West Africa's two leading oil producers face rather contrasting challenges in the early part of 2020, when Nigeria will need to find a way to keep its monthly output under the Opec+ production cap and Angola will struggle to even reach its own.
Among the region's smaller producers, Ghana faces delays and underperforming assets that have claimed the scalps of international oil firm executives, and Gabon must find a new oil minister after the arrest of its previous one. Off all these countries' coasts, pirates are back in action.
Nigeria's crude production cap will be 1.75mn b/d in the first three months of 2020, after the country agreed to a further 21,000 b/d cut at the most recent Opec meeting. Although state-owned NNPC said Nigeria reached full compliance with the country' previous 1.77mn b/d cap in November, this is at odds with calculations by Argus and Opec's other secondary sources. Abuja's own tally does not include around 200,000 b/d of middle sweet Egina, which it considers a condensate even though it does not match Opec's definition. Whether or not Nigeria backs down on this stance will go some way to determining if it can keep within its production cap.
Oil abundance is not the only issue troubling NNPC. Chevron, Total and ExxonMobil plan to trim their presence in Nigeria, following the government's introduction of additional royalty on revenues from deep-water production-sharing contracts. This could complicate Abuja's efforts to attract investors to an upstream licensing round planned for 2020, the first in more than a decade.
Illegal refining, theft and pipeline vandalism will continue to plague the country in 2020 as they have done for a decade or more.
To the south, Angola aims to boost production above 1.4mn b/d in 2020, but it will need much more than the 15,000 b/d expected from Eni's offshore Agogo field. State petroleum agency ANGP has until April to finalise negotiations with Total, Eni and state-owned Sonangol for development of 10 offshore blocks, and it plans a second round for a further 10 onshore blocks, again in 2020. Additional streams are much needed. Declining output from maturing fields offset the 200,000 b/d flowing out of Total-operated Kaombo project in 2019, bringing Angola's average production below 1.37mn b/d.
In Ghana, the government forecasts a 15,000 b/d increase in production in 2020, to 210,000 b/d, but the upstream is not in great shape. Aker Energy's chief executive Jan Arve Haugan resigned following delays to the 110,000 b/d offshore Pecan field development, where the firm has scaled back its plans and postponed a final investment decision (FID); Tullow Oil's latest forecast has lower-than-expected output from the firm's main assets, the Jubilee and TEN fields, and this prompted Tullow's chief executive Paul McDade to resign in December. Accra failed to entice investors with a licensing round in October, where only two of six blocks offered were awarded. It may hold another in 2020-21, which may yield better results if the government follows through with plans to improve fiscal terms.
Gabonese oil minister Noel Mboumba's sacking and subsequent arrest on corruption allegations in early December is an embarrassment, but Gabon is popular with international investors. The country is reaping the rewards of improved fiscal and cost-recovery terms for operators, and a licensing round for 35 blocks in January will likely provide a first blueprint for the future.
The implementation of a marine fuel sulphur cap in January has already boosted interest in west African grades, which are predominantly middle sweet and highly suitable for production of low-sulphur bunker fuel. To successfully ride this tide of momentum, the waters will need to be secure across the Gulf of Guinea, the world's most dangerous area for piracy. Attacks in Nigerian waters account for almost a quarter of the 119 recorded globally in the first three quarters of 2019. The latest occurred on 15 December, when pirates boarded the Duke when it was on route to Lome, Togo, from Luanda, Angola, and took crew hostage.
By Nicola De Sanctis
