Nj Aiuk and Joao Gaspar Markues
The story of oil exploration in Africa is one of many failures and victories, bold bets in unexplored areas that have brought great returns, forgotten countries where only a few few braves have decided to enter into the pursuit of wealth. This is a story for many African hot oil and gas hotspots. It's hard to imagine that at one point no one believed that Equatorial Guinea had an oil or was even willing to try it. Sudan, Chad, Kenya, Uganda, Tanzania, Senegal, Liberia … all in one way or another, the nations whose potentials have been long suppressed by international oil and gas companies, while a brave player did not take the chance and found them so desired resources.
The Republic of Nigeria is the latest on the list, and the one that is drawing more and more attention. Since April 2018, the British independent research and production company Savannah Petroleum has recorded five consecutive commercial commercially viable oil discoveries in its areas of the R3 and R4 production agreement in the Agadem Rift (ARB) basin in the southeast of Niger. Although the company has delivered a report on estimated reserves at the end of its research program, the results are extremely promising. So far, even before the latest discovery in October, the company has already signed a legally binding Memorandum of Understanding (MOU) with the Government of the Republic of Nigeria, outlining steps of cooperation necessary for both sides to adequately implement the early production scheme for the R3 block. This includes support for negotiations on oil-only agreements with the only refinery in the country, Societe de Raffinage de Zinder (SORAZ), and facilitating access to the third-party pipeline from ARB to the refinery.
Savin's success in the last 8 months has not gone unnoticed by the oil players in the region. Only this week, Oranto Petroleum, the most prominent domestic oil and gas company in Africa, through its president, Prince Arthur Eze, announced the signing of a memorandum of understanding with the Ministry of Oil of the Republic of Nigeria for the purchase of blocks R5, R6, Dibel and Dallol in the Tenere basin Agadem. Both the R5 and R6 border Savannah other permits for research at the Agadem, R1 and R2 bases, which also recorded significant oil and gas prospects over the past few years and which CGG estimated to contain up to 1.6 billion barrels of oil equivalent (MMBOE) in the reserves "not yet found".
Orant's move is symptomatic of the growing profile of the Republic of Niger as a market for oil and gas borders. We will probably witness similar moves by other international oil companies in the coming months. From now on, we will look back and surprise how long it took oil companies to explore a country that is so obviously rich in oil, which borders Chad, Nigeria, Algeria, Libya and Congo, well-established oil nations.
Brave a dragon
However, the real player who risked research in the Republic of Niger, when everyone else gave up, is not Savannah or Oranto, but China National Petroleum Compani (CNPC). In fact, history will say that it existed before and after the CNPC in the oil industry in Nigeria.
In 2008, the CNPC took over the area Elf, Esso, Tekaco and Petronas owned, gently examined and abandoned. Three years after entering Nigeria, CNPC hit oil and started production. In agreement with the government, the company built and operated 463 km of oil pipelines and a 20,000 barrel refinery daily in Zinder. The first oil was delivered in the fields of Sokor and Gumeri in 2011 and Agadi field in 2014, and everything is located on the surface of the company in the basin of Agadem Rift.
In the period from 2011 to 2014, CNPC made 95 discoveries from 129 exploration wells, confirmed over one billion barrels of oil reserves and completely changed the profile of the Republic of Niger as an oil nation.
Since then, Niger has become a de facto oil producer and through its refinery has become self-sufficient in fuel, a rare case across the continent. Before the CNPC, since the country first began exploring oil in the 1970s, only 25 wells were made and 5 smaller discoveries were made. Of course, the CNPC used extremely high oil prices to justify massive investment in research in 2008, but it still went through the border market with great rewards.
Slow but promising start
Despite all these successes, oil production in Niger remains marginal, reaching 20,000 barrels of oil per day (BOPD) at its peak, and slightly declining over the past several years. This happened despite year-to-year government promises and proposals to increase oil production in the country to 60, then 80, and then 90 thousand BOPD, the target set in early 2014.
The delay is mainly due to the lack of export infrastructure for crude oil. Niger has no pipeline connecting it to other countries, and with domestic consumption of no more than 7,000 barrels per day, pushing into production would only create a problem with oil storage.
Since 2012, the government has pushed for the construction of a pipeline to connect Niger to the Chad-Cameroon gas pipeline in the south, which could transport raw materials to the Kribi Cameroon Harbor in Guinea Bay for export. This property could only change Niger's face forever. However, the collapse of crude oil prices in 2014 made these 700 kilometers of 60,000 BOPD effort hard to finance for two partners, the CNPC and the Republic of Nigeria. Now, the Nigeria government has announced in April this year that construction of the gas pipeline will begin by the end of 2018, although it is also said for 2017. If it passes, Niger could be a de facto exporter of oil by 2020 and have access to a new capital inflow in order to continue to finance industry growth and overall economic development, especially if the price of crude oil continues to rise.
A note of concern
These are welcome news for one of the poorest countries in the world, despite being the fourth-largest world producer of uranium. However, this can also mean problems. If it is not surprising that Niger has found oil, if we take into account the wealth that lies in the suburbs of its neighbors, it should not be forgotten that the invention of oil for many of them did not always mean economic bliss and that the same can happen in Niger.
Oil is a breakthrough intensive industrial employment industry that, if not managed properly, can fully affect the economy and destroy other, otherwise competitive, economic sectors.
We covered this topic in detail in our book Big Barrels: African Oil and Gas and Cook for Prosperity, which examines what African countries have done to better manage their wealth of carbon sequestration and limit the potential negative effects of the oil industry on the economy. On this front, Niger has done little. Its oil and gas legislation has been in existence for decades, and this is more in line with the broad legal framework for mining than in oil.
This is a problem Nigerian leaders are advised to take seriously. They can take examples of many African oil and gas countries that have been fighting the same challenges over the past few years. They can look at Ghana for inspiration for a resource management code that suits some of the best in the world, as it created a fund for the protection of violence to protect the legacy of future generations, as well as a fund for stability to ensure security in case of oil price volatility. They can consider Nigerian battles with local content strategies to better shape policies that will include their population and promote the development of related industries to the oil sector, which can have a measurable impact on employment. They can look at Equatorial Guinea to see how infrastructure can boost the growth of the oil and gas industry, which is focused on providing services 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 lot of development of its international links in the oil and gas industry in Africa, providing knowledge and technical knowledge to new members in the industry. Moreover, Niger must strive to avoid many mistakes in African oil countries in the past and to grasp the understanding of potential, for example, the development of a natural gas-based economy that could have the economic, livelihood and social future of the country.
In this sense, transparency in signing agreements on the sharing of production and the use of oil revenues will be the most important. Compliance with programs such as
, which Niger entered and later withdrew, lay the foundations not only for the image of the country abroad, but also for the credibility of the government within its borders. Understanding civil society about the real impact of the oil industry and the way in which wealth is used and distributed is essential to preventing social unrest as we have been witnessing over and over again in places such as Nigeria or Tanzania.
In short, Niger is now a new star market in West Africa and an investment opportunity for big and small players. The Earth 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 lift millions out of poverty. The way the leaders of the country will manage this opportunity will determine whether this potential has ever been fulfilled and we can only hope that it is, but it is still necessary to take many steps that the Nigerians, the young and the elderly, come directly to the benefit of their hidden goods.
Nj Aiuk is a leading lawyer for energy and a strong lawyer for African entrepreneurs, Global Shaper with the World Economic Forum, one of the top ten top ten people in Africa in 2015 and a well-known trader in the oil and energy sector. He is the founder and executive director of Centurion Lav Group and executive president of the Chamber of Commerce in Africa.
Joao Gaspar Markues is an energy analyst and experienced expert from Africa with experience in field reporting from African focal points of oil.