ivory coast oil and gas sector on the up

Equity Research Sub-Saharan Africa 01 August 2013 Africa Rising
Ivory Coast oil and gas sector on the up......

Following the series of recent finds, interest for West African prospects has peaked as companies look to get a share. The Ivorian government plans to increase oil flow almost six fold by 2018, with gas production also rising.

One of the recent discoveries is that by French group, Total, in block CI-100 located in the Ivorian sedimentary basin, which is about 100km from Abidjan. The discovery is a layer of good-quality net oil pay around 28m thick at 2,280m of water deep offshore. "We are still waiting for the results, but we are optimistic on the potential of the country," says Nicolas Payer-Bertrand, director of Total Exploration and Production in the Ivory Coast.

Block CI-100 was originally owned by Ivorian company Yam's Petroleum, run by architect Pierre Fakhoury. Yam's sold 60% to Total in 2010 and a further 15% to the Ivorian state oil company Pétroci, retaining 25%.

On 17 February 2012, Total signed three other offshore prospection licenses – CI-514 (54 percent), CI-515 (45 percent) and CI-516 (45 percent) – along with Canadian Natural Resources, Anadarko and Pétroci. By late 2012, the companies had completed the first round of seismic 3D surveys. Others to announce finds were Russia's Lukoil, the US's Anadarko and Ireland's Tullow who declared positive results between December 2
011 and June 2012.

The discovery has boosted hopes among oil companies that have acquired acreage along the coast of Côte d'Ivoire. Though the country is not a major producer today’ these finds are said to promise greater production in the years to come.

Currently, the Ivory Coast’s production of crude oil is 35,000 bpd, down from 40,000bpd in 2010. This has been mirrored a similar decline in government receipts from the sector, which have fallen by 36% since 2011. However, the government has plans to overcome this decline. "Our ambition is to reach 200,000bpd in five years," says Adama Toungara, the minister of mines, oil and energy.

In recent years, the Ivorian government has signed 12 production-sharing contracts with companies including African Petroleum, Anardako and Tullow. The government's plan is to encourage oil companies to increase their drilling efforts. "From April 2011 until April 2013 we have had 16 wells drilled, while in the 10 years before that we had just five," confides a member of Pétroci's board who requested anonymity.

The Ivory Coast is yet another addition to a league of African states that will become significant recipients of FDI to the oil and gas sector on the continent. The economy will benefit from the investment and added revenue and we see this boosting economic growth. However, we do note that with 32% of its exports coming from cocoa, natural rubber and palm oil, soft commodities which have a high correlation with the price of crude oil, the Ivorian economy could become more prone to global shocks, especially to those emanating from the energy sector.