The Republic of Congo is looking to attract substantial investments in the gas exploration sector. CNBC Africa’s Kenneth Igbomor spoke to Lucinda Valerie Ross, Senior Technical Analyst, S&P Global for more.
The Republic of Congo is looking to attract substantial investments in the gas exploration sector. CNBC Africa’s Kenneth Igbomor spoke to Lucinda Valerie Ross for more on the sidelines of the Energy & Investment Expo. There are a number of existing projects as well as sanctioned projects that we are expecting online in the next few years. But due to the natural decline in production that we see, it's not going to be able to sustain the levels of 500,000 barrels per day that has been set as a target. So, we have a number of projects, potential projects in Congo that need to then take FID and attract the investment required for these projects to actually go ahead and be developed. Yeah, but Congo is an investment case now. How does it compare with its peers across the continent? So, Congo is seen as a country where they are relatively easy to negotiate with and open for business. But their current, what you call it, fiscal terms, they are very simple and straightforward and unambiguous. So, it's straightforward and easy for the investor to understand. But this then results in not necessarily the best economic situation for all the investors. So, and a number of other African countries that have actually recently taken on and improved their fiscal terms in order to attract investment. And these include both frontier regions like the Cerro Tom and Príncipe and Namibia, with the big gas discoveries offshore, as well as in the more mature regions such as Angola and Nigeria, that have been actively, with Nigeria and the PIA terms, actively improving their fiscal terms in order to attract the necessary investment. And the hope is with Congo's gas code that a similar thing will be done in Congo in order to actually attract the investors to explore in Congo where there is so much potential. Yeah, because the government is going big on gas this time around. And I'd like you to speak to that, because when you look at first the geopolitical environment right now, how that supports these gas ambitions for Congo, and also you just mentioned the gas code that the country is putting together, as well as other likely incentives that could attract investment into the gas space here in Congo. Yes, gas is growing ever more important. And this started with the Russia-Ukraine conflict, where there was a shortage in gas. So a number of operators, such as Eni in Congo, then actually moved ahead and took FID for their gas developments, such as the Marine 12 FLNG development, which we I think are all aware had an amazing time from FID to first gas, about a year. So it just shows that the climate for gas is currently, it is growing. And Africa has a large potential of resources to be developed. And even in terms of emissions, it's generally easier for the IOCs to get investment for these gas projects because of the low emissions as well. But I'd also like you to unwind the complexities for us here, because I understand that the location also plays a lot in the pricing dynamics. And I'd like you to put that into perspective. Yes, so gas is very different to oil in terms of the cost. So with oil, you just have to extract it and you can then transport it to anywhere in the world. Whereas with gas, it's very important, your size of your discovery, as well as its location to existing infrastructure plays a critical role in the commerciality of the project. So for instance, you either would need to build a pipeline to transport the gas to a facility or else the other option is to liquefy the gas before transporting it. But these then add additional both CAPEX and OPEX to the project. So it just means that in order to be commercial, the operators need to have an even bigger resource. Yeah, because I'd like you to also put into perspective for us the exploration trends that we're seeing play out here in Congo, and also the economics of the offshore gas discoveries and why that is challenging. Okay, so definitely. So we are seeing a trend in offshore exploration, moving into deeper waters. And this is generally due to two factors being the shallow shelf regions are mature. So we needing to move deeper in order to find new discovery, as well as the fact that technology is advancing. So we are now able to drill wells in water depth that previously it was not possible to do so. So even after COVID and the 2015 oil crash, we are seeing that despite there being a drop in exploration, we are deep water and ultra deep water wells still account for about around 50% of exploration wells being drilled. Yeah, but as we leave this forum now, for you, what has been the biggest takeaway from the conversations here? I would say my biggest takeaway from the conversation today is that it feels like there is a drive towards attracting the investors. And my hope is that when the gas code is announced, it will implement some of these incentives such that have been implemented by its neighbouring peers in order to attract investment in Congo.
Theme: Boosting Gas Exploration Investments in the Republic of Congo
The Republic of Congo is making significant strides in attracting investments in the gas exploration sector, as highlighted at the recent Energy & Investment Forum. Lucinda Valerie Ross, a Senior Technical Analyst at S&P Global, sheds light on the country's plans to bolster its gas exploration industry. Ross highlighted that while there are ongoing and sanctioned projects in Congo set to come online in the coming years, the natural decline in production poses a challenge to sustain the target of 500,000 barrels per day. Numerous potential projects in the country await Final Investment Decisions (FID) and require substantial investments to progress and thrive. Compared to its African peers, Congo stands out as a favorable investment destination due to its straightforward and easy-to-understand fiscal terms. However, Ross noted that neighboring countries like Sao Tome and Principe, Namibia, Angola, and Nigeria have revamped their fiscal terms to allure more investments. Ross emphasized the importance of Congo's gas code to attract investors and leverage the nation's vast gas potential. With a focus on gas development, the Congolese government is pushing towards expanding its gas sector amid a global surge in gas demand. Ross pointed out that recent geopolitical events have further underscored the significance of gas as a reliable energy source. Notably, companies like Eni have already committed to gas projects in Congo, including the Marine 12 FLNG development, reflecting an optimistic outlook for the country's gas industry. In terms of exploration trends, Congo is witnessing a shift towards offshore exploration in deeper waters, driven by the maturation of shallow shelf regions and technological advancements enabling drilling in previously inaccessible areas. Despite challenges posed by the economics of offshore gas discoveries, such as the need for intricate infrastructure due to location factors, operators remain focused on exploring new opportunities. The Energy & Investment Forum served as a platform for stakeholders to discuss strategies for attracting investments in Congo's gas sector. Ross expressed optimism about the prospect of implementing incentives akin to those adopted by neighboring countries to stimulate investment in Congo. As the nation gears up for the unveiling of its gas code, industry players are hopeful that it will enhance the investment environment and unlock the full potential of Congo's gas resources.
"My hope is that when the gas code is announced, it will implement some of these incentives such that have been implemented by its neighbouring peers in order to attract investment in Congo."
Congo, gas exploration, investments, Energy & Investment Forum, S&P Global, fiscal terms, Africa, geopolitical environment, Eni, offshore exploration, infrastructure, incentives, gas code