Oil and gas industry capital expenditure, capex, in sub-Saharan Africa has been cut by $100 billion over the next five years, according to Wood Mackenzie’s latest report on upstream activity in the region.
The new report revealed that deepwater has suffered the highest Capex cuts as a result of its high breakeven price relative to other sectors and identified Nigeria and Angola as having endured the worst of these cuts.
To this end, Wood Mackenzie predicted that sub-Saharan African liquids production will decline to 2.6 million barrels a day by 2030, from 4.8 million barrels a day presently.
While acknowledging that the giant Owowo discovery made by ExxonMobil in deepwater Nigeria shows the quality of resources Sub-Saharan Africa still has to offer but added that the major oil companies that heavily invested in Sub-Saharan Africa account for the bulk of the capex cuts.
For operators with deep pockets, the report identified Mozambique, Angola and Nigeria as leaders in upstream mergers and acquisitions (M&A) opportunities.
The report however noted that the M&A market has slowed down as buyers and sellers are unable to align on asset values due to oil price volatility.
According to the report, “deal activity may see an uptick if prices remain low for longer, as companies opt to divest non-core assets.”
Wood Mackenzie further revealed that exploration cuts will contribute to 46 per cent oil production decline by 2030, adding that governments in Sub-Saharan Africa need to revive the industry with attractive fiscal terms.
The report described East Africa’s emergence as a major global gas region as the industry’s biggest recent success in Sub-Saharan Africa
Speaking on the report, the Senior Research Manager for Sub-Saharan Africa at Wood Mackenzie, Mr. Femi Oso stated that exploration cuts in the region would lead to long-term slump in crude oil production.
Wood Mackenzie expects a slow recovery for exploration, adding that operators will benefit from cost deflation and will improve efficiency through streamlining project design.
