Africa’s Potential to Sate World’s Oil Demand Dims

The petroleum potential of Africa, a key contributor of oil barrels to thirsty markets, is beginning to look dimmer because of the credit crunch and a host of endemic challenges.

Certainly, Big Oil’s continental land grab will continue. Countries such as Angola and those around the Gulf of Guinea continue to lease tantalizing exploration blocks in the deep waters off the Atlantic coast. That region has been the hottest play in a scramble that has doubled the acreage under exploration licenses in sub-Saharan Africa to an area 10 times the size of France in the past three years.


But the astronomical costs involved in developing those fields, combined with escalating violence in the oil-rich Niger Delta, the relatively short life span of West Africa’s producing basins, unpredictable market prices, and an expected culling of cash-poor small players means Africa’s days as a reliable supplier of additional oil may be numbered.

“We have benefited from additional oil volumes from Africa, but given the production profile of offshore fields, we need to see significant new discoveries to sustain that trend,” says Fatih Birol, chief economist for the International Energy Agency in Paris. “It’s not clear that will happen.”

WSJ