Oil companies take fresh look at West Africa reserves
Thanks largely to the sharp increase in petroleum prices in recent years, major oil companies are taking a fresh look at non-Nigeria West Africa -- and liking what they see.
Drilling activity is under way or planned in virtually every coastal nation from Senegal to Angola. Although no one expects another Nigeria, promising discoveries in Ivory Coast, Cameroon, Congo, Angola, and perhaps Zaire have amply demonstrated the profitability of areas once thought uneconomic.
"West Africa is going to be a boom area, no doubt about it," said a rig manager whose firm arrived here last year on a one-year contract -- and already has work through 1982 in the region. In fact, although the number of drilling companies has approximately quadrupled in the area, rigs are in short supply.
By world standards, the recent discoveries are not large: Combined output from the new and future West African producers is unlikely to challenge Nigeria, with its exports of 2 million barrels per day, as the preeminent oil power in the region.
Nevertheless, at today's -- and tomorrow's -- prices, even modest production will have a dramatic impact on the balance of payments of countries such as Ivory Coast, Cameroon, Congo, and Angola, which have relatively small populations and low domestic oil demand.
What is more, oil tends to have a "multiplier effect" on developing economies , attracting investors in other sectors, such as banking, construction, and consumer goods, who see in the new liquidity not only economic stability, but also increased capital spending and demand for manufactured products.
Even without new discoveries -- which seems unlikely, given the stepped-up exploration -- non-OPEC West African producers could be exporting 500,000 barrels or more sometime in the mid-1980s. This development should give the smaller black states greater economic, and inevitably political, leverage in a world teetering between balanced oil supplies and shortage.
Ironically, it was the same doubling of prices since 1978 that drove many African countries to the brink of insolvency that also accounts, in large part, for the increased attention paid to the west coast of Africa, particularly the Gulf of Guinea.
Because of their proximity to Nigeria and Gabon (another member of the Organization of Petroleum Exporting Countries), several of the region's countries have long interested international oil firms. But because of geological formations that tend to trap oil in shallow pockets, rather than large reservoirs as in, say, Mexico or Saudi Arabia, until recently the companies felt the necessary exploration and collection would be too costly.
"It's like buying a kilo of potatoes," explained the manager of operations for one major company. "If the potatoes are small, you will need a lot of them to make the kilo, while if they're big, you'll only need three or four. Well, drilling a lot of small wells is a lot more expensive than a few large ones."
An upshot of the increased exploration in West Africa, however, is that while most discoveries have fallen into the "small potatoes" category, there have been a number of important surprises.
The most significant appears to be the find made by Phillips Petroleum offshore Jacqueville, Ivory Coast, last year. Though both Phillips and Ivorian officials are remaining tight-lipped about its potential, other industry sources claim it could rival the Prudhoe Bay find several years ago in Alaska.
"It's very big -- the whole industry is talking about it," said a drilling expert here. "It's not just that the structure itself is large; it also has all the right qualities: low-sulfur crude, and a beautiful gas cap," he added. (Gas trapped at the top of an oil-bearing structure facilitates the flow of oil.)
Other pleasant surprises in the area have included promising offshore discoveries by Elf Aquitaine and AGIP in Congo, and major natural gas finds by a Mobil-Total consortium and Gulf Oil in Cameroon. The gas fields, which have been compared to the Frigg zone in the British North Sea, have prompted the government to begin feasibility studies for a liquid natural gas (LNG) plant.
If the plant is given the expected go-ahead, it could make Cameroon an LNG exporter by 1987.
A little-publicized discovery by Exxon in central Zaire has also generated rumors in West African diplomatic circles of a "mammoth oil field." Though the report is unconfirmed, Exxon must be fairly confident that the area has promise: Onshore exploration costs run at least 10 times those offshore in West Africa, because of a lack of infrastructure and dense jungle that slows the movement of rigs.
Perhaps the best barometer of the region's petroleum potential is the increase in interest shown by non-oil-sector investors. Since 1978, the first year of Cameroon's oil production, Chase Manhattan Bank, First National Bank of Boston, and Banque de Paris et des Pays-Bas have joined the four French-owned foreign banks in Douala, Cameroon.
Bank of America has applied for permission to open an affiliate here, and Citibank is making no secret of its desire to do likewise.
Despite the Marxist philosophy of the Congolese government; bankers and businessmen from Europe and the United States now make the trek to Brazzaville, Congo.
And Abidjan, Ivory Coast, already a major business center, is bracing for a renewed wave of expatriates drawn by the Phillips discovery.