Sub-Saharan Africa has for decades been a cornerstone of the Majors' portfolios but that is changing as they position themselves for the energy transition. This means cutting back on oil investments and slimming down upstream portfolios to meet bold emissions targets. Traditional deepwater oil projects have given way to gas but that generates lower returns. Sub-Saharan Africa now makes up just 6% of the Majors' value globally and Big Oil in the region looks ripe for portfolio rationalisation.
Mature low-value assets are obvious candidates for disposal but to make a real difference, bigger sales will be needed. LNG mega-projects and brownfield developments will dominate in the near-term, whereas the Major's other producing assets are mature, with limited growth options. Only those with high cash margins, substantial upsides, and rapid returns will be retained.
Emissions intensity will also be under the spotlight. Legacy issues like flaring, maturity and long export routes push many fields above the Majors' global emissions averages. They will need to make some tough decisions about which assets to divest. For example, Equinor could cut its emissions intensity by 9% if it were to exit Angola. Non-operated fields like these will come under increased scrutiny as company strategies diverge.
Environmental considerations aside, we're still in a lower-for-longer world and all companies are focused on costs. On opex in particular, Sub-Saharan Africa is in trouble. Divesting the highest-cost assets would be the quickest way to cut back and companies may choose to spend their money elsewhere.
But, if the Majors do decide to divest rather than invest, buyers need to be found. The pool of potential buyers has shrunk over the past 10 years but there are still interested parties and the possibility of new entrants too. We classify potential buyers into four key groups, SSA-focused, local companies, Asian and Middle East NOCs, and traders. Each has different strategies and strengths.
Governments in the region may be uncomfortable with the thought of their main investors leaving. The Majors' aren't about to exit Sub-Saharan Africa entirely but large parts of the region could be opened up to new operators and investors. The challenge will be finding companies that can step into the Majors' shoes and maintain, or even reverse declining production.
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