production growth to flatten out in the coming years.
In Africa, energy companies are increasingly drawn to offshore oil projects, where they can avoid the civil wars and ethnic violence that have plagued the continent, often fuelled by unequal distribution of resource wealth, said Philippe de Pontet, analyst with New York-based Eurasia Group, a political risk firm.
Countries like Ivory Coast and Sierra Leone recently emerged from civil wars, and their growing oil revenues could help finance reconstruction. But they must be careful to avoid the "resource curse" that has often enriched elites and offered little to local populations.
Until recently, offshore plays have attracted smaller, independent energy firms, but now the majors and national oil companies are moving in. "Every company I know of is active in West Africa," said Fadel Gheit, New York-based analyst with Oppenheimer & Co.
And the West African offshore will attract even more attention - and exploration dollars - if the U.S. drives up the cost of drilling in the prolific Gulf of Mexico by imposing new regulations in response to the devastating April 20 blowout of BP PLC's Deepwater Horizon well.
"With more stringent environmental rules [expected] in the U.S. after this Gulf of Mexico disaster, that will help West Africa," Mr. Gheit said.
Houston-based Anadarko Petroleum Corp. and the U.K.'s Tullow Oil PLC reported significant finds in Uganda, and off the coasts of Ghana, Ivory Coast, Liberia and Sierra Leone, where companies hope that offshore developments could rival some existing fields further south.
Anadarko has also struck natural gas off Mozambique, in East Africa, while exploration companies are touting Kenya and even Somalia as prospective oil and gas producers.
Off the coast of Ghana, Anadarko has made two discoveries - Jubilee and Tweneboa - that have led the industry to conclude the deep water north of the Gulf of Guinea holds major crude oil fields. Some geologists believe West Africa was once part of the same geological formation that includes the oil-rich Gulf of Mexico and offshore Brazil, and that there may be vast deposits in the ultra-deep offshore.
While there have been many promising discoveries, Africa remains a relatively modest player in terms of actual energy reserves, accounting for less than 10 per cent of the global total. In the sub-Saharan region, only Nigeria and Angola have world-class reserves.
Super-major Exxon Mobil Corp. spent a quarter of its capital and exploration budget in Africa last year, or $6.2-billion (U.S.), just slightly behind spending in Asia and the Middle East. The lion's share of Exxon's efforts is going to Angola and Nigeria. The two OPEC members each produce about 2 million barrels per day and represent major sources of imported oil to the U.S. and China. Exxon expects to add 127,000 barrels per day in production in Angola over the next three years, and 82,000 barrels in Nigeria. After 2012, it is planning four more projects for a net addition of 117,000 barrels per day in Angola, and 328,000 in Nigeria. However, Nigeria has seen its production fall by 16 per cent - or more than 400,000 barrels per day - since 2005 as violence and civil conflict in the Niger Delta has impaired operations. Angola, over that same time span, boosted output by more than 600,000 barrels a day, and has become the second-largest source of imported oil to China and a significant source for the U.S.
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THE NEW CRUDE FRONTIER
CRUDE OIL RESERVES
In billions of barrels
...............................2008..........1998
Canada....................178*.........11.9
Libya........................43.7..........29.5
Nigeria.....................36.2..........22.5
Angola.....................13.5............4.0
Algeria.....................12.2..........11.3
Sudan........................6.7............0.3
Gabon.......................3.2.............2.6
Equatorial Guinea....1.9............0.8
Congo Brazzaville....1.7............0.6
*includes oil sands
CRUDE PRODUCTION
Thousand barrels per day, average
...................................2008...........1998
Canada....................3,238..........2,672
Libya........................1,846...........1,480
Nigeria.....................2,170...........2,167
Angola.....................1,875..............731
Algeria.....................1,993..........1,461
Sudan.........................480................12
Gabon........................235..............337
Equatorial Guinea.....363...............83
Congo Brazzaville.....249.............264
KATHRYN TAM / THE GLOBE AND MAIL
SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY INFORMATION ADMINISTRATION
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UNCONVENTIONAL, UNTAPPED: THE POTENTIAL OF ALTERNATIVE ENERGY
LARGE SCALE
POWER FROM THE SAHARA
A solar source:
The Sahara is a massive natural storehouse of solar energy - some patches of the 8.6-million-square-kilometre desert reach 45C on many afternoons.
Capturing the potential: The Sahara Forest Project proposes building "concentrating solar power plants." They use mirrors to focus light on water pipes or boilers, generating superheated steam to operate conventional steam turbines. A simple system, but one that doesn't come cheap: Scaling the technology to produce meaningful quantities of electricity is estimated to cost about $59-billion to be operational by 2020.
90,600 / Area in square kilometres of the desert that could yield the same amount of electricity as all the world's power plants combined.
Source: German Aerospace Center
15,500 / Area in square kilometres that could provide enough electricity for Europe.
1,000 / Average constant amount of solar energy reaching the earth in watts per square mile.
Source: University of Oregon Solar Monitoring Lab
0.3 / Percentage of light falling on the Sahara and Middle East deserts that could provide all of Europe's energy needs.
Source: German Aerospace Center
SMALL SCALE
BRINGING POWER TO THE PEOPLE
The problem:
Only 20% of Africans have electricity.
Only 2% of Africans in rural areas have electricity.
35%: Level that African leaders wish to achieve.
The wind solution:
African countries are more actively seeking alternatives to give rural families efficient means to cook their food and light their homes. Because the majority of the African population still has no access to electricity grids, small, decentralized and standalone sources of energy such as wind will have to play a key role.
337 / Wind installations in Africa, 2006.
2,140 / Wind installations in 2009, with a total capacity of 770 megawatts.
Source: World Wind Energy Report 2009
The solar solution:
The most ambitious project is a $7-million effort in Zimbabwe: 9,000 solar power systems were installed throughout the country in a bid to improve living standards, but also to curtail land degradation and pollution.
The Rive Estate, 70 kilometres from Zimbabwe's capital, Harare, boasts one of the best solar-village models in the country. Fifty-two commercial farming families share systems; there is one system for every two houses. Each family has two lamps and a connection for a radio or small television set. The new lighting systems have allowed for extended study hours for schoolchildren, reduced rural-to-urban migration in the area and upgraded health standards by electrifying a local health centre.
Source: Africa Renewal
