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Recently released market study: Congo Oil & Gas Report Q2 2014


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2014-03-28 12:06:10 - Fast Market Research recommends "Congo Oil & Gas Report Q2 2014" from Business Monitor International, now available

Sub-salt discoveries, oil sands and a revamping of the regulatory framework will dominate most discussions of the petroleum sector in the Republic of Congo in 2014. As the country struggles with a steady decline in production and a lag of new replacement projects in the near term, the government is sending strong signals that it realises measures have to be taken to reverse the trend by modernising the regulatory system, cooperating with its neighbour Angola and standing firm on its commitment to what could be the first bitumen oil sands development on the African continent. While the prospects for a spike in production are quite limited in the 2014-2015 window, the extension of the Moho-Bilando deepwater field will bring new

production on-stream in two phases in 2015 and 2016. We are factoring this new crude into the country's production outlook for 2016-2017. It will help make up for premature depletion of the Murphy Oil-led Azurite offshore field. The company announced in 2013 that it could release the FPSO before the contract expires in 2016. A late 2013 crude discovery by CNOOC and its partner ORYX on the Haute Mer offshore block was scheduled to undergo testing in early 2014 as part of a multi-well drilling and testing programme, according to ORYX, the junior partner.

Full Report Details at
- www.fastmr.com/prod/782487_congo_oil_gas_report_q2_2014.aspx

Strong government support for the sector, reflected in aggressive investment attraction campaigns accompanied by soothing words that any regulatory changes will add to the investment attractiveness of the country rather than swing to nationalist tendencies, should reassure current operators. Some clarity on the trendline should be evident in 2014 with an expected a new licensing round of 10 blocks, both offshore and onshore as well as more detail on any regulatory modernisation. However, there is a question mark over whether it will be enough to attract new entrants or merely entrench the dominance of Total and Eni.

The main trends and developments for the RoC's oil and gas sector are:

* Our forecasts suggest at least a temporary reversal in the decline of crude production starting in 2016 and 2017 before returning to a modest downward slope. The projection is based upon natural decline of mature fields, the announced wind down of the Azurite project, and the onset of new production from new stages of the Moho-Bilando field. Production has steadily fallen from a 2010 peak of 312,000 barrels per day (b/d) to 283,600b/d in 2013. We expect an uptick, peaking in 2016 at 398,900b/d, before returning to an annual rate of decline of 1% through 2023. However, the Eni-led discovery of 600mn barrels (bbl) of oil and 2bn cubic feet of gas from the Mariner XII block could add to shorter-term upscale risk if the discovery is commercially feasible, as the company hopes to ascertain in 2014.
* Downstream: Refined products consumption is rising annually at a rate of 7 to 8%, and is a concern to the government as the country's only refinery will soon be unable to meet domestic needs. The CORAF refinery at Pointe Noire has a nominal capacity of 21,000b/d, but a utilisation rate of just 65%. That means domestic consumption will overtake internal capacity by about 1000b/d in 2014. Talk of an expansion has been ongoing for nearly a decade, but there is no solid evidence of action to back government assertions the refinery will be expanded. Congo will become a net importer of refined products in 2014 and the trade deficit will only grow as demand for gasoline and other refined products rises to 24,000b/d by 2023 (an annual rate of 7% from 2012 to 2022). We therefore anticipate that consumption will rise from an estimated 12,000b/d in 2012 to just under 24,000b/d by 2022. In early 2014, government officials were quoted as saying that they hope to have an update on the dormant refinery expansion plans ready for release by April when they host the country's conference on the petroleum sector in Brazzaville. Despite an US$868mn investment deal signed with Saudi Arabia's Rawabi Holding Company in 2008 to increase capacity at the plant to 100,000b/d, there has been no evidence of the project entering an active stage. We have not factored any expansion in our forecasts and we see capacity stagnating at 21,000b/d with an average utilisation rate of 65.8% throughout the decade
* In January, 2014, the China Road and Bridge Corporation (CRBC) announced that it will lead design and construction of a tanker port at Pointe Noire. Official details are sparse. Congolese government officials, speaking to Agence France-Presse (AFP), said the port will cover an area of nine square kilometres and consist of 31 quays able to accommodate, liquid, bulk and container traffic. The report indicated the facility could accommodate ships up to 300,000 tonnes. However, no cost or construction schedules were available at the time of writing and therefore the announcement has not been factored into our analysis except to note the potential.
* Gas production, which has rising in recent years by annual gains of over 20% will see a 33% production spike in 2014 to an annual rate of 1.7bn and continue to rise before reaching 2.0bcm in 2022. Gas is primarily produced by Eni and most is used for re-injection into mature oil fields or to produce electricity in populated areas. Eni has committed to expanding electrical capacity as part of its arrangements with the government to explore and possibly exploit the bitumen resources of the Tchikatanga-Makola basin in the south of the country. The World Bank estimates that only 37% of the population has access to electricity this is a result of damage to the infrastructure during various civil wars in the 1990s.

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Author:
Bill Thompson
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Web: www.fastmr.com
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