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Why The West African Oil Boom Ended So Abruptly

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Global oil production is slowly recovering towards pre-Covid-19 levels, but in West Africa the pandemic is set to leave lasting effects. This important region for sweet crude oil production faces numerous challenges as it strives to heal from the pandemic, including underinvestment, a lack of infill drilling at mature fields, and infrastructure that is either aging or threatened, a Rystad Energy analysis showed.

Sweet crude is the preferred oil grade to make jet fuel – the worst-hit segment as oil demand plunged last year. West African crude oil production dropped to 3.71 million barrels per day (bpd) last year from 4.12 million bpd in 2019, and is set to decline further to 3.39 million bpd this year. While we expect output to tick back up in 2022 and 2023 as jet fuel demand returns, production is set to fall below 3 million bpd already from 2025 unless heavyweights Nigeria and Angola can stage a strong comeback and shake off the dismal growth trends of the past decade.

West Africa’s oil production was not destined to follow this current grim projection before Covid-19 hit – in fact, the region was in line for more investment and activity. Last year’s low oil prices and the unstable market conditions that have continued into 2021 changed the outlook, however, as major operators decided to practice capital discipline and limit their investment exposure in regions including West Africa.

As a result, Rystad Energy has reduced its forecast for West African crude oil output by 600,000 bpd for 2021 and by 650,000 bpd for 2026, compared with our pre-Covid-19 projections.

“The structural upstream obstacles that West Africa faces are realities that are not going away in the short term. Even if jet fuel makes a spectacular recovery and demand for light and medium sweet crude grades returns, Nigeria and Angola, as well as other neighbors in structural upstream decline, will not be in a position to supply the market,” says Nishant Bhushan, upstream analyst at Rystad Energy.

The region’s decline in 2021 is driven by its two biggest oil producers, Nigeria and Angola, which together are estimated to have lost 440,000 bpd versus the pre-Covid-19 forecast. We also estimate that crude oil production has dropped significantly in countries such as Congo, Gabon, and Equatorial Guinea, which together produced between 250,000 bpd and 300,000 bpd in 2010. Equatorial Guinea has seen a 60% reduction in oil production and Gabon nearly 35% in the past 11 years.

Crude oil production from West African countries was expected to pick up pace in tandem with their Middle Eastern counterparts as the OPEC+ group opened its supply taps. But even as OPEC+ production caps have gradually eased, Nigeria and Angola have not been able to ramp back up to their pre-shut-in production levels.

Crude production is not the only thing that’s been hit in the past couple of years. Since the start of 2020, we have also seen that the overall crude production capacity in Nigeria and Angola has taken a major blow. This is due to a number of reasons, including rapid declines at mature fields due to a lack of infill drilling, postponement of final investment decisions that were originally planned for 2020 and 2021, a lack of investment in oil and pipeline infrastructure which leads to frequent production shut-ins (prevalent in Nigeria), and civil unrest caused by militia groups.

West Africa has never had much unused capacity – most countries have produced at maximum capacity even as that capacity was gradually declining. When OPEC+ unveiled its massive 9.8 million bpd cut program in May 2020, the region had an overall oil production capacity of 4.2 million bpd. We estimate this has dropped by almost 420,000 bpd to around 3.8 million bpd by the end of 2021, and will keep shrinking to 3.5-3.6 million bpd by the end of next year.

Nigeria

Nigeria produces sweet crude grades ranging from light to heavy, but most of the volumes fall into medium to light grades. We expect the output of all sweet crude grades in Nigeria will decrease on the back of declining production from mature fields. The major drop in crude oil production is in grades like Bonga, Egina, and Qua IBoe, which are estimated to fall collectively by 180,000 bpd to 200,000 bpd by 2026 from 2021. Other crude grades, like Forcados, Bonny Light, Escravos, and Erha, are estimated to remain little changed, while some growth will be seen in crude grades like Amenam, Brass River, and Jonas Creek.

The decline in Nigeria’s crude oil production in recent years looks more structural as the country has failed to attract new investments in its oil and gas industry, be it in exploration, greenfield developments, or brownfield expansions. In the short term, we estimate Nigeria’s crude oil production will rise to about 1.55 million bpd in 2022 and 1.58 million bpd in 2023, with some new marginal field developments adding 30,000-35,000 bpd in 2022 and another 35,000-40,000 bpd in 2023. At the same time, some fields currently in the ramp-up phase are estimated to add 65,000-70,000 bpd in 2022, but only 10,000-15,000 bpd in 2023. After 2023, we estimate Nigeria’s output will continue to slide due to a lack of significant new discoveries, slipping to as low as 1.25 million bpd by 2026.

Angola

Like Nigeria, Angola’s decline in crude oil production is also structural, and production has been plummeting since 2015 – from 1.74 million bpd in 2015 to almost 1.11 million bpd in 2021. This output slump is the direct result of a lack of new investments in exploration and a failure by operators to halt the production decline at mature oil fields. New upstream projects are estimated to add 40,000-45,000 bpd this year and another 80,000-90,000 bpd in 2022, but this will not be enough to halt the downward spiral that will reduce Angola’s crude oil production to between 750,000 bpd and 800,000 bpd by 2026.

Angola mostly produces sweet crude, and we expect production of all the major sweet crude grades to slide in the coming years. We see overall sweet to regular crude grade output slumping by almost 300,000 bpd from 2021 to 2026 – a drop of about 30%. Major crude grades such as Nemba, Dalia, Mostarda, Gindungo, Girassol, and Kissanje are estimated to cumulatively decline by 280,000-300,000 bpd in 2026 from 2021. Some smaller crude grades like Sangos, Saturno, Cabinda, and Plutonio are estimated to remain at similar levels or inch up by 15,000-20,000 bpd combined.

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Ethiopia Conflict Dynamics Shift as New U.S. Envoy Takes Over

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Recent signs out of Ethiopia are encouraging, but major issues standing in the way of a sustainable peace remain unresolved.


By Michelle Gavin, Guest columnist and blogger

News coming out of Addis Ababa suggests that the conflict in Ethiopia is entering a new phase. For over a year, momentum seemed to be forever driving toward worsening violence between the federal government, its allies, and the Tigray People’s Liberation Front (TPLF), as well as a deepening rift between the Ethiopian government and international partners including the United States. But now the TPLF has retreated back to Tigray, and federal ground forces have declined to advance on the region. Ethiopian authorities have freed prominent opposition leaders from prison—including members of the TPLF and Oromo groups that have been at odds with the government—framing the pardons and amnesty as a step toward unity and reconciliation. Late last month, lawmakers approved the establishment of a national dialogue commission that will seek political solutions to the multiple fractures in Ethiopian society. While the dialogue as envisioned will not include armed opponents of the government, it could perhaps create a pathway toward more inclusive and consequential talks.

But not all the news is good. Humanitarian conditions in Tigray are as dire as ever, in large part because the Ethiopian government continues to impede access to the region. Ongoing aerial attacks on civilian targets are exacerbating the loss and suffering, killing Ethiopians and refugees and prompting aid organizations to suspend operations because they cannot safely do their work. This weekend the TPLF claimed that Eritrean forces were continuing to fight in Tigray—a claim that, if true, would render the restraint of federal forces far less meaningful. Meanwhile, many Ethiopians who were swept up in a wave of dubious arrests targeting human rights activists, journalists, and ethnic Tigrayan Ethiopians—whose only crime seemed to be their ethnicity—are still detained.

The Biden administration is assessing these developments and trying to capitalize on the positive trends as it transitions from Special Envoy for the Horn of Africa Jeffrey Feltman, whose resignation was announced last week, to his successor, David Satterfield. It will be important to resist the temptation of wishful thinking in this moment and to ensure that a desire for a reset of the bilateral relationship does not lead to a selective reading of the latest developments. There are positive signs, but doubts over the sincerity of the government’s desire for peace persist, as do real questions about the sustainability of steps toward peace. Prime Minister Abiy Ahmed’s political base may have been unified in its animus toward the TPLF, but without an urgent threat from a common enemy, competing and sometimes contradictory interests will be hard to satisfy. Some of the militant Amhara nationalists that Abiy relied on over the past year already view the latest amnesties as a betrayal. Eritrea will continue to pursue its own agenda, which does not entail standing down while Ethiopians resolve their political differences peacefully and emerge a stronger and more just society. Accountability for atrocities committed by all parties to the conflict remains elusive.

Over the past year Abiy and his supporters have used the history of U.S.-Ethiopia relations as a cudgel, pointing to Washington’s tendency to overlook internal repression and abuse during the years of TPLF dominance to question U.S. motives. It would be ironic if American desires to end this difficult period led to repeating the same mistakes. Of course, the United States wants a productive relationship with Ethiopia—especially a just, peaceful Ethiopia that models a successful heterogeneous society, champions democratic norms, and supports African institutions. But good relations with the government in Addis Ababa are not worth much if the country is tearing itself apart, simmering with grievances that explode into violence, or practicing and exporting the kind of brutal authoritarian governance that characterizes Eritrea. The United States should take care to consider the totality of the picture in Ethiopia today, remembering that it is the ultimate course of that influential country, not rapport with any one leader, that matters most.

*Michelle Gavin tracks political and security developments across sub-Saharan Africa. This article first appeared in CFR.

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Gold Mine Collapses, Kills Over 30 In Sudan

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At least 31 miners were killed and eight missing in Sudan on Tuesday when a rudimentary gold mine collapsed, a government official said.

The disaster occurred near Nuhud, a town about 500 kilometres (310 miles) west of Khartoum, said Khaled Dahwa, the head of the state-run Mineral Resources Company in West Kordofan.

“Thirty-one traditional miners were killed because of a mine collapsing,” he told AFP, adding one person survived and eight others were still missing.

Another official at the company said four miners were killed at the same mine in January.

“Authorities at the time shut down the mine and installed security but a couple of months ago they left,” he said.

Artisanal gold mining is a dangerous profession in Sudan largely due to ramshackle infrastructure.

It flourished around a decade ago in various parts of country, with people digging the ground using excavators in hopes of unearthing the precious metal.

About two million artisanal miners produce about 80 percent of the country’s annual gold production of around 80 tonnes, according to official figures.

Sudan, one of the world’s poorest countries, has recently suffered runaway inflation and embarked on tough economic reforms, including slashing subsidies on petrol and diesel and launching a managed currency float.

It is also reeling from political turbulence in the wake of a coup-led military chief General Abdel Fattah al-Burhan on October 25.

 

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Deadly bombing at restaurant packed for Christmas in Congo

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Officials in the Democratic Republic of Congo say at least six people have died in a suicide bomb attack on a crowded restaurant in the eastern city of Beni.

Police prevented the bomber from entering the building, but he blew himself up at the entrance killing himself and five other people.

Another 13 people were injured.

The officials blamed Saturday’s attack on the Allied Democratic Forces (ADF), a militant group said to be linked to the so-called Islamic State (IS).

So far no group has claimed responsibility for the attack.

More than 30 people were celebrating Christmas at the In Box restaurant when the bomb went off, two witnesses told AFP news agency.

Children and local officials were reportedly in the restaurant at the time.

“I was sitting there,” local radio presenter Nicolas Ekila told AFP. “There was a motorbike parked there. Suddenly the motorbike took off, then there was a deafening noise.”

After the explosion the military officer responsible for the state of emergency in the country’s east told residents to return home for their own safety.

There have been frequent clashes in Beni between the army and Islamists in recent weeks.

In November, Congolese and Ugandan forces began a joint operation against the ADF in an attempt to end a series of brutal attacks.

Authorities in Uganda say the group is behind a series of recent attacks in the country, including in the capital Kampala.

Map
Map

The militant group was formed in the 1990s by Ugandans disgruntled with the government’s treatment of Muslims, but it was routed from western Uganda and its remnants fled across the border to DR Congo.

It established itself in the eastern DR Congo and has been blamed for thousands of civilian killings there over the past decade, including in attacks on Christians.

In March the US put the ADF on its list of terror groups linked to IS. For its part, IS says the ADF is an affiliate.

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