Energy buzz in Africa

TotalEnergies, the operator of the Venus oil discovery offshore Namibia, is expected to make a final investment decision regarding the project by 2026, while Shell, the operator of the Graff discoveries, is likely to make it call in 2027 or 2028.These estimates by Rystad Energy are quoted by the African Energy Chamber (AEC) in its State of African Energy Report. The publication, reviewing energy development in the second quarter of this year, was released earlier this month.Namibia is listed under the top five major final investment decision (FID) destinations on the continent by the AEC. In terms of estimated oil and gas resources, TotalEnergies’ Venus project tops the FID list, while Shell’s Graff discovery is ranked fourth.Orange BasinLeading energy website Upstream Online on Monday said Shell and TotalEnergies have discovered at 11 billion barrels of light oil and up to 8.7 trillion cubic feet of gas in Namibia’s Orange Basin. Shell’s success doesn’t only include Graff-1, but also the Jonker-1X discovery. In addition, Shell completed drilling at its Lesedi-1X well last month, which confirmed the presence of hydrocarbons.This brought the total oil discoveries made in the Orange Basin to five in less than two years.The AEC quotes Rystad start-up estimation dates for Venus and Graff. Phase 1 of Venus is expected in 2029, followed by the second phas in 2033. Graff is anticipated to start up in 2031 or 2032.JonkerThe commercial viability of Shell’s and TotalEnergies’ are yet to be confirmed. TotalEnergies has a 40% stake in the Venus 1-X well, followed by QatarEnergies with 30%, Impact oil and Gas (20%) and Namibia’s state-owned National Petroleum Corporation (Namcor) with 10%. Namcor also has a 10%-stake in both the Graff-1 and Jonker-1X wells, while Shell and Qatar Energies each has an interest of 45%.According to the AEC’s latest report, Africa has discovered half a billion barrels of oil equivalent (Bboe) of oil and gas recoverable reserves so far this year.“Namibia, which turned out to be a blockbuster in 2022, continued to deliver with Jonker discovery,” the AEC said.‘Prolific’According to the Chamber: “2023 discovered volumes, so far, are majorly driven by the Jonker discovery in the prolific block offshore Namibia, operated by Shell Plc. With a recoverable reserves estimate of about 285 million barrels, Jonker accounts for 57% of the overall discovered volumes in Africa in 2023 so far.”Jonker is the only offshore discovery in Africa so far this year.Post the achievements of Venus and Graff offshore Namibia, the Jonker-1 high impact well (HIW) was drilled in “the prolific and underexplored Namibian waters”, the AEC said.“Jonker resulted in one of the biggest oil discoveries in Africa for the year so far and further cemented offshore Namibia as an exploration hub,” it added.ExplorationRystad earlier this month said exploration companies are prioritising the offshore sector in their hunt for new resources, “trying to capitalise on underexplored or frontier areas to unlock new volumes through high-risk, higher-cost offshore developments”.According to Rystad, the continued growth of Guyana’s Stabroek offshore block, with 603 million Bboe, means the Caribbean country leads the way globally in discovered volumes so far this year.“Turkey sits second with 380 million boe, Nigeria with 296 million boe and Namibia with 287 million boe, with the potential for these estimates to grow as we better understand the reserves,” Rystad added.SpendingSpending on conventional oil and gas exploration is growing and expected to top US$50 billion this year, the independent research and business intelligence company said. This is the highest since 2019, “but operators are still waiting for the results they had hoped for”, Rystad said.They elaborated: “Offshore discoveries are spread relatively evenly between ultra-deepwater, deepwater and shelf finds. “However, we expect increased activity in the remainder of 2023, especially in the ultra-deepwater market, with projected growth of 27% versus 2022 in terms of spud wells.”‘Cautious’Developments in the oil and gas space have been comparatively quiet for the first half of 2023, Cirrus Capital said in its Updated Economic Outlook, released recently.Both Shell and TotalEnergies are currently engaged in their appraisal initiatives. Reports from the media indicate positive flow test results and additional hydrocarbon discoveries through exploration drilling. “Seeing as both of these majors are listed, the flow of information is understandably cautious,” Cirrus noted.There is limited information available regarding Chevron's forthcoming actions after its acquisition of a nearby license in late 2022. On the other hand, Galp is set to commence a two-well exploration programme starting in November 2023. “Should this prove successful, neighbouring blocks will likely also see accelerated exploration programmes,” it said.TimelineCirrus’ reading of the relevant legislation leads it to believe that the operators have approximately two years from first discovery to complete an appraisal programme, suggesting that there will likely not be official confirmation until early next year.“Should a block prove commercially viable, there is uncertainty on the current time limits per legislation (if there is any) on the need to declare such a decision and begin the development phase,” the analysts said.They added: “Nonetheless, the current excitement around the offshore oil and gas prospects along with the onshore mining exploration have seen unprecedented levels of net FDI [foreign direct investment] inflows into Namibia, an encouraging sign and a vital leading indicator for future growth.”RenewablesThe AEC report lists Namibia under the top ten African countries with current solar and hydrogen capacity. Measured in Giga Watts (GW), Namibia is ranked eight for solar capacity, and fifth for hydrogen.“Africa’s renewable capacity forecast continues to remain miniscule compared to growing capacities from Asia, Europe and North America,” the Chamber said. “The only competitive growth is from the hydrogen space where high levels of activity/capacity has been announced in Mauritania, Egypt, South Africa, Morocco, Namibia and Djibouti,” the AEC added.Total announced capacity of renewables in Africa is currently about 385 GW, the report states. More than three-fourths of this is currently in concept stage and a little over 5% is operating. “This suggests a large potential with further upside as more operators and investors enter the continent with a clean energy and energy transition objective, but very little currently contributing to Africa’s energy needs. This also suggests large infrastructure needs which demand equally high investments,” the AEC said.GeographyThe geographical split suggests more than half of the announced capacity is in North Africa and apart from Mauritania in the west and South Africa in the south, the exposure of the rest of sub-Saharan Africa to announced renewables capacity is relatively much lower, the AEC said.“Apart from Mauritania and South Africa, announced wind capacity in Nigeria, all round capacity in Djibouti and promising hydrogen capacity growth in Namibia round off the main Sub-Saharan African renewables investments,” the Chamber added.Hydrogen in Africa currently has an announced capacity of about 125 GW.Ëgypt, Mauritania, South Africa, Morocco, Namibia and Djibouti add up to almost all the current announced hydrogen capacity in Africa, with Namibia gaining traction to emerge as a major player poised for growth,” the AEC said.‘Steep growth’The AEC expects Africa to see a “steep growth” in renewables capacity from 2025. Solar and wind is expected to drive the capacity, as well as the year-on-year growth going forward, it said. “Over 75% of the 2023 capacity is driven by solar and wind; and this increases to over 80% by 2025. 2026 – 2030 average cumulative solar and wind capacity is expected to be close to 80% of the total capacity over the period. “As hydrogen capacity picks up over the 2030s, the average cumulative solar and wind capacity is expected to be close to 75% of the total capacity over the period 2031 – 2035,” accodring to the AEC.PolicyWith all the hype around oil and gas, and the transformative potential this holds for Namibia, policy remains a concern, Cirrus said. “We consider the plausible reality that irrespective of whether any of the discoveries prove to be commercially viable, it is not guaranteed that this will result in development and production.”According to Cirrus: “At this stage a final investment decision seems incredibly unlikely given the apparent disinterest by the state in a fiscal stabilisation agreement or similar mechanism to protect an investment, which frankly cannot be exactly likened to the current minerals regime given the scale of investment is multitudes larger with far more transformative potential. “The current policy missteps in the minerals space, however, serve as a warning sign for the oil and gas industry, given the talk and subtext of resource nationalisation. This stresses the importance of prudent and pragmatic policy across all fronts, as well as the need to drive macroeconomic policy reform to ensure economic growth is not solely driven by or linked to the extractive industries.”Should production be viable and go ahead, Cirrus believes it would usher in “extreme levels of growth” for the country, particularly during the development phase with the establishment of peripheral industries.“Frankly, this is something we believe the country is simply not prepared for,” Cirrus said.

Energy buzz in Africa

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Namibian Sun 2024-11-27

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Energy buzz in Africa

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Namibian Sun 2024-11-27

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