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Mid-Sized Oil Companies Poised for Growth in West Africa

Mid-Sized Oil Companies Poised for Growth in West Africa

Introduction

In 2013, the continent of Africa produced 9.3 million barrels per day (bpd), or about 10% of global supplies. Africa’s oil production is concentrated in a relatively few number of countries, namely, Nigeria (2.3 million bpd); Angola (1.8 million bpd); Algeria (1.7 million bpd); and Libya (production fluctuated, but averaged 0.98 million bpd). Those four countries account for somewhere between two-thirds and three-quarters of the continent’s oil output.

Nevertheless, there are other countries that are starting to make waves in the oil sector. Many of them are located in West Africa.

Nigeria is the leader in this region, but other countries like Ghana, Senegal, Congo, Gabon, and Cote d’Ivoire are seeing a flurry of investment as oil companies begin to learn more about their oil reserves. To be sure, they are still the minnows, each only producing fewer than 400,000 bpd.

But that is why so many companies are interested – the region is largely underdeveloped and underexplored. Much of the new drilling is taking place offshore, where the Atlantic waters hold vast reserves of oil.

This report focuses on West Africa. But while the region is often dominated by the oil majors – Royal Dutch Shell, Chevron, Eni, etc. – there are also a few small and mid-sized companies drilling in West Africa. This offers the greatest opportunity for gains in a still emerging oil region.

West Africa Rising

Let’s start with Congo. Congo has not traditionally been a major source of offshore oil production. But Eni (BIT: ENI, NYSE: ENI) has had quite a run there lately. Admittedly, Eni is not a small company by any means, but its success warrants attention. The Italian oil company announced on October 30, 2014 that it has discovered a field that may hold 1 billion barrels of oil equivalent (boe), with 80% of the resources in the form of crude oil.

Eni’s Marine XII block is located in shallow water off Congo’s coast and holds an estimated 3.5 billion boe. But the well that Eni just drilled – the Minsala Marine 1 – could hold 1 billion boe by itself. It was drilled in just 75 feet of water depth, and Eni says it encountered 420 meters of oil payzone, located beneath a layer of salt. Between Congo and Gabon, Eni’s Chief Executive said that it has logged over 4 billion boe in discoveries…




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