Report overview

Economic growth in non-OECD countries, particularly in developing countries such as China and India, and a predicted increase in vehicle numbers to 2bn by 2030, are the chief factors in forecast growth in global energy demand, forecast to grow by 40% by 2030 compared with 2008 levels. Despite increasing concerns about emissions from the burning of fossil fuels and the effects on the global climate and increased investment in renewable energy sources, fossil fuels are forecast to account for more than three quarters of this energy demand growth. Of the main sources of primary energy; oil, coal, natural gas, nuclear, hydropower and biomass, coal will see the largest absolute rise, of about 53%. Demand for oil is forecast to rise by 24% to105m barrels per day in 2030, while natural gas demand is forecast to rise by an even greater volume, predicted to reach 4.4trn cubic meters a year by 2030. This sustained demand for oil and gas is against a backdrop of maturing oil and gas fields in many of the world’s ‘traditional’ producing areas such as the North Sea and the Gulf of Mexico, and concerns about peak oil. In addition, a large proportion of the world’s proven oil and gas reserves are held by a small number of countries, and evidence of resource nationalism and tighter criteria for foreign investment have led to increased concerns about energy security. Many of the world’s key producing fields are now maturing or are seriously depleted, and the continued demand for new oil and gas supplies means governments and companies are looking to new, and often completely unknown, regions to replace reserves. Some of these areas are believed to contain substantial undiscovered and undeveloped resources but many of them pose serious political and technological challenges to exploration and development.

Key findings

Over three quarters of overall energy demand growth up to 2030 is forecast to come from fossil fuels, despite increased investment in renewable energy sources. Over 50m bpd of the 78m bpd of oil forecast to be produced in 2030 will have to come from resources yet to be discovered or developed

In Africa, the Gulf of Guinea alone is forecast to meet a quarter of total US energy imports by 2020. Sierra Leone, Sao Tomé and Principe, and Liberia are emerging as high potential areas for investment in the west of the continent as companies look beyond major producers Nigeria and Angola. The joint development zone between Sao Tomé and Nigeria could contain up to 11bn barrels

In eastern Africa, following successful exploration in the Albertine basin, Uganda holds the potential to become a net oil exporter

The Arctic could contain undiscovered resources of 90bn bls of and 1,670trn cu ft of natural gas, representing 13% and 30% respectively of the world’s yet-to-be-found oil and gas

Technological developments such as wide-azimuth seismic acquisition and floating LNG will play key roles in successful exploration and development of frontier oil and gas reserves

Use this report to

• Understand the drivers of the need to explore for oil and gas in new and largelyunknown areas
• Analyse the opportunities available for investment consideration through examination of the data available and an exploration history of the selected frontier areas
• Be better-informed of both the potential and the challenges presented by exploration in frontier areas, including the associated political and technological risks
• Assess the attraction and the risks for your company of investing in these frontier areas
• Benefit from the report’s information to help make your company’s next international upstream investment decision

Explore issues including...

Sustained fossil fuels reliance: Despite climate change concerns and increasing investment in renewable energy sources such as wind, solar and biofuels, fossil fuels will account for over two-thirds of overall energy demand up to 2030

Maturing traditional producing areas: Many of the world’s traditional producing regions are maturing or depleted, meaning oil and gas companies now need to venture into new and unknown areas, ‘frontier’ regions, in order to look for new oil and gas resources to replace produced reserves and meet continued demand

Frontier equals high-potential, high-risk: Frontier areas are often data-poor, being barely or completely unexplored. Many are believed to hold substantial undiscovered oil/gas resources, but pose political, socio-economic, geographical and technological challenges that may present serious barriers to commercial investment

Technology opens up frontiers: Technological developments in the oil and gas sector, including significant advances in seismic to aid reservoir analysis; deep and ultra-deepwater drilling capabilities; growing liquefied natural gas (LNG) capacity and ‘mega-pipelines’

Discover

• By how much is demand for oil and gas forecast to grow in the next twenty years? How much of this forecast demand will need to come from resources yet to be discovered?
• To what degree can successful frontier exploration change the concept of ‘peak oil’?
• Why do oil and gas companies need to explore in new and unknown frontier areas?
• Which are the most promising ‘new’ countries in West Africa for exploration? ‘What is their undiscovered resource potential and how risky is investment?
• How likely is a resolution to the sovereignty dispute over Western Sahara, believed to hold substantial oil resources, and should companies sign for licences with Morocco or the territory’s exiled government?
• What discoveries have been made in the ultradeep waters of the Gulf of Mexico and what potential do its deep and ultra-deep-waters hold?
• Is going deeper in the Gulf of Mexico a better bet than new areas elsewhere in the US?
• What is the resource potential of the Falklands? Will drilling there lead to a repeat of the 1982 Falklands conflict?
• Which basins contain most of the Arctic’s undiscovered resources?
 

Top Frontier Oil Countries
Executive Summary 10
Introduction and context for frontier oil exploration 10
West Africa the ‘Third Generation’: Sierra Leone, Liberia, Sao Tomé and Principe 11
Ultra Deep Water: Gulf of Mexico, the next US frontier 12
Western Sahara: A disputed frontier and the challenge of sovereignty 12
The Falkland Islands 13
Other frontier countries: Uganda, the Bahamas and the Arctic 14
Technological advances facilitating frontier access and development 15
Chapter 1 Introduction and context for frontier oil exploration 18
Summary 18
Methodology 19
The global energy market 19
Sustained fossil fuels reliance 21
Energy security 23
Peak oil 27
Security & diversity of supply 28
Maturing of traditional producing areas 30
The push for the frontiers 31
No more easy options 32
Chapter 2 West Africa, the ‘third generation’: Sierra Leone, Liberia, Sao Tomé and Principe 36
Summary 36
Background and context to the new West African exploration 37
African advantage 38
Sierra Leone 40
Political landscape 41
Natural resources and oil exploration 41
The next Jubilee? 42
Liberia 44
Reserves potential 45
Onshore potential 47
Sao Tomé and Principe 48
Investment challenges and risks in the West Africa region 52
Coping with graft 55
Exploration risk 56
Chapter 3 Ultra deepwater Gulf of Mexico, the next US frontier 60
Summary 60
Introduction 61
Offshore exploration 62
Ultra-deep discoveries 64
Maturing production driving the need to go deeper 65
Reserves potential 66
Sustained licensing 67
Facilitating investment- why the GofM? 68
Challenges and risks of going deeper 70
Chapter 4 Western Sahara: a disputed frontier 74
Summary 74
Introduction 75
Hydrocarbon prospects 75
Exploration history 79
Licenses awarded by SADR and Morocco 81
Conflicting licenses 84
Political context 87
Current political situation and impact on exploration 88
Case Study - The East Timor experience 90
Conclusion 91
Chapter 5 The Falkland Islands 96
Summary 96
Introduction 97
Exploration history & production potential 98
The North Falkland Basin 100
Recent activity 101
The ‘Southern Basins’ 102
Proven reserves in the vicinity 103
Further opportunities available for investment 106
Far north of North Falklands 108
Political context and the challenge to exploration 108
Other challenges 110
Chapter 6 Other Frontier Countries: Uganda, the Bahamas and the
Arctic 114
Summary 114
Introduction 115
Uganda overview 115
Context for oil exploration and development 115
Risks and challenges to development 119
Learning the lessons of Nigeria 120
The Bahamas 121
Context for oil exploration and development 121
Why the Bahamas? 123
Challenges and risks 124
Arctic 124
Prospectivity of Arctic basins 125
Exploration history and current activity 128
Risks and challenges 130
Chapter 7 Technological advances facilitating frontier access and development 134
Summary 134
Introduction 135
Understanding little-known reservoirs 135
The future of seismic surveying 137
Exploration drilling capabilities 139
Marketing and monetization 142
The case for liquefied natural gas 144
Floating Liquified Natural Gas (FLNG) 146
Conclusion 148
Political and economic risk assessment of Frontier oil countries 149
Appendix 153
Glossary 153
Index 154
List of Figures
Figure 1.1: Global natural gas demand, IEA Reference Scenario (bcm), 2009 21
Figure 1.2: Ten largest global proven oil reserve holders (bn bls), 2009 25
Figure 1.3: Ten largest global proven gas reserve holders (trn cu meters), 2009 26
Figure 2.4: US oil imports December (bls ‘000), 2009 38
Figure 2.5: Venus and Jubilee oil discoveries 43
Figure 2.6: Liberia third licensing round acreage, 2010 46
Figure 2.7: JDZ Licensing Round 2004 50
Figure 2.8: São Tomé and Príncipe 1st Licensing Round (March 2010) 52
Figure 2.9: West Africa ‘the third generation’ SWOT 58
Figure 3.10: Gulf of Mexico estimated volume of deep water fields (Mboe), 2008 63
Figure 3.11: Ultra Deep Water Gulf of Mexico SWOT 72
Figure 4.12: Comparison North east/North West countries proven gas reserves (trn cubic feet), 2009 78
Figure 4.13: Aaiun Basin exploration well history 80
Figure 4.14: SADR Licensing Round 2008 83
Figure 4.15: Zag License Area 85
Figure 4.16: Western Sahara SWOT 93
Figure 5.17: Falkland Islands Regional Basins 99
Figure 5.18: Oil reserves in South American countries (bn bls), 2009 104
Figure 5.19: Share of gas reserves in South American countries (trn cu m), 2009 105
Figure 5.20: The Falkland Islands SWOT 112
Figure 6.21: Uganda Albertine Rift Basin 118
Figure 6.22: Key Arctic oil basins (bn bls) 126
Figure 6.23: Key Arctic gas reserves (trn cu feet) 127
Figure 6.24: Acreage offered in Baffin Bay (Greenland 2010) 129
Figure 6.25: Other countries SWOTs 131
Figure 7.26: Newbuild deep/ultra-deep water rig deliveries, 2008 141
Figure 7.27: Global liquefied natural gas (LNG) production (m tons) 145
Figure 7.28: Distribution of standard gas fields, 2008 148
Figure 7.29: Frontier Oil Countries political/economic comparison, 2010 150
List of Tables
Table 1.1: Global natural gas demand, IEA Reference Scenario (bcm), 2009 21
Table 1.2: Ten largest global proven gas reserve holders (trn cu meters), 2009 26
Table 1.3: Oil production, IEA Reference Scenario (m bpd), 2009 31
Table 2.4: US oil imports December (bls ‘000), 2009 37
Table 2.5: Key discoveries offshore West Africa (excl. Nigeria and Angola) 39
Table 2.6: JDZ oil potential (m bls) 49
Table 2.7: Transparency International Corruption Perception Index (CPI), 2009 55
Table 3.8: Deep/ultradeep GofM discoveries, 2008 64
Table 3.9: Lower Tertiary discoveries in water depths >5,000ft (2008) 65
Table 3.10: Active leases by water depth (2008) 68
Table 3.11: Licensing rounds under current five-year program 68
Table 4.12: Comparison North East/North West African countries oil reserves (bls bn), 2009 76
Table 4.13: Comparison North East/North West African countries gas reserves (trn cubic feet), 2009 78
Table 4.14: Aaiun Basin exploration well history 79
Table 4.15: Blocks offered by SADR in the 2008 licensing round 82
Table 4.16: Morocco-SADR: fiscal comparisons 2010 91
Table 5.17: Wells drilled in the North Falkland Basin (in 1998) 100
Table 5.18: Oil reserves in South American countries (bn bls), 2009 104
Table 5.19: Gas reserves in South American countries (trn cu m), 2009 105
Table 5.20: Farm-in opportunities (Argos Resources) 107
Table 5.21: Farm-in opportunities (Desire Petroleum) 108
Table 6.22: Uganda licensing status 117
Table 6.23: Bahamas exploration well history 122
Table 6.24: Key Arctic oil reserves (bn bls) 125
Table 6.25: Key Arctic gas reserves (trn cu feet) 126
Table 7.26: Key global oil & gas pipelines 143
Table 7.27: Global liquefied natural gas (LNG) production 145
Table 7.28: Distribution of standard gas fields, 2008 147
Table 7.29: Frontier oil countries political/economic comparison, 2010 149