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?