Industry Trend Analysis - Established Producers Losing Ground To Frontier Areas - NOV 2017

BMI View: SSA ' s reg ional upstream outlook is mixed , with traditional oil producers continuing to suffer from project delays due to the deepwater nature of their resources and a myriad of domestic issues. In contrast, exploration bright spots are emerg ing in frontier basins such the MSG BC and East African onshore resources become an area of nascent production growth.

The downturn in oil prices has been devastating to sub-Saharan Africa's (SSA's) upstream investment. Despite a strong pre-investment project pipeline, the number of final investments in the SSA upstream has been critically low. Production has been sustained by legacy projects that reached FID in the era of USD100 per barrel (bbl) oil. With a lack of new projects forecast to come online over the next 10 years, the production profile post-2018 looks bleak.

Nigeria is a country that has suffered severely from project delays. Africa's largest oil producer has significant reserves and a number of projects that have been put on hold amounting to 875,000 barrels per day (b/d). Despite the major stakeholders consistently highlighting the Nigerian projects in their upstream presentations, the investments have not materialised. The majority of SSA's hydrocarbons lie offshore, often in deepwater, for example all of Nigeria's 875,000 b/d of pre-FID projects are located in deepwater. These are the highly capital intensive projects that tend to sit towards the top end of the cost curve and are therefore the most vulnerable to budget trimming. While we do expect a number of these deepwater projects to reach FID over 2017 and 2018, as oil majors lock in future production growth, the earliest they will come online will be in early 2020's, leaving a shortfall in production until then.

Gulf Of Guinea Production Outlook Wanes
Crude, NGLP & Other Liquids Production, 000 b/d
e/f= BMI estimate/ forecast. Source: BMI, National Sources, EIA

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