As global oil markets jitter with every new twist in the Iran conflict, major Western companies are pondering the lasting consequences of this crisis.
One thing is clear according to The Economist: alternatives to the abundant Middle Eastern hydrocarbons will be increasingly sought. And among the various options, the British weekly notes, the African continent is emerging as one of the most promising destinations, attracting capital and attention that just a few years ago seemed impossible.
The awakening of global interest
After the price crash in 2015, the supermajors drastically cut exploration budgets, particularly withdrawing from the Global South. The result was a significant drop in annual new discoveries.
Declining reserves forced companies to rethink strategies, but for a decade Africa remained on the sidelines of Western interests.
In recent years the landscape has changed. Major companies have started moving again, especially attracted by ExxonMobil’s huge discovery off Guyana, which pushed many to focus on eastern Latin America.
The Middle East, before the conflict, had also seen renewed interest from groups like TotalEnergies. However, Africa still remained in the background.
Africa returns to the spotlight
Today the situation is different. Even before the war in Iran, spending plans indicated a strong increase in upstream investments in Africa.
According to Wood Mackenzie, the seven largest Western oil companies will allocate $64 billion to the continent between 2026 and 2030, compared to $41 billion in the previous five years. The share of total upstream investments will rise from 10.6% to 13.5%.
With the Middle East in flames, this flow could accelerate even further.
The mass return of the supermajors
Justin Cochrane of S&P Global openly speaks of a “flooded return” of major companies to Africa.
Recent and significant examples include: in September TotalEnergies obtained four offshore exploration permits in Liberia; in October BP announced new activities off Gabon; in February Eni announced a discovery in Ivory Coast. ExxonMobil, Shell, and Equinor are expanding their presence in Angola.
The continent is decidedly back on the radar.
Promising geology and cutting-edge technology
The renewed interest is no coincidence. Africa offers enormous offshore potential: of 42 “high-impact” wells identified globally by Rystad, 17 are here, mostly in ultra-deep waters (over 1,500 meters).
These fields can guarantee extraordinary revenues but require complex investments.
This is where technological advances come into play: artificial intelligence has improved exploration activities, while FPSO (Floating Production Storage and Offloading) technologies for deepwater wells have become more efficient and faster.
Experiences gained in Latin America are now being directly transferred to Africa.
Favorable conditions
African governments, burned by revenue losses when the majors left ten years ago, are now offering more advantageous contractual terms to attract investments again.
Meanwhile, African national oil companies – which produce over half of the continent’s hydrocarbons – have focused on consolidating onshore production and optimizing mature assets, leaving offshore exploration to the major international players.
Thanks to this dynamic, African oil and gas production has remained substantially stable in recent years, around 10 million barrels of oil equivalent per day.
The African Energy Chamber forecasts an increase up to 13.6 million barrels by 2030.
If Western companies decide to shift further resources from the Middle East to Africa in response to the Iran conflict, growth could be even more marked.
Local instability and energy security
Certainly, Africa is not immune to instability. Yet alternatives to Middle Eastern hydrocarbons are limited.
At a time of great focus on energy security, many governments worldwide look favorably on diversifying supplies.
Moreover, domestic demand for oil and gas in Africa is set to grow significantly in the coming years, making the continent even more attractive.
And, as Cochrane of S&P Global reminds us, there is also the competitive instinct: “No one wants to miss out on the next Guyana.”
