When it comes to finding the final frontier for big oil discoveries, you need to look beyond the Guyana-Suriname basin where everyone’s already staked their claims. And beyond the American shale patch, where growth is already slowing.
Africa is the next great oil frontier, where small-cap companies are staking large-cap claims of the kind that generously reward investors with a bigger risk appetite.
This could be the final, underexplored frontier for oil; is there anywhere else to go?
Reconnaissance Energy Africa told Oilprice.com in an interview.
7.5% of the world’s known oil reserves, and as much of its gas reserves, yet still remains woefully underexplored, is exactly what might make this the last big land based venue on Earth for oil. ” data-reactid=”20″>While many would have disagreed two decades ago, times have changed, and the fact that the African continent already holds 7.5% of the world’s known oil reserves, and as much of its gas reserves, yet still remains woefully underexplored, is exactly what might make this the last big land based venue on Earth for oil.
18 billion barrels+ of oil-in-place waiting to be proved up to technical recovery.” data-reactid=”21″>We’ve got the “legacy” players, such as Nigeria, Angola, Congo-Brazzaville and Equatorial New Guinea, but the real final frontier is only just emerging in places such as Ghana, Uganda, Mozambique, Tanzania and – even further off the radar, Namibia, where small-cap Reconnaissance Energy Africa (TSX:RECO.V; OTC: RECAF) holds the license for the entire Kavango Basin with potentially 18 billion barrels+ of oil-in-place waiting to be proved up to technical recovery.
Park, who previously worked as a lawyer specializing in upstream oil and gas and petroleum regimes, says the African continent is wildly undervalued. “The value of subsoil resources in OECD countries is at about $300,000 per square mile. In Africa, they’re valued at only about $60,000 per square mile,” he said. “This is either because Africa doesn’t have its fair share of the world’s resources, or because it hasn’t found those resources yet. I’d put money on the latter because Africa is vastly underexplored compared to the rest of the world.”
Deloitte, boasts the highest oil production among its peers, launching its first offshore licensing round in late 2018 and attracting majors from all over the place. They’re all hoping to top the massive Jubilee field – a massive discovery made in 2007 and operated by Tullow Oil. ” data-reactid=”24″>Ghana, according to Deloitte, boasts the highest oil production among its peers, launching its first offshore licensing round in late 2018 and attracting majors from all over the place. They’re all hoping to top the massive Jubilee field – a massive discovery made in 2007 and operated by Tullow Oil.
Mozambique, another newcomer on the final frontier scene, enjoys the largest gas resources in the region and the biggest untapped gas potential, according to Deloitte. And now it’s planning a massive LNG development in the Rovuma Basin, with production expected somewhere around 2022.
Tanzania – the fastest-growing economy among these oil players – is second only to Mozambique in terms of natural gas resources, while major oil discoveries in Uganda in 2006 have catapulted the country into fifth place in terms of resources, with first production scheduled for next year.
Namibia is the newest venue of the lot, but it’s also the one that has the potential to be bigger in territory than Eagle Ford–the shale basin that put the U.S. on the oil exporter map to rival the best of OPEC.
7 million net acres from the government for a block extending from the shoreline to about 135 miles offshore in water depths up to 13,000 feet, with exploration activities to begin by the end of this year.” data-reactid=”28″>The prize here is about as pure as it gets: The country has never produced a barrel of oil, but its potential is pinging the radar of even giant Exxon (NYSE:XOM), which recently acquired an additional 7 million net acres from the government for a block extending from the shoreline to about 135 miles offshore in water depths up to 13,000 feet, with exploration activities to begin by the end of this year.
6.3-million-acre Kavango Basin, which rivals the Eagle Ford in size. It’s also believed to be an extension of South Africa’s 600,000-square-kilometer Karoo sedimentary basin, home to Shell’s massive Whitehill Permian shale play. ” data-reactid=”29″>Onshore, the potential is also striking. And nothing is more striking than the 6.3-million-acre Kavango Basin, which rivals the Eagle Ford in size. It’s also believed to be an extension of South Africa’s 600,000-square-kilometer Karoo sedimentary basin, home to Shell’s massive Whitehill Permian shale play.
ReconAfrica bought up the entire basin, with a 90% interest (the government owns the other 10%) and a four-year exploration license and a 25-year production license once a commercial discovery is made. ” data-reactid=”30″>ReconAfrica bought up the entire basin, with a 90% interest (the government owns the other 10%) and a four-year exploration license and a 25-year production license once a commercial discovery is made.
estimated 18.2 billion barrels of oil in place. ” data-reactid=”31″>That’s a major feat for a small company with a market cap of ~$50-million. Still, they’ve done what is usually reserved for the majors: They’ve secured the oil and gas rights to an entire sedimentary basin in Namibia and Botswana–both very friendly to oil exploration, with very low royalty fees (5%) and an estimated 18.2 billion barrels of oil in place.
It is the quintessential setup for the rare savvy junior. It has plans to go big on exploration, and even has the potential to be scooped up by a supermajor that’s already operating in the region.
June 11th, they expanded their position, announcing a new petroleum license covering the Eastern extension for the Deep Kavango Basin and a farm-out option agreement. That new license is northwestern Botswana is for 2.45 million acres and is contiguous to its 6.3-million-acre petroleum license in northeast Namibia. ” data-reactid=”44″>And if that wasn’t enough–this small-cap just keeps getting bigger and bigger: On June 11th, they expanded their position, announcing a new petroleum license covering the Eastern extension for the Deep Kavango Basin and a farm-out option agreement. That new license is northwestern Botswana is for 2.45 million acres and is contiguous to its 6.3-million-acre petroleum license in northeast Namibia.
first rig earlier this year.
And just as exciting – one of the world’s leading Geochemists, Dan Jarvie of Worldwide Geochemistry has just put out a report on Recon Africa’s oil potential and he is saying there is potential for 120 billion barrels of petroleum potential on just 12% of Recon Africa’s holdings. You can read his full report here: https://reconafrica.com/wp-content/uploads/ReconAfrica-Postulated-Petroleum-Yields-V2.pdf” data-reactid=”45″>And now, ReconAfrica is fully funded for a 3-well drilling campaign, and acquired its first rig earlier this year.
And just as exciting – one of the world’s leading Geochemists, Dan Jarvie of Worldwide Geochemistry has just put out a report on Recon Africa’s oil potential and he is saying there is potential for 120 billion barrels of petroleum potential on just 12% of Recon Africa’s holdings. You can read his full report here: https://reconafrica.com/wp-content/uploads/ReconAfrica-Postulated-Petroleum-Yields-V2.pdf
Dan does not put his name to anything he doesn’t strongly believe in. This is a very strong message from one of the shale sectors pioneers.
That’s an unusually advantageous position for a small-cap oil and gas company to be in–especially these days. The typical scenario is that a small-cap company has to keep going back to the market to raise bits and pieces of money to actually get to the drilling, and they usually move very slowly.
TSX:RECO.V; OTC: RECAF) because it’s already fully funded and de-risked to prove this basin up.
over CAD$22 million, making it the most successful oil deal on the Toronto Stock Exchange (TSX.V) this year.
Whether it’s legacies like Nigeria and Angola, or newcomers with massive potential such as Ghana, Uganda, Mozambique or Namibia, what’s always kept investors away is the regulatory risk associated with these venues.
That’s exactly why Africa is, today, the next frontier for oil.
Park, who has spent years identifying and creating investor-friendly petroleum regimes around the world – from Africa to South America – says this is exactly what makes or breaks a country’s oil industry.
Overall, Park says he’s disappointed that Africa has fallen so far behind.
That’s a result of states creating regimes that are “complex and heavily taxed”, he says. “They also fail to give investors the assurances they need. Investors want to be confident that when they make a discovery, it will turn into money.”
So, while Africa is definitely the place to go for resources, it’s not always attractive to investors.
According to Deloitte, the risks are high, and companies need to plan for everything from regulatory and policy hurdles, to problems with third-party partners and suppliers, environmental and labor issues, and overriding questions of infrastructure.
In addition to that, “macro risks, such as political, security, governance, economic structural, country liquidity and currency risks also loom large”.
For Park, Namibia ticked all the right boxes: good geology, good fiscal terms and a good regime. That includes a 5% royalty and a 35% corporate income tax on oil reserve profits–and, of course, the country is offering up good deals because it hasn’t made any discoveries yet.
For companies who can properly navigate the risk, that risk gets smaller every day, particularly thanks to technological advancements.
Major developments over the past decade and a half open up enormous possibilities in this underexplored region.
And if parts of Africa weren’t on investor radar yet, they will be soon.
“You probably hadn’t heard of Suriname on the oil map until a couple of months ago,” says Park. “By the time it’s on everyone’s radar, it’s much less of an opportunity. Namibia, for instance, is just emerging as one of the world’s exploration hot-spots with some big wells going down this year. But for now, it’s a virgin opportunity.”
“Success with ReconAfrica’s three-well programme could radically alter the value of the Company because it has all rights to the entire sedimentary basin. In all, the basin is optimally conducive to a functioning petroleum system that must be drilled,” Park said.
By. Sam Kennedy
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