Opportunities and threats in West Africa

Exportlink export news :: map of Nigeria With extensive foreign investment in Nigeria’s oil industry and the conflict in the Niger Delta over the distribution of oil revenue, Nigeria appears to have been seldom out of the news in recent months. Recent publicity on hostage-taking and violence in Nigeria highlights these threats, but the dilemma for UK companies is balancing this need for care with the huge business opportunities on offer.

Upcoming elections are also likely to cause instability, but a 2.5 million barrels/day (bpd) production capacity and plans to produce 4 million/bpd by 2010 continue to make this region a highly attractive target for oil and gas operating companies and their service providers.

In this special exportlink report, Suzanne Bird, International Business Executive at Aberdeen and Grampian Chamber of Commerce, provides an update on local outputs and prospects in West Africa, along with some practical tips on personal security.

Current Production Levels

Troubles in the Niger Delta late in 2006 resulted in a shut-in loss of 547,000/bpd in production. Against that, the offshore Bonga field is now on-stream with a current 125,000/bpd which is set to increase to 225,000/bpd. In addition, a new offshore oilfield shared with Sao Tome is estimated to hold 11 billion/bpd reserves and could be yielding 3 million/bpd by 2009. Despite its troubles, Nigeria is producing above the OPEC quota, and it would appear that the “shut-in” is not affecting exports.

Nigeria is not the only area of interest in West Africa, however, although it enjoys the number one spot for oil reserves and offers robust opportunity for UK companies at present.

West Africa - Gas

West Africa currently accounts for 10% of the world oil production, but less than 2% of world gas production. Gas is currently been developed and will soon be a major consideration when evaluating offshore activity in West Africa as both operators and governments have come to appreciate the potential of gas as a commercial resource.

Angola and Nigeria collectively account for 96% of realised West African gas reserves, with Cameroon and Congo Brazzaville representing the other significant finds in the region. This altered viewpoint on the commercial use of gas is demonstrated by plans for the national oil companies of Nigeria, Angola and Equatorial Guinea to develop LNG plants and the lucrative West African Gas Pipeline project.

West Africa – Oil

West Africa accounts for a significant percentage of the world’s oil production and, with a staggering 16 discoveries during 2004 alone, there is considerable scope for UK companies.

Nigeria is the largest oil producer in Sub-Sahara Africa with output totalled at 3.2% of world oil production and 44% of the regional offshore total.

Angola-Cabinda is the second largest offshore oil producer in the region and in the top 15 regions worldwide. Recent years have accounted for 33% of the regional offshore total and 3% of the world offshore total.

Despite its location, Cameroon is only a modest oil producer in West Africa and currently produces an estimated 62,000 barrels per day. All the production comes from 30 offshore fields and Cameroon is also a signatory to the West African Gas Pipeline project.

The Congo, or Congo-Brazzaville, is sub-Saharan Africa’s fourth largest oil producer. It accounts for a small part of the West African coastline between Gabon and Cabinda (Angola) and produces an estimated 240,000 barrels per day.

Cote d’Ivoire (the Ivory Coast) is the westernmost offshore oil producer in West Africa. There are a few fields producing small quantities of both oil and gas and production is estimated at 10,000 barrels per day. The country boasts a well-developed and large economy primarily built around agriculture.

Equatorial Guinea comprises a small part of mainland West Africa and the island of Bioko. There are currently four oil fields – Zafiro, Jade, Alba and Ceiba – all of which are offshore and produce an estimated 350,000 barrels per day.

Gabon dominates a large portion of the West African coastline, however there is only a modest level of development activity offshore Gabon with oil production estimated at 235,000 barrels per day.

The Democratic Republic of Congo is one of Africa’s largest states but it has a small coastline which separates Angola and the Cabinda enclave. Total production in 2004 was just 23,000 barrels per day.

Sâo Tomé and Principe have an exclusive economic zone and a joint venture zone with Nigeria which, to date, has awarded 5 licences. The country is planning its first licensing round in 2007.

Foreign and Commonwealth Office Travel Advice

There is particular concern for SME’s wishing to travel to Nigeria and other West African states, since, unlike larger corporations, they may lack private security for their staff. Many representatives of SME’s feel exposed and unwilling to travel down at a time of unrest.

But there are some commonsense steps which can be followed for working in West Africa, even for short spells.

The UK West African Action Group (UK WAAG) run under the auspices of Aberdeen and Grampian Chamber of Commerce in conjunction with the Foreign and Commonwealth Office offers the following travel advice:

It is advisable for journeys not to be made at night and for socialising to be confined to the hotel or with known contacts or clients

Personnel should not leave the precincts of the airport if arriving in the late evening without the support of their designated “meet and greet”

Personnel should have an emergency number to ring in the event of being stranded at the airport or the heliport

A check mechanism is recommended to ensure that the meeting party is who he/she says he is (some companies use passwords or have information on their arrival sheets that only the bona-fide waiting party would know, like a date of birth or designated rig job)

It is preferable to let the contractor book the overnight hotel as they will have vetted the premises. Picking up ad-hoc accommodation is not recommended.

Most major hotels offer a car and driver service, and it is recommended to utilise this supplier.

Keep your car doors and windows shut and locked and valuables out of sight.

It is strongly recommended that you obtain comprehensive travel and medicine insurance before travelling.

All travelling personnel should be instructed in how to deal with and behave in the event of a roadblock or a threatening personal security situation

Being able to react and deal with difficulties arising in any of the developing countries of the world is of paramount importance for visitors.

UK WAAG in-country support services

The UK West African Action Group recognises these difficulties and for 10 years has offered a range of services and provided support and information to UK-based companies with aspirations to enter the challenging oil and gas markets of West Africa.

In addition the Chamber has led many very successful trade missions to West African countries and assisted many member companies to take advantage of the opportunities to be found in the region.

The Nigerian Initiative programme offers support services in Lagos and Port Harcourt, including a letter of invitation, visa application pack, airport meet and depart support, and quality accommodation; a car and driver can also be arranged and the costs set against a debit card. UK WAAG members can use a debit card system especially designed to counteract fraud and benefit from professional, legal and commercial support available through the UK WAAG Nigerian Legal partner.

Preparation is essential

The object of this support is not to alarm but to prepare clients as far as is possible for visiting and travelling within hot spots of the world. Increasingly this knowledge and preparation is now an integral part of operating in international arenas worldwide and ignorance is no excuse. Preparation and knowledge of both the political and cultural make-up of the country is a prerequisite before travelling.

Developing but oil-rich countries like Nigeria, Angola, Mexico and Brazil are keen to attract foreign technologies and financial investment and do their best to ensure the safety of their visitors.

British High Commissions and the local Embassies do their bit to support expatriate staff but the onus is really on the individual to prepare professionally and utilise what expertise and intelligence is available before travelling.

Suzanne Bird is International Business Executive at Aberdeen and Grampian Chamber of Commerce. She is responsible for organising trade missions, international events and seminars, maintaining information on local exporters and markets supplied and running the secretariat for the UK West Africa Action Group.

(T) 01224 343 921 (F) 01224 343 999 (E) suzanne.bird@agcc.co.uk