Chad: Oil well positioned to attract more investment

In recent years, the lack of investment in the African oil and gas sector has led to a sharp drop in production.

With the sanctions on Russian energy, OPEC and its allies have set themselves the goal of achieving a greater share of the global market.

Africa is looking for solutions to increase investments in the oil sector and the energy transition.

  • Despite reserves estimated at one billion barrels of oil, production in Chad has been slow, with 2022 levels estimated at 68,000 bpd. This is a significant drop from 2021 levels of 109,000 bpd.
  • The majority of Chad’s crude comes from the Doba Basin, with major operators including ExxonMobil and Shell continuing to push things forward.
  • Chad was among the countries that recently signed an agreement to create a regional network of oil and gas pipelines and hub infrastructure that donors say will boost energy supply and reduce reliance on imports of refined products. .

“A lot of things have happened in the world today to make us believe that they are not serious about the energy transition because when the security of the national interest, the energy security is threatened, they forget all transition and they are coming to ask for more oil and gas and even coal,” said Omar Ibrahim, Secretary General of the Organization of African Petroleum Producers.

Nevertheless, it is correct to say that an increasing number of investors are withdrawing from the development of hydrocarbons. This does not mean, however, that they are turning their backs on Africa.

Chad is seeking to increase the involvement of international companies in the country’s exploration and production activities and attract investment to boost the entire oil and gas value chain.

Stretching from the Sahara desert in the mountainous north bordering Libya to the fertile plains in the south, landlocked Chad is three times the size of California. It is home to around 16 million people, just over half of whom are Muslim. The oil sector has the potential to change Chad’s future.

The Central African country joined the circle of African oil producing and exporting countries in the early 2000s and its economy is now very dependent on it. According to the Chadian Public Finance Observatory, it remains a modest producer, with 47 million barrels in 2021.

According to figures from the Observatory of Economic Complexity (OEC), a global data visualization tool for international trade, in 2020 Chad exported $1.19 billion worth of crude oil, making it the 35th largest exporter of crude oil in the world. In the same year, crude oil was Chad’s most exported product. The main destinations for Chad’s crude oil exports are China, France, Germany, Chinese Taipei and India.

Chad’s fastest growing crude oil export markets between 2019 and 2020 were France, Chinese Taipei and Germany.

Central African countries recently signed an agreement to create a regional network of oil and gas pipelines and hub infrastructure that donors say will boost energy supply and reduce reliance on imports of refined products. Chad was one of those countries.

The project aims to build three multinational oil and gas pipeline networks of about 6,500 km, storage depots, liquefied natural gas terminals, at least three refineries and gas-fired power plants connecting 11 countries by 2030 , according to Reuters.

Countries including Equatorial Guinea, Cameroon, Gabon, Chad, Angola, Democratic Republic of Congo and Republic of Congo are all oil producers or have vast untapped oil and gas reserves, but depend on imports of refined products.

In 2003, Chad began exporting oil to an Atlantic terminal via a pipeline built through neighboring Cameroon. This still exists today and offers considerable value to investors looking to venture into oil extraction in Chad.

Just to share a brief history of the pipeline: it was financed by the World Bank. According to an article by Ideas4development published on June 17, 2021, prospecting by the French Geological Service (BRGM) in the 1950s suggested that the Chadian subsoil contained oil, particularly in the south around Doba, but also in the Kanem and Tibesti. However, confirmation that the Doba reserves were worth mining did not come until 1975 and extraction did not begin until 1988.

Major oil groups have long been reluctant to get involved in Chad’s oil fields. Fields in the center/west and north of the country were located in areas of chronic insecurity.

Then an unprecedented arrangement was made. The World Bank agreed to finance from public funds. The pipeline would later allow private operators Exxon, Chevron and Petronas to deliver their crude oil to the Cameroonian port of Kribi. This would make it possible to ship to European or American refineries, where the oil could be offered on the market at prices that would not be increased by the cost of transport infrastructure.

Chad faces military challenges on most of its borders, which should be considered a risk. To the west, in the Lake Chad region, the army has been fighting the Nigerian Islamist group Boko Haram since 2015. On the border with Sudan, eastern Chad has experienced conflicts between different ethnic groups. Northern Chad is also unstable, sparsely populated and difficult to control. Several Chadian rebel groups have set up their base in neighboring southern Libya. Despite these problems, the Chadian armed forces are considered by many analysts to be the most effective in the Sahel.

The country is also a key member of two regional anti-jihadist coalitions and is a close ally of France, whose N’Djamena base is also the headquarters of its Barkhane mission in the Sahel.

According to African Business, the question for energy projects in Africa must be whether they can attract this investment, given the competition from Asia and elsewhere. This avalanche of potential cash will face the same problems that the industry is already facing.

As one renewable energy company executive noted, “I don’t see any lack of funding. The problem is the other way around – the lack of well-structured projects. The question is why aren’t there more projects? We are way behind in Africa, the strategy is not working.

While Chad’s major oil players are mired in operational and financial difficulties, private suppliers have great opportunities to fill the country’s developing oil gaps.

Now let your imagination wander about voyages of discovery and exploratory expeditions.

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