Africa Emerges as Focal Point in Global Oil and Gas Exploration

• Global oil and gas exploration is increasingly concentrated in "core" areas like Guyana and Namibia, where recent discoveries have been made.
• While this concentration brings economic benefits, it also raises concerns about unexplored potential in other regions and the environmental impact of deepwater drilling.
• Namibia, with its recent discoveries and influx of major oil companies, is poised to become a significant player in the global oil and gas market, but must navigate the challenges of the "resource curse."

The skewed activity is highlighted by explorers demarcating assets within their portfolios as ‘core’ areas of operations, with the majority of guided exploration spending being directed towards exploring these areas. Secondly, the acceleration of development of proven basins amid the rise of renewable sources of energy has been demonstrated by the recent flurry of activity within the Guyana Basin and Namibia’s sector of the Orange Basin. These basins have not only seen an increase in activity but have also in recent years contributed significantly towards global conventional discovered volumes, which have been declining. Additionally, the availability of vast resources within technically and financially challenging offshore areas has been exemplified by an increase in deepwater and ultra-deepwater activity and the announcement of standout discoveries from these areas.

A shift to ‘core’ areas

Guyana and the Orange Basin continue to drive exploration spending and explorers are estimated to spend about 50% of this year’s projected exploration expenditure (expex) in offshore basins, with French major TotalEnergies set to spend around 30% of its total guided exploration spending this year of $1 billion on Namibian exploration. This risk-taking appetite among explorers is highlighted by the fact that 15% of this year’s estimated expex will be dedicated towards proving the subsurface potential of environmentally challenging and high-cost ultra-deepwater areas. However, a concentration of exploration within so-called core areas may prove a disadvantage for some host nations that could see their subsurface potential remain unexplored. TotalEnergies recently indicated it is willing to exit its Brulpadda and Luiperd discoveries offshore South Africa in a move that could lead to these breakthrough finds being stranded.

Following the swift rise of Brazil’s pre-salt plays with the announcement of the huge Tupi find in 2006, discoveries such as Eni’s Zohr gas field in the Mediterranean Sea ignited hopes of countries such as Egypt replicating Brazil’s success. However, the North African nation has since failed to unearth any discovery akin to the size of Zohr. Both Guyana and Namibia have, however, managed to follow up basin-opening discoveries with a raft of similar finds, with ExxonMobil making the Liza discovery on the Stabroek Block off Guyana in 2015 and Namibia posting TotalEnergies’ Venus and Shell’s Graff finds in early 2022. With ExxonMobil and its Stabroek partners already heading towards sanctioning of their seventh development, the announcement of over 12 billion barrels of oil equivalent (boe) of recoverable resources on the block is set to propel Guyana to the fifth-largest conventional liquids producer by the mid-2030s.

These volumes in Guyana have not only increased cash flow for the companies holding stakes in the discoveries but have also deeply impacted the economic conditions of the host nation by accumulating billions of dollars via its oil fund. 

Aatisha Mahajan - Vice President Upstream Research

Namibia, although having announced over 2.5 billion boe of oil and gas volumes, is still in a nascent state in terms of its upstream sector and awaits development of its discoveries. The announcement of additional volumes via future exploration could help the nation’s dream of replicating the Brazilian and Guyanese success stories, although it will have to overcome the effects of the so-called resource curse, which has in the past negatively impacted many resources-rich African nations.

Namibia on the rise

Discoveries in both Namibia and Guyana have seen industry players flocking to these countries to secure exploration blocks. Following the success of majors Shell and TotalEnergies in Namibia, peers BP, Eni and Chevron are now farming into the country’s exploration blocks, with a series of wells to be drilled over the next few years, which would leave ExxonMobil as the only major not present in the basin. Additionally, Galp Energia’s Mopane discovery, announced earlier this year with a postulated resource potential of about 10 billion barrels of oil, has attracted industry attention, with about 12 major oil and gas companies reported to have expressed interest in acquiring 50% of the Portuguese operator’s 80% interest in the tract. Additionally, with numerous wells planned to be drilled, Namibia could be on track to replicating Guyana’s success, at least in terms of resource potential, primarily due to success of exploration across different blocks compared to Guyana, where success has been limited to Stabroek.

Although mature upstream areas such as Southeast Asia, the US Gulf of Mexico and the Norwegian Continental Shelf will continue to entice global explorers, owing to their rich networks of infrastructure and the ability to economically develop medium to small finds, explorers in the next few years will continue to probe the Southern Atlantic margin, focusing on mature countries such as Brazil, Mexico and Guyana, while Africa also takes a front seat. According to Rystad Energy analysis, Africa leads among regions with the largest number of high-impact wells planned to be drilled this year, taking 13 of the planned 36 wells.

By Aatisha Mahajan via Rystad Energy 

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