Focused mainly on their huge domestic energy resources, Gulf oil companies have been slow to look to sub-Saharan Africa. But that could change as they seek to diversify their production interests, particularly as fresh opportunities open up in a new generation of oil-producing African countries.

The emergent oil and gas sector in East Africa – for many decades hardly on the agenda of international hydrocarbons investors – could offer particularly interesting opportunities.

With sector expertise and ample capital resources, Gulf energy groups could be well placed to act as joint venture partners in new exploration and production (E&P) projects, even if they often lack the personnel and local infrastructure to take on lead operating roles.

Kuwaiti pioneer

A pioneer in this field has been Kuwait Foreign Petroleum Exploration Company (Kufpec), which first ventured south of the Sahara in 1985, taking a stake in Block B in southern Sudan. By 1991, it also held an interest in the offshore Yombo field in Republic of Congo, operated by the US’ Amoco using floating production, storage and offloading vessels. Although Kufpec held only a 6.25 per cent interest in a relatively small heavy oil field, with initial output flows of only 6,000 barrels a day (b/d), the investment signalled the company’s readiness to become involved in territories far beyond the usual geographical comfort zone for Middle Eastern investors.

Over the past two decades, as a subsidiary of state-owned Kuwait Petroleum Corporation,

Kufpec’s African venture stakes
Country Block % of ownership Status
South Sudan Block B 27.5 Talks under way
Ivory Coast Block CI 24 33.7 Withdrew in 2011
  Block CI 102 27 Withdrew in 2011
Mauritania PSC A 13.1 Renewed and combined in 2011 as Block C-10 on new terms but with discoveries kept as separate exploration areas
  PSC B 11.6  
  Chinguetti EEA 10.2 In production: net output in 2011 was 626 b/d
R. Congo Marine Block 9 46.1 Interest increased after withdrawal of a joint venture partner
Kufpec=Kuwait Foreign Petroleum Exploration Company; b/d=barrels a day; R. Congo=Republic of Congo. Source: Kufpec Annual Report 2011

Kufpec has fulfilled a specialised international role. It has functioned on a relatively tight budget and with few staff, analysing numerous opportunities for investing in E&P projects around the world, both in established major oil exporting countries and in secondary terrain where there are niche opportunities in which to hold stakes.

Over time, Kufpec has held a varied spread of sub-Saharan interests. But the company pursues a proactive investment strategy and is not afraid to withdraw from ventures when targeted opportunities for development do not materialise. For example, in Ivory Coast, it relinquished its stake in Block 102 in 2011, at the end of the first exploration period, and pulled back from another interest too, after the authorities opted against granting evaluation rights for a gas discovery. Kufpec now holds a 46.15 per cent stake in Marine block 9 in Republic of Congo and 10-15 per cent stakes in a range of E&P interests in Mauritania.

However, probably the most complex African challenge in political and business terms is presented by southern Sudan’s Block B. France’s Total held the lead interest in this vast, potentially promising zone, with Kufpec owning a 27.5 per cent stake. But the block lies in a region that was at the heart of the protracted conflict between the central Sudan government and southern Sudan independence fighters; because of the security problems, for two decades it was impossible to safely sustain an exploration programme.

But after it gained independence in 2011, and with security conditions much improved, South Sudan became keen to see this potentially rich resource asset developed. Late last year, it proposed breaking up Block B, allocating a third to Total, with the other sections possibly allocated to Kufpec and the US’ ExxonMobil; there were also rumours that new investors might be invited to tender. No final decisions have yet been taken and the outlook for Kufpec in Block B remains unclear.

Recent years have seen a shift in the focus of Kufpec’s activity towards North Africa and the Asia-Pacific region. South of the Sahara, its footprint has become less marked, but this may be partly the coincidental result of regulatory or exploration developments in various unconnected countries.

While it may be a trailblazer, Kufpec has not been entirely alone in looking to Africa. The Ras al-Khaimah Gas Commission has been involved in exploration work in Tanzania, while Dubai’s Emirates National Oil Company (Enoc) has invested in oil storage facilities in Djibouti and Mozambique.

In 2006, Qatar-based Venessia Petroleum was contracted to develop the Malawian energy sector. In 2009, it signed terms for the development of an oil pipeline from Beira to Malawi.

As Africa continues to develop its energy resources, it is likely that more GCC companies will follow Kufpec in bringing their expertise to bear on a rich, but often underexploited continent.