BMI View: Harvest Natural Resources' subsalt discovery is the first of its kind offshore Gabon. We forecast the country will experience declining output throughout the decade and would therefore welcome subsalt development as an important game-changer. More broadly, the discovery could confirm the regional potential and attract further investment from international oil companies.
Gabon's declining oil output could face progressive revival as offshore subsalt exploration gained credibility following Harvest Natural Resources ' discovery in early January. Currently, we forecast oil production to fall steadily , as several fields are reaching maturity and as the once third largest African oil producer has failed to attract sufficient exploration investment. From 247,000 barrels per day (b/d) estimated in 2012, we see output falling to 215,000b/d in 2022. Similarly, reserves will continue to erode if no major streak of discoveries are made, slumping from 3.5bn barrels (bbl) in 2012 to about 2.7bn bbl in 2022.
|Pending On The Subsalt Quest|
|Gabon Oil Production ('000b/d) & Oil Reserves (mn bbl)|
12,000 Feet Below Sea Level
Harvest's subsalt discovery in early January is the first of its kind in the Gabonese sea. The company encountered oil in the Dussafu Tortue Marin -1 (DTM-1) wildcat well while testing the subsalt potential of the Gamba and Dentale Formations. Harvest declared that it will proceed to further appraisal , including fluid sampling and a sidetrack well.
The Atlantic coasts of West Africa and South America exhibit marked geological similarities and subsalt exploration has been gaining momentum in West Africa following Petrobras ' success offshore Brazil. The state-owned company has already attempted to benefit from its world leading subsalt expertise by acquiring 50% in two blocks offshore Gabon from Ophir Energy in June 2011. Harvest's discovery also echoes Cobalt Energy 's Cameia-1 subsalt hit offshore Angola in 2012 , further raising expectations that subsalt exploration underpinned by the continental drift theory may unlock significant resources.
Until more exploration occurs , it will remain difficult to factor in the impact of subsalt exploration in the region . We have therefore left our reserves forecasts unchanged but we highlight the growth of subsalt exploration as a n increasingly important upside risk. We also consider that later development in the DTM-1 discovery could confirm the extent of the region's subsalt potential. If further appraisal results by Harvest were to prove the discovery commercially viable, it could lead more international oil companies to join the subsalt game , especially in Gabon, Congo and Angola. In 2011, Petrobras announced that it estimated the breakeven cost of its subsalt exploration at US$35-40 per barrel, noting a 45% reduction in costs due to technical progress and the company's expertise .