Côte d’Ivoire: Exploring offshore and investing in gas
Cote d’Ivoire | 18 Feb 2013
As neighbouring Ghana moves to hit its maximum targeted production later this year in its flagship Jubilee field, offshore oil exploration has been ramped up in Côte d’Ivoire, resulting in two significant finds since December 2011. With these discoveries, the government is targeting an increase in production to 200,000 barrels per day (bpd) by 2018, as opposed to current output of 32,000 bpd.
In June 2012 exploration group Tullow Oil struck oil at its offshore well near the coast of Côte d’Ivoire, not far from the Jubilee field across the country’s maritime border with Ghana. This is the first deepwater exploration well drilled in the CI-103 block and, according to Tullow, this discovery is encouraging for future exploration efforts as it suggests that the proven oil-bearing geological conditions in nearby Ghana may extend into Côte d’Ivoire’s offshore areas. The CI-103 block is currently operated by Tullow, which has a 45% stake, along with partners Anadarko Petroleum (40%) and the Société Nationale d’Opérations Pétrolières de Côte d’Ivoire (Petroci) (15%).
It is far from the first. In December 2011 US firm PanAtlantic (formerly Vanco) and Russia’s Lukoil found oil at an exploration well, around 93 km southeast of Abidjan, in the CI-401 block, owned by Lukoil (56.66%), PanAtlantic (28.34%) and Petroci (15%).
Although attracting increased offshore exploration efforts has been a boon to the oil sector, for the time being it is uncertain whether the discoveries in CI-103 and CI-401 are commercially viable; consequently, further drilling in 2013 and 2014 is planned to assess hydrocarbon reserve levels within these blocks. Companies are demonstrating interest in nearby blocks with similar depths: block CI-401 ranges from 950 to 2100 metres, and Lukoil signed a production-sharing agreement (PSA) in October 2012 with the Ivoirian government on block CI-524, which is in 800-1500 metres of water and is actually an eastern part of block CI-401.
Overall, since the end of the political conflict that paralysed the country over the first half of 2011, the government has signed 14 new PSAs with oil companies, including Total and Anadarko, in the hopes of rapidly increasing production. Indeed, exploration efforts have been stepped up across the Gulf of Guinea, encouraged by major finds in the region, inspired in part by the success of Ghana’s Jubilee Field and commercially viable discoveries in neighbouring fields, such as Deepwater Tano and West Cape Three Points.
The government has also capitalised on interest in natural gas fields, having signed three exclusive exploitation deals in 2012, including two with Ivoirian-based Foxtrot and one with Rialto Energy, as part of plans to increase production at the Foxtrot and Rialto fields from 170m cu feet per day to 250m cu feet per day. Foxtrot, which produces gas for domestic consumption from the CI-27 block, announced in December that it would invest $1bn over the next three years to improve its current platform and to build and operate a new, greenfield platform.
To help ensure the financing of Foxtrot’s investment in on/offshore oil and gas facilities, the Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group, has committed $437m in investment guarantees to back an equity investment by SCDM Energie of France and a non-shareholder loan arranged by HSBC. MIGA’s guarantees will protect these investments for eight years against risks of war and civil disturbance, breach of contract, expropriation and transfer restriction.
With demand for power set to increase by 7% year-on-year, driven by increased industrial use, significant investment is needed across the energy supply chain and, as investors remain wary of the challenging business climate and security concerns, such guarantees and support from the international community remain crucial. Moreover, increased gas production could also service the planned expansion of the West Africa Gas Pipeline to Grand Bassam, east of Abidjan.
Owing to very limited investment and technical problems resulting from a decade of political instability and conflict, the oil sector in Côte d’Ivoire has languished, and the new government has made a priority of increasing the energy supply to keep pace with economic growth. Although the recent spate of PSAs bode well for the sector, the uncertain reserve levels in the past year’s finds augur that oil production is unlikely to increase significantly in the near term.
In the meantime, the development of Côte d’Ivoire’s offshore oil and gas sector would benefit greatly from resolving a long-term dispute over the delineation of its maritime border with Ghana and determining whether increased production is to be refined locally by the Société Ivoirienne de Raffinage or elsewhere.
Countries: Ivory Coast