Africa: bright future for oil production: Africa has long been regarded as a region of importance to the international oil industry. Today, thanks to a string of major discoveries and the development of the Gulf of Guinea as one of the world's premier areas of deepwater activity, African production is becoming even more important.

Africa's share of global reserves is increasing. Nigerian and Angolan production looks set to double over the next decade, but it is difficult to escape the feeling that the continent could be doing more to make the most of its hydrocarbon resources. Many commentators were skeptical when, in 1999, the Nigerian government first set its targets of boosting the country's proven oil reserves to 30 billion barrels by 2004 and 40 billion barrels by 2010, and increasing production capacity to 3 million barrels a day (b/d) by 2004 and 4 million b/d by 2010.

The figures seemed to be the wildly optimistic assessments of the country's new civilian regime, which was keen to tell its people and international financial agencies what they wanted to hear: Many observers, though pointedly not many in the oil industry itself, viewed the targets as laughable.

How much has changed in just four short years. When Funsho Kupolokun, the Nigerian special assistant to the presidency on petroleum affairs, said recently that the 30 billion barrel target had already been met, his claim provoked little surprise.

And in a speech at the Nigerian Association of Petroleum Explorationists, Shell Nigeria's Nick van Ooyen claimed that there could be over 40 billion barrels in the Niger Delta alone, with many billions more in deepwater fields. The 2010 goals also no longer look to be in doubt.

Nigeria's reserves have been boosted by a series of major discoveries in the Niger Delta and in the deepwater arena, including Shell's EA, Bongs and Forcados discoveries and Exxon Mobil's Erha and Yoho fields.

High success rates have attracted yet more investment and increased interest in available acreage. Out of the 15 exploration wells that Shell Nigeria drilled during 2001 and 2002, 14 struck lucky, adding 750 million barrels to the company's Nigerian reserves. A total of 76 exploration wells are planned in Nigeria this year--an all-time record.

The first deepwater discoveries were not made until 1996 and are only now being brought on stream. With the notable exception of Angola, Nigeria possesses the largest deepwater territory in the Gulf of Guinea at 110,000 sq kms, a figure reflected in the increasing importance of offshore acreage in licensing rounds. Moreover, the proportion of this acreage on which production is economically and technically viable is likely to rise over the next decade, as much of it lies in over 1,500 metres of water and is therefore still at the cutting edge of technology.

Nigerian fields are leading the way in the development of the floating, production, storage and offloading (FPSO) vessels, which are required to access deepwater fields in the area.

A massive FPSO is currently being fitted on Tyne-side in northeast England for use on the Bonga field. The ship, also named the Bonga, has crude storage capacity of 2 million barrels, with processing capacity of 225,000 b/d of crude oil and 170m cubic feet a day (cf/d) of natural gas.

Production on the 500m field is expected in peak at 350,000 b/d, although the associated Bonga South West field, which is due to come on stream in 2005, has the potential to be even bigger.

Sao Tome & Principe

Following the intermediate resolution of contractual difficulties between the government of Sao Tome & Principe and foreign oil companies, the licensing round for the Nigeria-Sao Tome & Principe joint development zone (JDZ) was finally launched in April. Nine blocks were included in the round and bidders are requested to provide an indication of the bonus on often

All nine blocks comprise deepwater and ultra deepwater, so while development may be technologically challenging, the rewards are likely to be substantial.

The geology of the JDZ looks promising and surveys of the acreage have highlighted the likely presence of major viable oil fields. However, the current estimate of 8 billion barrels of crude oil is partly based on the size of fields in neighbouring Nigerian acreage. The eventual figure could be substantially higher or lower than this.

Any discovery could revolutionise the economy of Sao Tome & Principe. The archipelagic state is one of Africa's most indebted nations by head of population and a combination of population pressure, over reliance on the export of agricultural commodities and land degradation are causing increasing problems.

With a population of just 145,000, even the country's 40% share of JDZ revenues could go a long way, providing it is well spent and invested. But given the experience of other oil producers in the region, maintaining stable and just governance in the face of oil wealth will prove a stiff test. The current unstable political climate on the islands pays testimony to that.

Angola

Further south, a combination of steady development in the northern enclave of Cabinda and a succession of major deepwater discoveries looks set to double oil production in Angola. Indeed, the government is so optimistic that existing discoveries and licensed acreage will provide a steadily increasing stream of income that it has decided to limit the amount of acreage on otter.

Cabinda GuLf Oil Company (CABGOC), which is owned by Chevron Texaco, operates Block Zero onshore Cabinda. The company is investing $4bn on the block over a six-year period, and production is expected to top 600,000 b/d by the start of 2004.

Total national production is expected to reach one million b/d as a result of new offshore fields gradually being brought on stream.

Exxon Mobil could challenge CABGOC's position as Angola's biggest producer over the next few years, mainly because of its position as operator of the three Block 15 Kizomba projects.

The Hungo and Chocalho fields on Kizomba A should be brought on stream by 2005 and production on the fields is expected to peak at 250,000 b/d.

Production on Kizomba B should begin one year later, with Kizomba C some time after that: output from both complexes is predicted to reach 250,000 b/d.

Around $3bn is being invested in developing the Kissanje and Dikanza fields on Kizomba B, where production will be via sub-sea wells tied back to a floating, storage and offloading (FPSO) vessel with a 2.2m barrel capacity.

Similarly, huge investments are being committed elsewhere in Angola. Investment on the TotalFinaElf operated Girassol field on Block 17 is predicted in top $2.8 billion, with the aim of producing output of 200,000 b/d.

The French company holds a 40% stake on Block 17, with the rest of the consortium made up of ExxonMobil (20%), BP (16.67%) and Norwegian companies Statoil (13.33%) and Norsk Hydro (10%).

Apart from Girassol, a series of subsequent major finds have been made on Block 17, including the Dalia, Lirio, Orquidea and Tulipa fields.

BP's Block 18 should also eventually contribute hundreds of thousands of barrels a day to national output. Like the Kizomba project, the Greater Plutonio scheme on the block is to be developed as a series of separate phases.