New Output To Help Offset Declines Elsewhere

BMI View : Production from new fields could help ease the hit to Chad's oil dependent economy as output from the Esso - operated Doba fields continues to decline. While the wider region is benefiting from new investment in exploration and production, the gains in Chad and elsewhere appear to be modest, making it unlikely these countries will soon compete with larger neighbouring producers such as Nigeria for a top place in Africa's oil race.

Canada- based Griffiths Energy has announced that oil production from the Badila and Mangara discoveries in landlocked Chad could begin in Q213. Production from the fields could be shipped via a connection to the existing Chad-Cameroon oil pipeline, which is on schedule to be completed in early 2013. Griff i ths is reportedly targeting 50,000 barrels per day (b/d) in output from the fields by 2014. In September 2012, the company farmed- out a 25% interest in the fields to Glencore in exchange for US$ 300mn to finance an accelerated exploration and development schedule.

However, new volumes are important to Chad's oil sector, with new wells and water injection necessary to stabilise production from the country's existing production in the Doba basin fields operated by Esso, an Exxon subsidiary, alongside partners Petronas and Chevron. The company reported that production averaged around 105,000b/d in 2012, a 9% decline from 2011; however, an annual report noted that without investment and interventions undertaken throughout the year, output would have declined an additional 27,000b/d.

According to the EIA, oil production in 2011 was 124,000b/d, and indeed output remains well below the initial projection of 250,000b/d when the Doba project was planned. The EIA also reports 1.5bn barrels (bbl) of proven reserves, suggesting that although Chad may have untapped hydrocarbon resources, significantly more investment would be necessary to prove up the country's reserves to a scale that would dramatically alter the outlook for an oil industry that at present has limited prospects for growth.

Output Holds But Only With Upgrades To Doba
Chad Oil Production & Consumption ('000b/d)

In light of the falling output elsewhere, new production from the Badila and Mangara fields is of critical importance to the long-term health of Chad's oil sector and to government finances, which remain dependent upon oil revenue ( see our online service, November 9 2012, 'Balance of Payments Hit By Declining Oil Production'). Further declines in output will, according to BMI's Country Risk team, continue to negatively impact the country's fiscal situation, given that we expect oil to account for 91.7% of its total exports in 2013.

Economy Remains Highly Dependent On Black Gold
Chad - Oil & Non-Oil Exports, US$bn

Opportunity Comes With Risk

Alongside a number of active exploration zones in Africa, interest in the region ' s oil potential is picking u p with the award of new blocks, stepped- up exploration campaigns and new project developments. In Cameroon, new onshore and offshore exploration may boost the outlook for oil production , which is now set to decline . Mean while , in Niger, an agreement to utilise the Chad- Cameroon Pipeline could see exports begin sometime in 2013 or 2013 under current plans ( see ' Positive Appraisal Supports Upstream Interest ' , January 31 2013 ; and 'Oil Production Could Transform Economy' , March 14 2012 ).

Yet , downside risks in Chad stem part ly from the country's challenging business environment, with a Canadian judge issuin g a CAD10.35mn fine (US$10.37mn ) against Griffiths Energy in January 2013 for payments to Chad officials in an effort to secure oil a creage. These developments underscore the persistent allegations of corruption in Chad, under the leader ship of President Idriss Deby who has been in power since 1990. Deby's failure to invest oil revenues in badly needed infrastructure and social development program me s ha s been a source of tension in the country, and with international donors.

Link To Pipeline Would Enable Exports From Landlocked Chad, Niger
Oil Infrastructure In Niger, Chad & Cameroon
This article is tagged to:
Sector: Oil & Gas
Geography: Chad

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