Oil firms have put major projects in Nigeria and West Africa on hold because of low prices – as they have across the globe – but when the market finally picks up, development is likely to recover much more slowly in the region than elsewhere, Reuters reports.
High costs bedevil the region, which includes established producers such as Nigeria and when you add to this long-standing problems of poor infrastructure, complex bureaucracy and politics, West Africa may be well down the list for any investment revival. Much of West Africa’s oil and gas is also offshore where drilling is expensive: sub-ocean wells can cost $100 million each and whole projects billions. Accordingly, many multinationals have cut offshore development.
A dive in oil prices since mid-2014 has forced international energy companies to postpone or cancel hundreds of billions of dollars in investment all over the world. In Nigeria it has made projects for Royal Dutch Shell uneconomic, and hurt the government which relies heavily on oil revenue. When considering the large shale oil deposits onshore the United States which can be drilled for a few million dollars, it would appear that these are the kind of projects that will be revived first whenever oil prices finally rebound. West African projects will therefore need to be not only viable, but also compete with such production if they are to attract any further investment.