Britain’s new discovery could greatly alter the dynamics of an already cloudy oil industry, particularly for Africa’s big producers.
British oil exploration firm, U.K. Oil & Gas Investments, has revealed that its latest discovery at an onshore site in south England, near Gatwick airport, could hold a whooping 100 billion barrels of oil reserves.
“Based on what we’ve found here, we’re looking at between 50 and 100 billion barrels of oil in place in the ground,” said Steven Sanderson, the oil explorer’s chief executive. “We believe we can recover between 5 per cent and 15 per cent of the oil in the ground, which by 2030 could mean that we produce 10 per cent to 30 per cent of the UK’s oil demand from within the Weald area.”
This would elevate the UK to the elite group of top oil producing nations, making it the seventh biggest producer.
Should the estimated oil reserves prove accurate, it will also trump the combined reserves of Africa’s top producing nations – Nigeria, Libya, Angola. Nigeria holds a reserve of 37 billion barrels, while Libya and Angola are prospected to have 48 billion and 10 billion barrels of oil beneath their soil. This means Africa’s top three producers hold a combined 95 billion barrels of oil reserves.
Aside from the US, China and India, the UK has been actively involved in oil trade with Africa. Royal Dutch Shell, a petroleum company formed by a merger of Royal Dutch Petroleum and UK-based Shell Transport & Trading, is actively involved in exploration across Africa, particularly in Nigeria where it is the country’s biggest producing firm. London-headquartered Tullow Oil is also deeply involved in prospects across East Africa, the continent’s newest oil field. However, the interest in Africa’s oil may quickly wane off on the back of this finding.
The US has already offered a cue to Africa. In 2014, America reduced its import of Nigerian oil to focus more on developing domestic shale gas. In July last year, the US Department of Energy confirmed it did not buy a single drop of Nigerian crude for the first since both countries began trading oil in 1973. This forced Alison Madueke, Nigeria’s Petroleum Minister, to say at the time that Shale Gas was one of the most serious threats for African producers. Nigeria quickly found respite with Asian buyers like India, but Shale exploration was already brewing a second challenge, one that Nigeria and its African oil producing colleagues are yet to recover from.
Since the U.S., the world’s biggest spenders on oil, ramped up Shale gas production in 2014, they have cut down on imports. This move ushered in a period of global oversupply, and subsequently a significant decrease in price. From July 2014, oil prices dropped more than 60 percent to $54, from a high of $115 just before the crash. The impact of this was seen in the 2015 downward revision of budgets by African countries heavily dependent on revenue from oil sales, particularly Nigeria and Angola.
With the UK expected to flood the market with more oil, and Iran, a country with over 157 billion barrels of oil reserves, preparing to see its ban on oil sale lifted by the UN, African producers, all whom average a net production of 2.5 million barrels per day, will have to contend with two challenges: a depleted oil revenue coffer and customer losses.