Gushing Oil Profits From Offshore Africa
Tony is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In what surely must be a surprise to nearly every global investor, one of the world's fastest growing economies is located on the western coast of Africa – Angola. This country's GDP is expected to grow this year by an incredible 9.1 percent!
What is causing this surge of economic growth in Angola? The answer is a simple one word answer – oil. The country is now Africa's second-biggest oil producer, trailing only Nigeria, and a major supplier of low-sulfur crude oil to China, which bought about 45 percent of the country's production in 2010.
The country is blessed with huge offshore oil fields. Unknown to most investors, the famous huge pre-salt oil fields offshore Brazil that Petrobras ADR (NYSE: PBR) is trying to develop are believed now to extend all the way across the Atlantic Ocean to the shores of western Africa. In fact, Petrobras itself has launched exploration efforts off Angola's southern coast. It is drilling test wells in the deep waters of the Benguela Basin. The company is also exploring neighboring areas off the coast of Namibia and elsewhere.
But Petrobras is hardly alone to trying exploit Angola's oil riches. Another, albeit smaller, company that looks to have struck it rich is Houston-based and Goldman Sachs-backed Cobalt International Energy (NYSE: CIE). In February, it announced a major discovery in the Kwanza Basin that is thought to hold some 1.5 billion barrels of crude oil. Geologists have said that Kwanza very much resembles the Santos Basin offshore Brazil where so many large oil discoveries have been made.
The exploration director for Africa at Spanish oil giant Repsol S.A. ADR (NASDAQOTH: REPYY.PK), Didier Lluchm, told the Financial Times that “the Cobalt discovery proved that what was a concept – the comparison between the Kwanza basin and Brazil – has become a reality.” Repsol recently secured stakes in three blocks in Angolan waters.
The Cobalt discovery helped to set off a feeding frenzy among the other major international oil companies too for drilling rights offshore Angola. Some of the companies involved in the bidding are BP, Total, Statoil, Eni and ConocoPhillips.
One of the companies most excited to have signed an agreement for additional drilling rights is Norway's Statoil ADR (NYSE: STO), which paid close to $1 billion for its stakes in two blocks. The company said it considers the entire region offshore Angola as “some of the very best unexplored acreage left on the planet.” It has now been in the country for 20 years and is already producing 170,000 barrels a day there.
Another company with good exposure to these newly opened Angolan fields is BP PLC ADR (NYSE: BP). The British company now has interests in nine blocks, covering a total area of more than 12,600 square miles. This latest investment builds upon the company's already heavy presence in the country. BP has invested over $21 billion into Angola over the past 10 years and plans to spend at least another $15 billion over the next decade.
As Statoil stated, the waters off the Angolan coast look to offer oil companies some of the very best unexplored acreage on the planet. It is believed that 10 percent of the global marine seismic fleet will be in Angolan waters this year. That may mean that the Angolan government's estimate of oil production to grow to 3.5 million barrels of oil a day from the current 1.8 million barrels may be too conservative. That will be good for Angola and the companies exploring for oil there including the acknowledged overseas leader in exploration there, Cobalt International Energy.
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