What's Happening?
Oil majors are actively pursuing exploration opportunities in Sub-Saharan Africa as they face declining production post-2030. Companies like Shell, Equinor, and ExxonMobil have signed numerous agreements, including Memorandums of Understanding (MoUs)
and Agreements in Principle (AiPs), to secure exploration acreage in deep and ultra-deep waters. These agreements cover over 360,000 km², an area larger than the Permian Basin. The focus is on de-risking exploration acreage through low-cost commitments, such as desk-based studies and analysis of geological data. This strategy allows companies to maintain fiscal discipline while positioning themselves for future formal deals with host countries.
Why It's Important?
The agreements represent a strategic move by oil majors to secure future production sources as existing fields decline. By focusing on Sub-Saharan Africa, companies aim to tap into regions with potential for significant discoveries, similar to those in Namibia and Guyana. The low-cost nature of these agreements allows companies to explore high-risk areas without substantial financial commitments, potentially leading to lucrative opportunities if successful. For host countries, these agreements can attract foreign investment and boost local economies, although the conversion of these agreements into binding contracts remains uncertain.
What's Next?
The real test for these agreements will occur over the next three to five years as companies decide whether to convert them into binding contracts with firm obligations, such as seismic acquisition or drilling. Historically, only a small percentage of such agreements have resulted in formal contracts. However, the involvement of major companies in countries with proven potential suggests a higher likelihood of successful conversions. The outcome will significantly impact the exploration landscape in Sub-Saharan Africa and the global oil market.
