Sound development planning is essential in this diverse and rapidly evolving region
By Stephen Thornley
Africa’s oil and gas industry is experiencing significant shifts at every level. While the region holds vast world-class natural resources, energy availability and hence consumption per capita remains low, with many lacking reliable access to electricity and energy infrastructure. This paradigm makes Africa an increasingly appealing destination for international investment.
The African Energy Chamber (AEC) has predicted that upstream capital expenditure in Africa is set to reach $43b this year, rising to $54b by 2030, as the continent looks to ensure energy security and growth in the sector.
Clearly the opportunity is not uniform across the entire continent of Africa. Geographically, it comprises a land mass three times the size of Europe, so differences are inevitable in regulatory requirements, natural resource type and size, market maturity and the physical environment itself.
Each country is unique. Oil and gas markets in some areas—including Nigeria, Algeria, Angola and Libya—are extremely mature, encompassing multiple producing and ageing assets. While others—such as Tanzania, Namibia and Ethiopia—are predominantly in the exploration stages of identifying potential resource pools.
Targeted expertise and knowledge across the diverse geography and an understanding of the engineering needs for different project phases is therefore critical. For example, many projects in Namibia need the skills to develop opportunities from initial exploration through to concept development, while more mature asset life extension and debottlenecking skills are likely to be needed for projects in Nigeria and Angola. Using both skillsets simultaneously can add significant value by maximising the use of existing assets and infrastructure in parallel with identifying and optimising new opportunities in line with the subsurface uncertainty and the range of potential reservoir outcomes.
Upstream Africa
Understanding the opportunity frame
The first step in adding the most value to a resource opportunity is in the early phases of the development lifecycle. Establishing the frame of the opportunity, for instance, by identifying and testing the drivers, objectives, boundary conditions and success factors using a structured process, is crucial and can often give rise to unexpected considerations. It is this framing process that helps to form the early business case and is a critical element at the beginning of a project.
Projects can take several years to mature, pass sanction and build. During this time, the world continues to change, so it is important to ensure that touch points throughout the project life-cycle, such as development ‘decision gates’ encompass a challenge and refresh of the project frame and not just a review of the concept(s) developed, prior to embarking on the next phase.
From a technical perspective, understanding the impact of alternative subsurface scenarios and range of outcomes on the concept, scope and cost of the development is critical. Examples of key concept drivers may include reservoir compartmentalisation, well deliverability, aquifer support and propensity for water breakthrough, all of which would have a direct and fundamental impact on facilities design including well count, location, capacity, operating pressures, water handling facilities and so on.
The most successful developments are those with an early, clear and stable frame with multi-discipline teams working together to maintain a focus on value and stakeholder alignment
Compositional characteristics of produced fluids—such as biogenic gas content, elevated LPG levels, extended hydrocarbon tails, and the presence of wax or asphaltenes—must also be evaluated as early as initial data (actual or analogue) becomes available, as these things significantly affect processing requirements and flow assurance. Impurities such as hydrogen sulphide (H₂S) and mercury (Hg) have critical implications for both system material selection and the design of treatment processes. Capturing this information early helps to optimise the development and reduces the need for later value improvement exercises or potential project recycle further down the line.
From a facilities perspective, having the right tools, depth of experience, technological awareness and benchmarking data to assess these things at the right level in a country context, without necessarily having lots of engineering to draw on, is key to success.
As with the broader frame, it is important for organisations to embrace the technical change that inevitably comes through the early development phases as the reservoir understanding matures. Whilst not entirely predictable, flexibility can be factored into early concept thinking and this is best achieved through open and integrated development planning across the technical and commercial disciplines.
Stakeholder alignment, risk and portfolio priority
Larger developments have multiple stakeholders including local and national government, joint venture partners, regulatory authorities, NGOs, financiers—and in some instances—those looking to acquire or sell-down opportunities. Aligning all stakeholders can be extremely challenging particularly where cash allocation and portfolio priorities may conflict.
It is important to establish stakeholder risk thresholds early in the development process, especially for those with a key hand in the big decisions. Key techno-economic decisions such as whether to prioritise downside protection or optimise for expected reservoir outcomes must be aligned, especially for marginal opportunities. The goal is to strike a balance between maximising value from likely scenarios and mitigating downside risk to an acceptable level; excessive accounting for downside risk can often lead to projects being economically challenged and failing to pass through the next decision gate. Early alignment on these trade-offs is essential to building a robust business case. After all, it’s this alignment that will ultimately set the pace of the development.
Getting it right first time
The most successful developments are those with an early, clear and stable frame with multi-discipline teams working together to maintain a focus on value and stakeholder alignment. As countries in Africa look to build and consolidate their energy security, early engagement of the right technical expertise is essential. This approach is key to securing investment and ensuring long-term energy security.
•Stephen Thornley is head consultant at KBR Consulting
Source: Petroleum Economist
