Mickael Vogel, director of strategy at the African Energy Chamber, explains how Chad, in an effort to expand exploration and boost domestic production, proves that focusing on basics is a recipe for success
Chad’s rig counts have been surprisingly high for a year now, in a country that produces only about 100,000 bopds. With seven rigs deployed in its territory since September 2018, according to Baker Hughes GE, Chad has more rigs than most African oil provinces.
It is more than Angola, the second-largest producer of oil in sub-Saharan Africa. It is almost more than Congo, the third-largest producer in sub-Saharan Africa. The list goes on: more than Gabon, Cameroon, or even Equatorial Guinea. The reason is that Chad is drilling. In spite of several industrial setbacks, drilling efforts have resulted in increased production and oil revenues.
Vogel said Chad has the 10th largest proven oil reserves in Africa, but its output has been declining in recent years due to ripening fields and disruption caused by the conflict with Boko Haram in the southwest.
In 2019, both ExxonMobil, which produces a fourth of Chad’s oil, and Glencore, which accounts for about nine per cent of Chad’s production, announced their intention to sell their assets in Chad.
But as two of its biggest operators were preparing to leave, Chad welcomed new ones and did not lose focus on bringing out what former Minister Me Béchir Madit called the “second golden age of oil between the end of 2019 and 2025”. In order to ensure the growth of its industry, Chad launched the construction of a mini Rig-Rig refinery in 2017 to address the serious domestic shortage of petroleum products, granted several new fields to CNPCIC in the Bongor Basin, welcomed the new operator United Hydrocarbons and re-negotiated its debt to the Glencore commodity trading giant in 2018.
As oil prices started to rebound, good news came along. Taiwan’s Overseas Petroleum and Investment Corporation completed its operation platform and connecting pipeline to the Komé centre, while Petrochad developed its Krim-Krim wells. The Société des Hydrocarbures du Tchad (SHT), a national oil company, has also made progress in developing its Sedigui field by signing a contract with the Sino-British consortium to construct a gas pipeline, a gas treatment plant and a gas terminal in Djarmaya.
In two months alone, between July 2018 and September 2018, the rigs deployed in Chad rose from just one to seven, according to Baker Hughes GE. That’s a considerable jump in such a short time, while most of its neighbours were still dealing with drilling syndrome. For a year now, Chad has had more rigs deployed on its territory than most other African markets, revealing sustained drilling activity that has now been translated into numbers. As the drilling activity increased, production increased, and so did the revenues.
According to reports from the Ministry of Finance and Budget, Chad’s oil production and oil revenues have so far increased considerably in 2019. In the first quarter, oil revenues increased by more than 64 per cent compared to the same period last year, driven by an increase in production of more than 18 per cent, most of which was due to the CNPCIC and a higher foreign exchange rate.
The trend was confirmed in the second quarter. During this period, oil revenues increased by another 38.6 per cent, while oil production increased by 23 per cent, again led by the CNPCIC, which has seen an increase in production of more than 45 per cent this year. Chad produced 22,791,749 bbl between January 2019 and June 2019. On a daily basis, that’s an average of 126,000 bopds, a very healthy figure for a state whose oil exports account for 70 per cent of its revenues.
The improved situation in Chad explains why the acquisition of ExxonMobil’s 40 per cent stake in the Doba Basin has become a source of intense tendering and negotiation. It also explains why the country’s economic outlook is bright.
In 2019, the IMG predicts that Chad’s economy will grow by 4.5 per cent, well above the world average of 3.3 per cent. When many African oil nations are struggling with a slow recovery, “Chad reminds us that a successful energy strategy is unthinkable, and drilling must be part of it,” Vogel concluded.
