Oil & Gas

Investments in new oil production have been slowing down since around 2014, leading many to predict that higher prices are likely to persist, supported by energy policies in key jurisdictions that are against the oil industry. However, it could be argued that the oil industry's investments in the past decade have been more focused on prospects with a higher chance of discovery or have simply been more fortunate than usual. This trend is particularly evident in Africa.

Recently, French Total Energies announced plans to acquire a 33% stake in an exploration block offshore South Africa, with its partner Qatar Energy acquiring a 24% interest. This move is part of Total Energies' exploration campaign in Namibia, which shares the Orange Basin with South Africa. The Orange Basin has become a significant area for oil exploration, with several discoveries totaling around 5 billion barrels of reserves in the last couple of years. The rate of success in the Orange Basin has been unusually high, with 15 confirmed discoveries of commercial hydrocarbon volumes in 17 exploration wells drilled since February 2022.

Total Energies' largest discovery so far is the Venus field offshore Namibia, which is estimated to hold 3 billion barrels of reserves. This success has encouraged Total Energies to expand its exploration efforts in the Orange Basin, despite ongoing forecasts for peak oil demand.

Other companies are also actively pursuing oil and gas opportunities in Africa. For example, in January, Canada-based Africa Oil Corp acquired additional acreage in the Orange Basin block. This block is estimated to contain prospective resources equivalent to around 4 billion barrels of oil equivalent, with success probabilities ranging between 11% and 39% for the 24 prospects in the block.

Southern Africa is not the only hotspot for oil and gas exploration in Africa. Offshore Energy reported that a Houston-based energy company recently acquired a Swedish exploration player to gain access to an offshore block in the Ivory Coast. The target company, Svenska Petroleum Exploration, holds a 27% stake in the Baobab field offshore the Ivory Coast, which is currently producing oil equivalent to 4,500 barrels per day, with plans for expansion.

In addition to oil, liquefied natural gas (LNG) has become a priority for many investors, especially in Africa. The Greater Tortue Ahmeyim LNG project, located on the border between Senegal and Mauritania, is set to begin operations in the third quarter of this year. The project, led by BP in partnership with Kosmos Energy and the state energy companies of the two countries, will initially have an annual capacity of 2.3 million tons, which will later be expanded to 10 million tons over three phases.

Another significant LNG project in Africa is the Tanzania LNG terminal, expected to reach a pre-final investment decision next year. This project, with a price tag of $42 billion, aims to tap Tanzania's offshore gas resources and is being developed by Equinor, Shell, and Exxon. Once operational, it could turn Tanzania into a major player in the LNG market.

Overall, oil and gas exploration in Africa is booming due to the continent's significant undiscovered hydrocarbon reserves and the willingness of local governments to support exploration activities. Wood Mackenzie estimated last year that the energy industry is investing a total of $800 billion in African oil and gas, with Africa poised to become a leading producer of LNG and deepwater oil.