OS: Investment expected to shift from oil to gas in West Africa
There will be a shift in investment focus towards natural gas in West Africa if oil prices remain at levels below US$40 per barrel. Energy companies are completing existing oil projects, but future developments and demand for offshore vessels will increasingly be on gas projects.
As the region’s economies and population grow, there could be more demand for locally produced gas resources. This should lead to greater political focus on producing offshore gas fields, partially sustaining support vessel demand, said Tidewater director of international sales and marketing Frank Gibone. “We could see a shift from oil to gas over the next few years, as African nations would like to consume their own energy, especially with gas resources in Nigeria,” he said at the 2016 Annual Offshore Support Journal Conference in London in February.
Most offshore projects started before the oil price slump are continuing, albeit with lower capital expenditure, but any new oil developments have been postponed. Because the large oil projects still underway are in deep water in Angola and Nigeria, these two nations represent almost 70 per cent of the expected capital investment in the region over the next four years. According to Tidewater, 47 per cent of total West Africa offshore capital investment from 2016 to 2020 will be in Angola and 22 per cent in Nigeria. Another 11 per cent will be in Equatorial Guinea and 9 per cent in Ghana.
Mr Gibone said many of the deferred developments are in the hands of major oil companies and independent companies, so when there is an upturn in the oil price, they could be reactivated. “The independents and international oil companies can make decisions quickly,” he explained. “They were quick to renegotiate contracts and take advantage of the lower costs by going back to tender and continuing some operations at reduced costs.”
He said there were still multiple challenges in operating in the Gulf of Guinea, including security, political instability, taxation and local content requirements. The recent influx of offshore support vessels from other regions has increased the commercial risks. “In the last 18 months, the commercial appeal has been reducing due to reactive arrivals of more assets from other regions, causing an excess in supply,” he said. As the region’s largest fleet operator, Tidewater has had to manage these risks. It operates 93 vessels in West Africa and invested in local partnerships and joint ventures in the majority of states.
Oceaneering International has felt the commercial challenges of operating in the region. In February, it announced that BP would terminate a field support vessel services contract prematurely for Angolan deepwater operations. Oceaneering said operations with subsea support vessel Bourbon Oceanteam 101 are expected to be completed in May instead of January 2017 as previously expected. This means the vessel will be redelivered to owner Bourbon Offshore. The costs incurred by Oceaneering associated with the early release and demobilisation of the vessel are expected to be reimbursed by BP. It was not all bad news, as vessel services with a second chartered vessel, Ocean Intervention III, are expected to continue with BP through to January 2017.
Brokers reported that Topaz Marine had cut its operations in the region by sailing three vessels to Turkey, where they would be ready for mobilisation to the Middle East or Caspian Sea. Chart Shipping reported that 3,300 dwt platform supply vessels Topaz Megan and Topaz Faye as well as 5,150 bhp anchor handler Topaz Jurong left the Gulf of Guinea in December and were moored in Tuzla.
