Thursday , October 28 2021

Africa: In the oil industry of Niger, fortune favors black



The history of oil exploitation in Africa is one of the many failures and victories, bold bets in unexplored areas that have brought great returns, forgotten lands that have only decided to venture in search of wealth. This has been the story of many critical oil and gas points in Africa. It's hard to imagine that at one point, nobody believed that Equatorial Guinea had oil or even was willing to try it. Sudan, Chad, Kenya, Uganda, Tanzania, Senegal, Liberia … all are nations whose potential has been disapproved by international oil and gas companies until a daring player has searched for and found these desired resources.

The Republic of Niger is the youngest of the list and another that attracts increasing attention. Just since April 2018, the British-owned junior British exploration and production company Savannah Petroleum recorded five consecutive commercially viable oil discoveries in its R3 and R4 Production Sharing contracts in the Agadem Rift (ARB) basin in southeastern Niger. While the company transmitted the estimated reserves report for the end of its exploratory program, the results are very promising. So much so that even before its latest discovery in October, the company had already signed a memorandum of understanding legally binding (MOU) with the government of the Republic of Niger describing the necessary cooperation steps for both parties for the proper implementation of a start-up scheme of production for block R3. These include support in the negotiations of agreements for the sale of oil with the only refinery in the country, the Société de Raffinage de Zinder (SORAZ), as well as facilitating access to the connection of third party pipelines from the ARB to the refinery.

Savannah's successes during the last 8 months have not gone unnoticed by the region's oil players. This week, Oranto Petroleum, the largest oil and gas company in Africa, through its president, Prince Eze, announced the signing of a memorandum of understanding with the Ministry of Petroleum of the Republic of Niger for the acquisition of blocks R5, R6, Dibella and Dallol in the Tenere and Agadem cups. Both R5 and R6 border other Savannah exploration licenses in the Agadem, R1 and R2 Basins, which have also seen considerable oil and gas prospects in recent years and have been valued by CGG as containing up to 1.6 billion barrels of oil equivalent MMBOE) in "still to find" reservations.

The movement of Oranto is symptomatic of the growing profile of the Republic of Niger as a frontier market for oil and gas. It is likely that we will see similar movements from other international oil companies in the coming months. Years from now on, we will look back and we will surprise the time that led the oil companies to explore a country that is so rich in oil that bound Chad, Nigeria, Algeria, Libya and Congo, well-established oil nations.

The dragon bold

However, the real player who risked exploring in the Republic of Niger when everyone had stopped being Savannah or Oranto, but the China National Petroleum Company (CNPC). In fact, history will tell how there was a before and after the CNPC in the oil industry in Nigeria.

It was CNPC that in 2008 it assumed a surface that Elf, Esso, Texaco and Petronas owned, under a small interview and abandoned. Three years after entering Niger, the CNPC hit oil and began to produce. According to an agreement with the government, the company built and operated a gas pipeline of 463 kilometers and the refinery of 20 thousand barrels per day in Zinder. The first oil was delivered from the Sokor and Goumeri fields in 2011 and from the Agadi field in 2014, all located on the surface of the company on the Agrama Rift bridge.

Between 2011 and 2014, the CNPC made 95 discoveries of 129 exploration wells, confirmed more than one billion barrels in oil reserves and completely changed the profile of the Republic of Niger as a petroleum nation.

Since then, Niger has become a petroleum producer in fact and, through its refinery, has become self-sufficient in fuel, a rare case across the continent. Before the CNPC, since the country began to be explored by oil in the 1970s, only 25 wells were drilled and 5 small discoveries were made. Of course, CNPC benefited from the high oil prices to justify massive exploration investment in 2008, but nevertheless crossed a border market with great rewards.

A slow but promising start

In spite of all these successes, Niger's oil production remains marginal, reaching 20,000 barrels of oil per day (BOPD) at its peak and declining slightly in recent years. This happened despite year after year of government promises and proposals to boost the country's oil production to 60 years, 80 and then 90 thousand BOPD, a target set for 2014.

The delay was largely linked to the lack of export infrastructure for crude oil. On the ground, Niger has no gas pipelines that connect it to other nations, and with domestic consumption of more than 7 thousand barrels per day, pushing with production would only create an oil storage problem.

Since 2012, the government has driven a pipeline connection that was built to link Niger to the south-south Chad-Cameroon pipeline, which could transport crude oil to the Cameroonian port of Kribi, in the Gulf of Guinea, for exports. That resource could only change the face of Niger forever. However, the collapse in crude oil prices in 2014 made this 700 kilometers in 60,000 BOPD attempts with difficult financing for the two partners, CNPC and Niger Republic. Now, the Niger government has declared in April this year that gas pipeline construction will begin before the end of 2018, although the same was said for 2017. If that happens, Niger could be an oil exporter in fact by 2020 and have access to a new capital flow to continue to finance global economic and economic growth, especially if the price of crude oil increases.

A note of concern

These are welcome news for one of the poorest nations in the world, despite being the fourth largest producer of uranium in the world. However, it can also mean problems. If it is not surprising that Niger finds oil, if we take into account the riches found in the subsoil of its neighbors, it should not be forgotten that the conclusion of oil has not always meant economic happiness for many of them and that the same can happen in Niger.

Oil is a heavy industrial and capitalist heavy industry that, if not properly managed, can completely swallow the economy and destroy other more competitive economic sectors.

We cover this issue extensively in our Big Barrels book: oil and gas in Africa and the search for prosperity, which looks at what the African nations did to better manage their hydrocarbon wealth and curb the potential negative effects of the oil industry on the economy. . And on that front, Niger did little. Its legislation on oil and gas goes back to tens of decades as it is more in line with a broad legal framework than a specific oil miner.

This is a problem that Nigerian leaders are advised to take seriously. They can have examples of many African oil and gas countries that have fought the same challenges in recent years. They can look at Ghana so that it is inspired by a resource management code that rivals among the best in the world, as it has created a patrimonial fund to protect the legacy of future generations, as well as a stability fund to provide security in the event of volatility of the oil prices They can see Nigeria's battles with local content strategies to improve design policies that include their population and promote the development of an industry associated with the oil sector, which can have a measurable impact on employment. They can look at Equatorial Guinea to see how the infrastructure can boost the growth of a petroleum and gas industry in order to offer services across borders. They can seek international cooperation, either through regional associations or seeking the knowledge of their allies and neighbors. Equatorial Guinea, for example, has achieved a lot in the development of its international ties in the oil and gas industry in Africa, providing technical knowledge and expertise to new clients in the industry. In addition, Niger must strive to avoid the many mistakes that have been observed in the oil nations of Africa in the past and to advance the knowledge of the potential of, for example, the development of a natural gas economy that could have for the economy, the environment and the future society of the country.

In this regard, transparency in the signing of production sharing agreements and the use of oil revenues will be fundamental. Adherence to programs like the one

, which Niger entered and later retired, 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. The understanding of civil society about the real impact of the oil industry and the way in which wealth from it is used and distributed is essential to avoid social unrest as we have seen repeatedly in places like Nigeria or Tanzania.

In short, Niger is now the new star star market in West Africa and an investment opportunity for big and small. 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 that can bring about millions of poverty. The way in which the country's leaders manage this opportunity will determine if that potential is already met and we can only expect it to be, but we must follow many steps so that Nigerians, young and old, can benefit directly from their lands. hidden treasures

NJ Ayuk is a leading energy lawyer and a strong advocate of African businessmen, The Global Shaper with the World Economic Forum, one of the Forbes' Top 10 Most Influential Men in Africa in 2015, and a well known dealmaker. sectors of oil and power. . He is the founder and CEO of Centurion Law Group and the chief executive of the African Energy Chamber of Commerce.

João Gaspar Marques is an experienced and energetic analyst in Africa with experience in reporting on the oil fields in Africa.

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