Oil & Gas: Adapting to a changing universe

As a result of the changing face of African oil exports, Chinese trade with sub-Saharan Africa is now 2.7 times bigger than that of the US with the continent. This trend will probably be sustained for a long time to come as the Chinese economy is likely to grow faster than that of the US for many years.

China may have a great deal of untapped shale oil potential, although this is not on the same scale as the US and so is unlikely to result in a reduction in Chinese imports of African oil.

Falling demand for oil in the US is not the only way in which the Nigerian oil industry is reducing its ties with the West. International oil companies have warned for many years that they would withdraw from the Niger Delta if the security situation did not improve but few believed that they would actually do it. Now, however, US firms ConocoPhillips and Chevron, plus several European counterparts, are selling upstream assets in the Delta.

They will no doubt continue to operate offshore but their onshore and shallow water fields are not being bought up by other Western firms but rather by their Nigerian counterparts.

Last year Anglo-Dutch firm Shell put its 30% stakes in four blocks up for sale: OMLs 18, 24, 25 and 29, as well as the Nembe Creek Trunk Line. At the end of August, the company announced that it had sold some of these assets, although it did not give any details.

A spokesperson said: “We have signed sales & purchase agreements for some of the Oil Mining Leases, but not all that we are seeking to divest.” It has been reported in London that the company will earn about $5bn from the sell-off.

The remaining equity in the four blocks is held by the other members of Shell Petroleum Development Company (SPDC): Nigerian National Petroleum Corporation (NNPC) (55%), Total (10%) and Eni (5%). The latter two will also sell their stakes. Two Nigerian firms, Aiteo and Taleveras, are reported to have made a $2.85bn bid for the most important of the four blocks: OML 29.

New producers
Two new sources of African hydrocarbon production look set to emerge over the next few years. Firstly, the government of Niger has signed deals with the governments of Chad and Cameroon to construct an extension to the existing Chad-Cameroon oil pipeline into Niger.

This will allow China National Petroleum Corporation (CNPC) to export the oil it produces on its Agadem Block in Niger through the line and then from the deepwater port of Kribi in Cameroon. Chad and Cameroon will both benefit from transit fees, although financial details of the arrangement have not yet been released.

CNPC currently produces a few thousand barrels of oil a day for local consumption but this will be ramped up to 20,000 b/d, in addition to the 80,000 b/d that the Chinese firm plans to ship from Kribi in what is Niger’s first commercial oil project.

Niamey will benefit in several ways: from the oil revenues generated; from a convenient local source of supply to its new Soraz oil refinery in the city of Zinder; and from the impact that the CNPC venture will have in attracting further upstream exploration in the country. About 13,000 b/d of refined petroleum product will be exported by the Soraz plant, which is jointly owned by the government of Niger and CNPC.

The second new source of production is the Etinde gas project in Cameroon. Oil production in the country has slowly declined over the past decade and the country has relatively little of the deepwater acreage that has driven up oil production in other Gulf of Guinea oil-producing nations.

As a result, the government has sought to encourage the commercial development of its gas reserves. In August, a long-standing investor in the Cameroonian gas industry, UK firm Bowleven, secured final approval for its development plans on Block MLHP 7 over the next two decades, with a possible extension of another 10 years.