When it comes to finding the final frontier for big oil discoveries, you need to look beyond the Guyana-Suriname basin where everyone’s already staked their claims. And beyond the American shale patch, where growth is already slowing.
Africa is the next great oil frontier, where small-cap companies are staking large-cap claims of the kind that generously reward investors with a bigger risk appetite.
This could be the final, underexplored frontier for oil; is there anywhere else to go?
“There is nowhere on earth with as much potential as Africa,” Jay Park, CEO of Reconnaissance Energy Africa told Oilprice.com in an interview.
While many would have disagreed two decades ago, times have changed, and the fact that the African continent already holds 7.5% of the world’s known oil reserves, and as much of its gas reserves, yet still remains woefully underexplored, is exactly what might make this the last big land based venue on Earth for oil.
We’ve got the “legacy” players, such as Nigeria, Angola, Congo-Brazzaville and Equatorial New Guinea, but the real final frontier is only just emerging in places such as Ghana, Uganda, Mozambique, Tanzania and - even further off the radar, Namibia.
Park, who previously worked as a lawyer specializing in upstream oil and gas and petroleum regimes, says the African continent is wildly undervalued. “The value of subsoil resources in OECD countries is at about $300,000 per square mile. In Africa, they’re valued at only about $60,000 per square mile,” he said. “This is either because Africa doesn’t have its fair share of the world’s resources, or because it hasn’t found those resources yet. I’d put money on the latter because Africa is vastly underexplored compared to the rest of the world.”
‘New Legacies’
Ghana, according to Deloitte, boasts the highest oil production among its peers, launching its first offshore licensing round in late 2018 and attracting majors from all over the place. They’re all hoping to top the massive Jubilee field - a massive discovery made in 2007 and operated by Tullow Oil.
Mozambique, another newcomer on the final frontier scene, enjoys the largest gas resources in the region and the biggest untapped gas potential, according to Deloitte. And now it’s planning a massive LNG development in the Rovuma Basin, with production expected somewhere around 2022.
Tanzania - the fastest-growing economy among these oil players - is second only to Mozambique in terms of natural gas resources, while major oil discoveries in Uganda in 2006 have catapulted the country into fifth place in terms of resources, with first production scheduled for next year.
Namibia is the newest venue of the lot, but it’s also the one that has the potential to be bigger in territory than Eagle Ford--the shale basin that put the U.S. on the oil exporter map to rival the best of OPEC.
The prize here is about as pure as it gets: The country has never produced a barrel of oil, but its potential is pinging the radar of even giant Exxon (NYSE:XOM), which recently acquired an additional 7 million net acres from the government for a block extending from the shoreline to about 135 miles offshore in water depths up to 13,000 feet, with exploration activities to begin by the end of this year.
Onshore, the potential is also striking. And nothing is more striking than the 6.3-million-acre Kavango Basin, which rivals the Eagle Ford in size. It’s also believed to be an extension of South Africa’s 600,000-square-kilometer Karoo sedimentary basin, home to Shell’s massive Whitehill Permian shale play.
ReconAfrica bought up the entire basin, with a 90% interest (the government owns the other 10%) and a four-year exploration license and a 25-year production license once a commercial discovery is made.
That’s a major feat for a small company with a market cap of ~$50-million. Still, they’ve done what is usually reserved for the majors: They’ve secured the oil and gas rights to an entire sedimentary basin in Namibia and Botswana--both very friendly to oil exploration, with very low royalty fees (5%) and an estimated 18.2 billion barrels of oil in place.