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HomeTop NewsCongo Republic set to climb African oil producer rankings

Congo Republic set to climb African oil producer rankings

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Nigeria’s Petroleum Minister, Madueke

Congo Republic is set to reverse a decline in production and climb to become sub-Saharan Africa’s third-largest oil producer within three years as investors plough billions of dollars into new projects.
Geologists have drawn parallels between the West African coastline and the geology of offshore Brazil, where billions of barrels in oil reserves are tucked beneath a submerged salt crust layer.
In February, Eni said it had struck so-called “pre-salt” oil in Congo’s Nene Marine fields and estimated total reserves at 1.2 billion barrels of oil and 30 billion cubic metres of gas.
While oil from new pre-salt finds may not come onstream for many years, a series of multi-billion dollar projects will allow Congo to leapfrog the current number 3 producer Equatorial Guinea by 2017, Reuters calculations show.
“The international oil companies with the deep pockets have all opted for Congo,” said Ecobank’s Lagos-based Energy Research Analyst Dolapo Oni. “There are interesting opportunities in pre-salt and in shallow water and onshore.”
Ecobank also expects Congo to become the region’s number three producer.
Production in Congo, a Central African nation of 4 million people, is below the peak of around 310,000 bpd in 2010, according to data from U.S. Energy Information Administration.
The data, based on announced projects from Total, Eni and Chevron, indicate that production will rise by 175,000 barrels per day, assuming steady output from existing fields.
This would raise total output to nearly 500,000 barrels per day from around 270,000 bpd in 2013.
The data excludes an Eni oil sands project at Tchikatanga as the firm has not given a daily output forecast, saying only that the project could reach 150 million barrels of oil equivalent.
In contrast, hydrocarbon finds in Equatorial Guinea over the past two years have mostly been gas, such as a series of discoveries by Africa-focused Ophir in its block R.
At the same time, oil output in Equatorial Guinea from established producers such as Hess and ExxonMobil has declined over the past two years, company reports showed.
NEW BASIN
Congo plans to hold a licensing round this year for a total of 10 blocks, offshore and onshore, as it seeks to boost investment.
“In the upstream, most of the fields are at the mature stage,” said oil minister Andre Raphael Loemba at an industry conference in the capital Brazzaville last month. “That’s why we are launching the promotion of free zones,” he said.
Oil companies are being attracted by these newly available oil blocks. The zones include acreage that Eni has called “one of the new themes of frontier exploration in Africa”.
Congo state oil company SNPC said at the same conference it will shortly begin exploration work in the shallow water Cuvette Basin, an undeveloped area where Eni is also due to begin surveys.
Energy consultancy firm Wood Mackenzie said the government has become more relaxed in applying tax terms, specifically a system known as “super profit sharing” whereby the state takes profits on everything above a certain oil price.
This was previously as low as $35-$40 a barrel but has been negotiated higher to over $50 a barrel for some recently sanctioned projects, easing the tax burden for producers.
“The government has taken steps to encourage investment and that’s been viewed as positive by the industry,” said Martin Kelly, Wood Mackenzie’s lead analyst for sub-Saharan Africa.
Industry sources said that one factor that could encourage further investment in Congo is its advanced oil infrastructure relative to regional neighbours.
London-based oil firm SOCO, which is exploring for oil offshore, said the country was open to investment.
“Congo Brazzaville has terms compatible with most oil producing nations in West Africa and still has considerable prospective acreage available, while maintaining a receptive environment for foreign investment and presence in the country,” said SOCO executive director Roger Cagle.
POVERTY REDUCTION?
Oil accounts for around 65 percent of Congo’s gross domestic product, making it highly dependent on the sector, even relative to other regional oil producers such as Gabon and Nigeria.
The International Monetary Fund has commended the country for a new measure that envisages placing a third of its oil revenues into savings, although says that it is still needs to do more to reduce poverty.
Around half of the country’s population of 4 million lives beneath the poverty line, defined by the World Bank as living on less than $1.25 a day.
Industry sources say that on a longer-term time horizon of between 5-10 years, Gabon could also see production rising if explorers awarded acreage in its October licensing rounds are successful.

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