EDINBURGH, UK – Wood Mackenzie predicts a 30% reduction in spending on exploration and appraisal offshore Africa this year.
Expenditure will likely switch from high-risk, high-cost wildcats to appraising discoveries or proving further resources near proposed projects, the analyst claims, in order to deliver higher returns to shareholders.
Exploration should continue in the deepwater Kwanza basin offshore Angola. BP is one operator planning to drill in the region. Despite last year’s disappointing well results, 2015 should provide more clarity on where the presalt fairways extends.
Deepwater Nigeria – a proven basin with significant undiscovered reserves – could reclaim attention, the analysts add.
Africa’s deepwater development costs are among the highest globally, typically $25-30/bbl. In the current price environment this could lead many companies to delay final investment decisions on projects.
Day rates for offshore rigs in the region have fallen 30% in recent months, although other oilfield services have yet to follow suit.
Wood Mackenzie expectsAfrican development costs to drop by around 15% in 2015 – not as much as in other regions, with a $5-10 lower long-term price potentially determining whether a project is viable or not.
Planned bid rounds in Angola, Kenya and Tanzania may be deferred this year, while the deadline for 15 blocks in Mozambique has been extended until the end of April. The analysts expect bid rounds in Egypt and Algeria to proceed later in 2015, and offshore blocks could be offered for the first time in the Algerian sector of the Mediterranean.
In Somalia, both the federal and Somaliland administrations could offer acreage later in the year, and Madagascar may offer up to 50 offshore blocks in 2015.