Independent oil companies winning more exploration success in Africa
By Sunny Oputa
Years are gone when oil exploration used to be done mainly by big oil companies such as Shell Royal Dutch, Chevron, ExxonMobil, BP, Total SA and sometimes by their joint ventures with national oil companies. Currently, most oil and gas explorations in Africa have been taken over by independents in the ilk of Tullow Oil, Afren, Africa Oil, Anadarko Petroleum, Ophir. These independent oil and gas companies were 15 years ago not considered serious players in handling oil and gas exploration ventures.
The significant success of the discovery made in Ghana’s Jubilee Field by Tullow Oil and its partners made the world to start looking at the emerging junior oil companies with degree of seriousness. The Jubilee field was discovered in June 2007 in the Mahogany well is located 60 km offshore between the deep water Tano and West Cape Three Points blocks in Ghana. The recoverable estimate of the field is expected to be a little more than 370 million barrels and has potentials of about 1.8billion barrels of recoverable.
Before the Jubilee Field break through, that area was considered by some mega oil companies of having geology that won’t bring significant yield or will turn out to be total dry holes. Tullow Oil’s success with Kosmos Energy, Anadarko and others made industry observers to start wandering what triggered the break through and what changed. In the same manner, Industry observers have began to question the swift decline in the interest of mega oil companies in exploration especially in some regions in Africa– whether it is a strategic move governed by market dynamics and geopolitical squabbles or internal ruffles in organizations influenced by draining innovative workforce. Moreover, the alarming rates in which some of the major oil companies are divesting of their assets has also triggered reasonable questioning – giving the mouth much to chew.
A 2007 study and report released by Baker Institute for Public Policy of Rice University stated that the five big major international oil companies are reducing their spending on exploration despite the huge annual profits made by these companies. The study went further to show that while there has been a remarkable or sharp decline in the exploration votes by the big companies, the independents or rather second-tier companies are spending more in exploration than the mega companies. Analysts considered the fear of geopolitical upheavals, unexpected effects of emerging local content laws and earlier misdirected corporate social responsibility acts and environmental problems earlier created which are coming to fore as some of the issues that must have made larger oil companies to soft pedal in entering into new campaigns.
As at 4,000 years ago when man found the need to explore for oil and put it into use, the exploration of hydrocarbon has never been a venture undertaken by light pocket people. Oil exploration with the heavy financial involvement, need for various resources, process and technological complexities, and the massive political and legal intrigues that play along with it, has always been enterprise engaged by states, kings, the rich and powerful.
Larger oil companies and their national JV partners discovered global known big fields such as Agbami (Chevron), Bonga (Shell) in Nigeria, Kizomaba field Angola ( Exxon Mobil) . The larger companies and sometimes the “New Seven Sisters” were credited with most of the major field discoveries in the world. Suddenly the reverse started becoming the case.
Whereby independent are seen more on the radar in Africa, the big oil companies tend to be declining in their exploration quest in the region and shifting back to Europe, USA and Latin America. Independents oil companies have also opened up new frontiers in Africa where nobody thought that oil will be discovered within the nearest time. Tullow, Anadarko and Afren amongst others have shown good degree of success in new discoveries. Tullow’s high rate of success after Ghana’s Jubilee field’s discovery in opening up new frontier in Uganda, Kenya and the triumph of Anadarko in Mozambique has leveled the playing field.
The successes of these independents have been attributed to the ability of these companies having big appetite for risk and the innovative nature of their workforce. Some of the major oil companies have started suffering from brain drain. Some of the best minds are leaving the big oil companies to launch their own exploration and production companies due to the market condition that favors new entry.
New petroleum laws of local content that empowers indigenes of oil producing countries to join in the exploitation of their natural resources have led to formation of partnerships with indigenous companies and best minds from mega oil companies who want to venture into the lucrative (but risky) oil business. As a result of the eagerness to succeed, these young companies seems to be quick in embracing technologies that help them to work far and beyond. Industry observers are of the opinion that big companies have become so large with humongous assets and have started to relax.
Big oil companies seems to be stuck with the traditional way of oil business and remained too conventional in their application of technologies, while the junior oil companies who are highly motivated are going beyond conventional technologies to seek for alternative or unconventional, safer and environmentally conscious methods as far as success will be written in their books.