Ayuk and Joao Gaspar Marques
The story of oil exploration in Africa is one of many failures and victories, from lack of bounty in the unexplored areas that brought great returns, forgotten countries, only a few bold people have decided to invest in the pursuit of wealth. This is a story for many current Africa's current oil and gas spots. It is hard to imagine that no one at one time believed that Equatorial Guinea had oil or even wanted to try it. Sudan, Chad, Kenya, Uganda, Tanzania, Senegal, Liberia … all in one way or another, nations whose potential has long been replaced by international oil and gas companies until a clever player has taken advantage of the opportunity and found them so desired resources.
The Republic of Niger is the latest on the list, and it attracts more and more attention. Since April 2018, the young British research and production company Savannah Petroleum has recorded five consecutive commercially viable discovery of oil in its R3 and R4 zones, in collaboration with Agadem Rift Pool (ARB) in southeast Niger. As the company reported the estimated reserves at the end of its research program, the results are remarkably promising. So much so that even before the most recent discoveries in October, the company has already signed a legally binding Memorandum of Understanding (MOU) with the Government of the Republic of Niger, which cites the steps required by both parties for the proper implementation of the Early Production Scheme for block R3. This includes support in oil refining negotiations with the country's only refineries, the Société de Raffinage de Zinder (SORAZ) company, as well as facilitating access to the port of the oil pipeline owned by a third party from ARB to the refinery.
Savannah's successes over the past eight months have not gone unnoticed by oil players in the region. Just this week, Oranto Petroleum, the most prominent African-based oil and gas producer in Africa, through its president, Prince Arthur Eze announced the signing of a Memorandum of Understanding with the Republic of Niger Fuel Ministry for the procurement of R5, R6, Dibella and Dallol blocks at Tenere and Agadem pools . And R5 and R6 cut off Savannah's other exploration license at the Agadem Basin, R1 and R2, which also had significant oil and gas outlook for the past few years, estimated by CGG to contain up to 1.6 billion barrels of equivalent oil (MMBOE) in the "still find" reserve.
Oranto's move is symptomatic from the growing profile of the Republic of Nigeria as a marginal oil and gas market. We will probably be witnessing similar moves by other international oil companies in the coming months. For years now, we are looking back and surprised how long it was for oil companies to explore a country that was obviously rich in oil at the border of Chad, Nigeria, Algeria, Libya and Congo, a well-established oil nation.
However, a real player who risked exploring in Niger when everyone else gave up was not Savannah or Oranto, but China National Petroleum Company (CNPC). In fact, history will say that it existed before and after the CNPC in the oil industry Nigeria.
In 2008, CNPC took over the area that Elf, Esso, Texaco and Petronas had, were slightly questioned and abandoned. Three years after entering Niger, CNPC hit oil and started production. According to a government agreement, the company has built and operated 463-kilometer oil pipeline and 20,000 barrels refineries per day in Zinder. The first oil was delivered from the Sokor and Goumeri fields in 2011 and from Agadi field 2014, all located on the surface of Agadem Rift pool.
Between 2011 and 2014, CNPC made 95 findings from 129 exploration wells, confirmed over one billion barrels in oil reserves, and completely changed the profile of the Republic of Nigeria as a oil nation.
Since then, Niger has become a de facto oil producer and has become self-sufficient in fuel through its refinery, a rare case across the continent. Prior to the CNPC, since the country began exploring oil in the early 1970s, only 25 boreholes were drilled and five smaller discoveries were made. Of course, CNPC benefited from exceptionally high oil prices to justify massive investment in research in 2008, but still crossed the border market with big prizes.
Slow, but promising start
Despite all these successes, Niger's oil production remains marginal, reaching 20,000 barrels of oil per day (BOPD) at its peak, and has been declining slightly in recent years. This happened despite the years after government promises and proposals to increase oil production in the country at 60, then 80 and 90 thousand BOPD, which was set for 2014.
The delay was mainly related to the lack of export infrastructure for crude oil. Niger has no pipeline connecting it with other nations, and domestic consumption of no more than 7,000 barrels a day, pushing with production will only create an oil storage problem.
Since 2012, the government has pushed for connecting the pipeline to connect Niger with the Chad-Cameroon pipeline in the south, which could transport the crude truck port of Kribi, Guinea, to export. This property itself could change the face of Niger forever. However, the fall in crude oil prices in 2014 has made 700 thousand kilometers of 60,000 BOPD's financing attempts for two partners, CNPC and the Niger. In April this year, the Niger government said the gas pipeline construction would begin before the end of 2018, although the same thing was announced in 2017. If expanded, Niger could be a de facto oil exporter by 2020 and have access to new capital inflows to continue financing the growth of industry and overall economic growth, especially if crude oil prices continue to grow.
Notice of concern
These are welcome news for one of the poorest countries in the world, despite being the fourth largest uranium producer in the world. However, this can also mean trouble. If it is not surprising that Niger found the oil, if we count the wealth found in the subterranean neighbors, one must not forget that oil founding did not always mean economic bliss for many of them, and that can also happen in Niger,
Oil is a comprehensive capital industry that, if not properly managed, can completely capture the economy and destroy other, otherwise competitive, economic sectors.
This topic has been widely covered in our Big Barrels: African Oil and Gas and Quest for Prosperity, looking at what African countries did to better manage their hydrocarbon wealth and halt the potential negative effects of the oil industry on the economy, and on that side, Niger did a little. Its oil and gas legislation dates back to decades, which is more in line with the broad legal framework of mining than the oil code.
This is a problem that advises Nigeria leaders seriously to understand. I can take the examples of many African oil and gas countries that have faced the same challenges in recent years. They can look at Ghana's inspiration for a resource management codex that surpasses some of the world's best because it has created an inheritance fund to protect the legacy of future generations, as well as the stability of the oil security oil security fund. They can look at Nigerian battles with local content strategies to better design policies that will involve their populations and promote the development of the affiliated industry to the oil sector, which can have measurable employment impact. They can look to Equatorial Guinea to see how infrastructure can boost the growth of oil and gas industries facing service delivery across borders. They can seek international co-operation, either through regional associations or by seeking the knowledge of their allies and neighbors. Equatorial Guinea, for example, has made a great deal of developing its international connections to the oil and gas industry in Africa by providing know-how and technical knowledge to new users in the industry. Furthermore, Niger must strive to avoid many mistakes that have been witnessed in the African oil nations in the past, and a leap in understanding the potential, for example, the development of a natural gas economy may have the economic, ecological and social future of the country.
In this regard, transparency in signing the agreement on the division of production and use of oil revenues will be most important. Maintaining programs like
, which Niger entered and later withdrew, will lay the foundations not only for the image of the country abroad, but also for the credibility of the government within its own borders. Understanding civil society about the real impact of the oil industry and its use and distribution of wealth is of crucial importance for preventing social disruption, such as witnessing over and over again in places like Nigeria or Tanzania.
In short, Niger is now a new market star in West Africa and an investment opportunity for large and small industry players. The country is on the verge of a new era in its history, which can bring great wealth to its people and future generations, and this can raise millions of poverty. The way that this opportunity is managed by the leaders of the country will determine whether this potential has ever been fulfilled and we can only hope it is but many steps for generations, both young and old, are still needed to make the most of their land hidden treasures.
NJ Ayuk is a leading energy attorney and a strong advocate of African entrepreneurs, Global Entrepreneur with the World Economic Forum, one of Forbes' 10 most influential men in Africa in 2015 and a well-known intruder in the oil and energy sector. He is the founder and CEO of the Centurion Law Group and executive President of Africa's Energy Chambers.
João Gaspar Marques is an energy analyst and experienced specialist in Africa with experience in field reporting from African petroleum points.