https://oilprice.com/-By Felicity Bradstock
- The West’s sanctions on Russia following Putin’s invasion of Ukraine have left a global oil supply gap.
- Up-and-coming oil regions such as Guyana and Suriname could help ease the supply crunch down the line.
- International oil firms are racing to these new oil regions, hoping to strike it rich.
New oil regions that have attracted the attention of oil majors looking for greater longevity in their operations and cheap, low-carbon oil prospects could receive an additional boost in response to the Russian invasion of Ukraine. As governments rush to source alternative oil and gas supplies, the rapid development of promising new oil regions could provide the long-term supply needed to reduce the global reliance on Russia. Sanctions on Russia are invigorating interest in new oil regions as energy firms look to develop alternative operations to boost supply and diversify their oil and gas sources. Governments are also embracing the shift as they look to ‘friendlier’ regions in a bid to decrease their reliance not only on Russia but on potential less-than-ideal alternatives, such as Venezuela and Iran.
In the Caribbean, ExxonMobil and other international oil firms have been working hard to explore its waters for oil and gas reserves. Exxon estimates its discoveries, to date, to be around 10 billion barrels of recoverable crude in the Stabroek Block, which could allow for 10 development projects, pumping in excess of 1 million bpd by 2027. TotalEnergies and Apache are experiencing similar successes in neighboring Suriname, with the region destined for an oil boom over the next decade.
Exxon is now investing even more heavily in the region, injecting $10 billion into its fourth offshore oil project in Guyana. Liam Mallon, president of Exxon’s upstream company, explained that Exxon’s fourth project at Yellowtail will “provide the world with another reliable source of energy to meet future demand and ensure a secure energy transition.”
Expanding operations in new oil-producing regions could be a win-win. Oil majors will likely gain international support for developing new, low-carbon oil projects to fill the supply gap while global demand remains high. Meanwhile, increased interest in countries such as Guyana, Suriname, and Ghana will allow them to bargain for more favorable contracts with international firms, allowing them to pump earnings back into the national economy and supporting development aims.
Another area of interest for several oil majors is Africa. The potential of developing low-cost operations in underexplored areas has led several oil and gas firms to establish operations across the continent in recent years. The African continent produces just under 10 percent of the world’s oil, predominantly originating from Nigeria and Libya. But now other countries such as Ghana, Namibia, and Angola are looking to develop their oil industries while demand remains high.
Several industry experts are already discussing whether Africa may be able to fill the supply gap if developed more rapidly. With European leaders targeting an end to their reliance on Russian oil and gas “well before 2030,” several African countries could offer the necessary alternative. With greater international investment across the region, several African states could fund the infrastructure projects required to realize their untapped potential.
In Ghana, the oil output was looking positive pre-pandemic. However, Exxon exited its operations in the country in 2023 to focus on other projects. In addition, lower demand for oil during the pandemic led to a decrease in production. But now Ghana’s oil industry is experiencing a revival as state-owned Ghana National Petroleum Corp. is taking on a larger role through the purchase of shares in oilfields from the likes of Occidental Petroleum. The recent oil shortage could now present a major opportunity for Ghana to develop its national oil industry.
In Namibia, TotalEnergies announced a 3-billion-barrel offshore discovery earlier this year, marking sub-Saharan Africa’s biggest ever oil find. Total now hopes to produce at least 250,000 bpd from the region, with a total anticipated investment of $13 billion. The company’s report stated that the find “cements Namibia’s position as the next deep-water exploration hotspot”.
There is also significant potential for African countries to add value to their oil and gas operations by developing their downstream activities. Nigeria, for example, currently only exports crude, with no refining capacity. This is a common story for countries that have little money to invest in their downstream operations. However, if they are able to establish favorable contracts with international investors, they could reinvest these funds into developing the industry to add greater value to their exports.
While there will inevitably be a lag in developing the oil operations required to produce enough crude to meet the global demand, expanding activities across new, more favorable oil regions could support the long-term goals of the oil and gas industry. Establishing new markets could be the key to developing cheaper, low-carbon oil operations, as well as supporting local economies as countries become more closely involved in their oil and gas operations.
By Felicity Bradstock for Oilprice.com