Deep water: How West Africa compares with Gulf of Mexico

May 5, 2003
Activity off Africa and North America tends to dominate the thinking of many of the world's oilmen.

Activity off Africa and North America tends to dominate the thinking of many of the world's oilmen.

West Africa's large deepwater reserves have particular strategic attraction to both US oil majors and the US administration as a strategic alternative to Middle Eastern reserves. At a local level, much of the activity of Houston oil company offices is focused on West African field developments.

Over the past 5 years similar levels of offshore oil and gas reserves have been brought onstream in North America and Africa. However, the picture is about to change dramatically, and West Africa is forecast to power ahead.

In this article energy analysts Douglas-Westwood and offshore data specialists Infield Systems compare West Africa and North America both in terms of the reserve prospects and likely levels of capital expenditure in key sectors.

The Infield database shows that over the past 5 years reserves of about 1.6 billion bbl of oil and gas equivalent (boe) have been brought onstream each year off North America, with most of this being in the Gulf of Mexico. Considering future prospects under consideration for development in the period to 2007, this annual average rises to 2.2 billion boe.

Click here to enlarge image

Africa exhibits a very different reserve development trend, because it is at a much earlier stage in its development cycle (Fig. 1). The outlook is for continuing growth from 3 billion boe coming onstream in 2003 to 9 billion in 2007 if all the projects currently being talked about, such as Akpo, Agbami, and Nnwa, proceed.

Click here to enlarge image

With some 17 billion boe slated in 250 prospective offshore fields, Africa now accounts for 16% of all reserve prospects listed on the Infield database for the period 2003-07 (Table 1). It is of note that prospects for the region now exceed western Europe, which has 12% of the world total, including giant Ormen Lange field in the Norwegian Sea. North America trails with 7% at this writing.

With shallow water reserves being steadily depleted worldwide, big oil is increasingly targeting its dollars at deep water. The "World Deepwater Report" forecasts a global capex on deepwater developments of $57.9 billion in 2003-07, more than double the $25.6 billion we estimate was spent in the previous 5 years. The US Gulf of Mexico and West Africa together account for 70% of the deepwater capital expenditure forecast.

For the purposes of this analysis, we regard deepwater as 500 m of water and deeper.

Click here to enlarge image

We expect West African deepwater capex to grow from about $1.4 billion in 2002 to $5.4 billion in 2007, giving a total of $22 billion during 2003-07. The Gulf of Mexico is a much more established deepwater province, and we expect 5-year spending to total some $18 billion. The spend profiles are quite different (Fig. 2).

West Africa deep water

Equatorial Guinea

The first brace of West African deepwater 'elephants' was discovered in the spring of 1996, Shell's Bonga on OPL 216 off Nigeria (March 1996) and TotalFinaElf's Girassol on Block 17 off Angola (April 1996). Since then, West Africa has emerged as perhaps the most significant deepwater province in the world, although some high-profile failures and disappointments occurred along the way.

In terms of deepwater potential, Angola and Nigeria are in a class of their own, thanks largely to the fact that their territorial waters overlie the sedimentary deposits of two great river systems, the Congo and the Niger.

It was, however, the smaller nation of Equatorial Guinea with a population of just half a million which achieved first oil from the region's deep waters. This came from ExxonMobil's Topacio field, which lies northwest of Bioko Island in 579 m of water. It is a satellite of the operator's Zafiro project and started production in 1997. Topacio is flowing 6,000 b/d oil to the Zafiro Producer FPSO.

Following Topacio in November 2000 was the first phase of Ceiba field, off Equatorial Guinea farther south of the country's mainland Rio Muni province. Ceiba lies in 700 m of water. Triton Energy Ltd., Dallas independent, operated the initial stages of this ongoing development and has since been taken over by Amerada Hess.

Just over a year after first oil from Ceiba, production began to flow at TotalFinaElf's Girassol project on Block 17 off Angola. With an estimated capex of $2.5 billion, this landmark project dwarfs its West African predecessors and indeed most other deepwater projects in the world.

The Infield database lists 32 West African deepwater prospects expected onstream in 2003-07.

According to the Infield database, development of these prospects could require as many as 433 production and injection wells (347 subsea and 86 surface) with 18 FPSOs, three TLPs, and one FSO. The 32 prospects lie off six countries. Angola leads the field with 17, followed by Nigeria 9, Equatorial Guinea and the Congo 2 each, and Mauritania and Ivory Coast 1 each.

Work off Angola

Off Angola, the deepwater center of attention is focused on two main blocks.

Block 15 operated by ExxonMobil and Block 17 operated by TotalFinaElf are both many times larger than a Gulf of Mexico block, and thus each may contain several large fields. This minimizes unitization problems, but the state plays a more direct role and often likes to have a say in the development planning stage, witness Sonangol's involvement in the Kizomba project recently.

That said, the sizes of the individual fields discovered so far off Angola are not so much different from that of their Gulf of Mexico equivalents. The cut off point of 500 m of water has most effect on Angola Block 14 as it eliminates from this study ChevronTexaco's enormous Benguela-Belize platform project set to go in 396 m of water.

On Block 17, Girassol is already on production, and a series of satellite developments is beginning this year with the tieback of Jasmim field. TotalFinaElf's next big project will be the development of the similarly sized and priced Dalia field with another very large FPSO.

The reasons behind the development of two very similar vessels in close proximity revolve around differences in the nature of the crudes they are to produce and the processing equipment that they need. This will also affect which particular satellite field will be tied back to which particular host FPSO in the future.

BP may face a similar problem to the immediate southeast where the Block 18 Plutonio project is just getting off the ground and where one or perhaps two FPSOs may be needed to develop a series of widely spread finds.

ExxonMobil's Kizomba project on Block 15 to the north-northwest is taking a different development route. Here all the production wells are going to be on a dry tree unit TLP with an accompanying FPSO, while the water and gas injection wells are to be all wet subsea completions.

Kizomba has three phases. Kizomba A will access crudes from neighboring Hungo and Chocalho fields starting in 2004. The look-a-like Kizomba B project to serve Kissanje and Dikanza fields will follow in 12-18 months if all goes smoothly. The smaller and more diverse Batuque, Mondo, and Saxi fields of Kizomba C will then be tied back in a more conventional arrangement to a further FPSO after that.

The Xikomba early production system FPSO will precede all of these into production by the end of 2003.

Nigeria and elsewhere

After a slower start, Nigeria is set soon to catch up with Angola in the deepwater development stakes and by 2007 to take over as large finds such as Akpo, Agbami, and Nnwa/Doro begin to be developed.

Northwest of Akpo, ConocoPhillips is mulling the development of Chota on Block 220, which now appears to be continuous with Bolia to the west on Block 219.

Therefore we are already beginning to see the start of a more complicated unitization problem here than there has been in Angola.

The two main deepwater projects under development in Nigerian waters are Shell's Bonga on OML 118 and ExxonMobil's Erha on OPL 209. Both are major FPSO projects.

Both will be beaten into production by Agip-ENI's smaller fast-track Abo project, going into production shortly. Abo is based around a conversion rather than a new build, and recently it appears that reserve figures have been increasing on Block OPL 316, heralding a larger project than originally envisaged.

Bonga likewise is situated in an area of more recent finds. Bonga Southwest and ChevronTexaco's Aparo discoveries may be continuous and may therefore require unitization before going ahead.

Projects to watch outside Angola and Nigeria are the Moho-Bilondo project in Congo-B just north of the Angolan border, further developments in Equatorial Guinea around the Ceiba and Zafiro poles, and step-out activity off the Ivory Coast.

Having returned Espoir field to production in early 2002, Canadian Natural Resources Ltd. now looks to the deepwater development of Baobab field to the south.

The remotest deepwater field from currently existing infrastructure is to be found off Mauritania, where Woodside Petroleum (Pty.) Ltd.'s Chinguetti discovery looks set for the go-ahead within the time frame of this study.

Gulf of Mexico deep water

Most of the activity in the US Gulf of Mexico to date has been targeting accessible reserves in shallower water on the continental shelf.

This has given rise to the development of an extensive infrastructure network which is proving invaluable in the development of the significant volumes of hydrocarbons being discovered in the region's deeper waters. The shelf boasts numerous platforms well placed to host subsea tiebacks, and more than 25,000 miles (40,000 km) of offshore pipeline to transport production ashore.

The business environment is relatively stable, logistical constraints are minimal, and many refineries and gas processing plants are located along the coast. All these factors, coupled with the region's benign environment and the relatively lenient fiscal regime that prevails, create what are perhaps the world's most favorable conditions for deepwater development.

The period 1998-2002 saw reserves totaling 3.8 billion boe brought into production.

Deepwater development prospects identified for 2003-07 are targeting more than twice this volume, with combined reserves of over 8.2 billion boe.

The figure also shows that the bulk (85%) of the reserves in future deepwater prospects are located in 1,000 m of water or more, up from 61% in the previous 5 years. The increase is most marked in 1,500 m of water or more.

At present some 54 deepwater fields are in production and some 27 prospects identified for the next 5 years. Many are of about 100 million boe, but BP's flagship project Thunder Horse in 1,846 m of water on Mississippi Canyon Block 778 is the largest discovery ever made in the Gulf of Mexico with more than 1.5 billion bbl of reserves.

Click here to enlarge image

In comparison with West Africa, in the Gulf of Mexico deepwater development is 6-7 years ahead (Table 2). Although, as mentioned above, block sizes are much smaller in the gulf, the pace of development has not been slowed by yards of red tape and endless litigation as might have been the case.

Despite intercompany rivalries, co-operation has won out over confrontation.

The well developed shallow water infrastructure in the Gulf of Mexico, built up over 50 years, has definitely aided this advance into deepwater.

The Gulf of Mexico has clusters of finds as well as developments, similar to the situation on the great Angolan blocks.

This year should see the start up of the Na Kika project based on a giant FPS moored in MC 474 and serving blocks as far apart as MC 383 Kepler and MC 657 Coulomb.

In the next few years, in another pole area BP et al. will bring on three major fields in the southeast Green Canyon area at Holstein, Mad Dog, and Atlantis via two SPAR units and another large FPS.

But the real jewel in BP's crown looks set to be the development of Thunder Horse and North Thunder Horse southwest of the currently six-field Na Kika development and sharing some infrastructure with it.

One thing noticeably different about the current crop of Gulf of Mexico development schemes compared to their West African equivalents is the absence of any FPSO based schemes.

There has been talk of the Alaminos Canyon Trident and Great White fields being developed via an FPSO towards the end of the period, but recent appraisal drilling has not been very positive. However, even for the Gulf of Mexico this area is quite remote and a definite case for an FPSO study in the rest of the world.

Another type of platform that has found favor in the Gulf of Mexico but not in West African waters is the spar, much favored at the moment in American waters over all but mini-TLPs, but definitely out of favor off West Africa were sea states apparently mitigate against this type of structure.

Drilling expenditure

Drilling forms the largest single expenditure sector of the offshore industry, and "The World Offshore Drilling Report" forecasts a total of $169 billion to be spent globally on drilling and completing offshore wells in the next 5 years.

Click here to enlarge image

Spending levels are expected to remain fairly constant at around $34 billion/year in this period, though a decline of around 4% is expected due to a lack of drilling opportunities as we approach 2007 (Fig. 3).

The US is the world's most active area for offshore drilling, and over 90% of the 5,026 wells drilled off North America between 1998 and 2002 were in the Gulf of Mexico.

Over the next 5 years we expect annual offshore well numbers to range from 934 to 992, with the total number of wells drilled over this period declining slightly, relative to the previous 5 years.

However, due to the fact that an increasing proportion of new wells are located in deep water, we expect total drilling expenditure to increase slightly, from $8.3 billion in 2002 to a peak of $9.7 billion in 2005 before experiencing a slight decline to $9.1 billion in 2007 (Fig. 3).

Click here to enlarge image

Fig. 4 shows how Africa is also characterized by a strong growth in deepwater activity. The year 2003 should, for the first time, see levels of deepwater spending exceeding shallow water spending.

Like North America we expect a slight drop in the total number of wells in the 2003-07 compared with the previous 5 years, but due to the higher cost associated with drilling deepwater wells we expect a significant increase in the total spend for the African region.

Click here to enlarge image

This worldwide change from shallow-water to deepwater drilling can be seen in Fig. 5.

The authors
Roger Knight ([email protected]) has been responsible the past 16 years for the collection, validation, and evaluation of the global offshore oil & gas data held on the Infield Systems' database, the source of the field information in this article. Before that he was a university lecturer in petrology and structural geology in Iran. He holds a PhD in geology.

Steve Robertson ([email protected]) has undertaken research on projects for investment banks and contributed to a number of Douglas-Westwood Ltd. publications, including "The Marine Propulsion Report" and "The World Offshore Drilling Report." He holds a BSc in computing and economics and before joining Douglas-Westwood worked in the defense and financial sectors.

Dominic Harbinson ([email protected]) as senior analyst with Douglas-Westwood has authored a series of global studies including "The World Subsea Report," "The World Floating Production Report," "The World Deepwater Report," and "The World Offshore Pipelines & Umbilicals Report." His other work includes surveys and market studies for a wide range of clients such as investment banks, international contractors, and oil majors.