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Global Oil and Gas Industry Has Been Focusing on Offshore Areas for New Finds

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Offshore Oil and Gas Discoveries

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Offshore Oil and Gas Discoveries - Latin America And Africa Emerging As Major Investment Destinations


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Global Oil and Gas Industry Has Been Focusing on Offshore Areas for New Finds

The global oil and gas industry has been increasingly focusing on offshore locations to explore the deepwater and ultra-deepwater basins. One main factor is the lack of new big discoveries in mature onshore oil and gas regions. Another cause can be the restricted access to new business opportunities in major oil and gas producing countries, many of which are going for resource nationalization. Since 2000, more than half of the new oil and gas reserves worldwide have been discovered in offshore areas.

Deepwater and ultra-deepwater discoveries are expected to become more important contributors in maintaining production levels in the face of increasing global demand, especially for oil. As new technologies emerge for the high-risk and high-reward prospects of these deep waters, it is likely that older prospects, those that are closer to developed infrastructure, will be reexamined and reappraised with these new technologies.

Offshore drilling and exploration activities are less sensitive to crude oil price fluctuations than onshore businesses as offshore operations benefit from favorable petroleum regulations and policies. With crude prices hovering in the range of $80-$82, there has been sustained interest in offshore oil and gas development in several countries.


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Despite a Higher Number of Offshore Discoveries in Europe and Asia-Pacific, Discoveries in Africa and Latin America Have a Higher Reserves Potential

Global demand for additional oil and gas resources has led to several offshore discoveries in the recent past. Most of these discoveries have been in the less explored offshore areas of the globe. Currently, Latin America and Africa have become attractive investment destinations globally for oil and gas due to major offshore discoveries with a huge amount of reserves. The offshore oil and gas discoveries made in these regions have abundant proved reserves with a high production potential.

For further details, please click or add the below link to your browser:

http://www.globaldata.com/reportstore/Report.aspx?ID=Offshore-Oil-and-Gas-Discoveries--Latin-America-and-Africa-Emerging-As-Major-Investment-Destinations&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities

During the period 2007-2010, 82 offshore oil and gas discoveries have been made in Africa and 111 in Latin America. Asia-Pacific and Europe occupy the top positions in the number of offshore oil and gas discoveries made during this period but Latin America and Africa have seen giant offshore oil and gas discoveries that have much bigger reserves. Moreover, the number of discoveries


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in Latin America and Africa has remained more or less consistent, showing considerable increase over the past years. Giant offshore discoveries like Tupi, Libra, Perla and Jubilee are in Latin America and Africa.

Increasing Success in Offshore Exploration is Leading to an Increase in Offshore Oil and Gas Production in Latin America

Latin America will need huge investments to finance 3% to 4% growth in its oil and gas production every year. Due to unavailability of sufficient capital to finance the development of these indigenous oil and gas reserves, Latin America is forced to depend on foreign direct investment. Limited capital availability in the local market is forcing oil and gas rich countries in the region to seek investments from foreign countries. The growth in the exploration and production of Latin America is driven by growing investments in the region in the last few years. Latin America’s total offshore capital expenditure (capex) is expected to increase at a CAGR of 25.6% during the period 2005-2014.

Nationalization of Oil and Gas Resources in Latin America is Leading to Dominance of NOCs

With Latin America witnessing a significant growth in its hydrocarbon resources, the fear of encroachment on its oil and gas assets by foreign companies has led to resource nationalization in the region.


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Latin American countries are making efforts to keep the domestic oil companies in charge of major shares of their oil and gas resources.

The fiscal terms for international investors in Latin America are not very favorable in most of the major resource holding countries like Venezuela, Bolivia and Ecuador. The terms strengthen the NOCs by making them the sole operators of hydrocarbon resources in certain countries but hinder investments from international majors.

NOCs dominate the upstream sector in Brazil and Venezuela – these two countries together account for more than 50% of the total oil and gas reserves in Latin America and also account for over 50% of the oil production in each country. The NOCs in Colombia and Ecuador also account for more than 50% of the total oil produced in these countries.

The reserves and production of the NOCs in Latin America are increasing on account of major exploration activities being carried out by these companies. NOCs continue to dominate the upstream sector in Latin America with support from their national governments.


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For further details, please click or add the below link to your browser:

http://www.globaldata.com/reportstore/Report.aspx?ID=Offshore-Oil-and-Gas-Discoveries--Latin-America-and-Africa-Emerging-As-Major-Investment-Destinations&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities

Government Support and Favorable Policies in Africa Have Played a Vital Role in Increasing Investments in the Oil and Gas Upstream Sector

Latin American countries have pursued policies that have discouraged foreign investments during favorable conditions of high crude oil prices and market premiums for access to hydrocarbon resources. In contrast, African countries like Angola, Libya and Ghana took advantage of the favorable climate by attracting foreign investments and increasing their production capacities. The African oil and gas upstream sector consists of non-stringent policies compared to Latin America, especially in the case of state control over natural resources. Africa provides a favorable investment environment to International Oil Companies (IOCs) to explore and produce in the region.

To develop the oil and gas sector and to attract investments in the African region, the governments of African countries are encouraging IOCs to come and invest in the region. Between 2007 and mid-2010, different companies have invested over


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$12 billion in acquiring assets in the region. The offshore oil and gas industry also accounts for a major share of the GDP of the African nations. In Nigeria alone, Shell’s offshore subsidiary, SNEPCo, has paid almost $3 billion in tax and royalties to the Nigerian Government over the last five years.

Unlike Latin America, IOCs Dominate the Offshore Oil and Gas Segment in Africa

IOCs have increased their investments in exploration and production in Africa, generating substantial oil revenues for oil and gas producing countries in the region. Out of the 82 offshore discoveries in Africa during 2007-2010, 34 discoveries have been made by only four major IOCs - Total S.A, ExxonMobil Corporation, Chevron Corporation and BP Plc.

IOCs enjoy technological advantage over the African NOCs. Besides, most of the offshore potential areas of Africa are owned by IOCs, which makes them the largest oil and gas producers in Africa. The investments that the IOCs are making in upcoming areas like Africa also helps them to keep a diverse supply base for their developed markets.


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For further details, please click or add the below link to your browser:

http://www.globaldata.com/reportstore/Report.aspx?ID=Offshore-Oil-and-Gas-Discoveries--Latin-America-and-Africa-Emerging-As-Major-Investment-Destinations&ReportType=Industry_Report&coreindustry=Industry_Report&Title=Energy_and_Utilities

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