Rising demand for power underlines need to further develop Cote d'Ivoire's energy sector

With growing demand for electricity both at home and abroad, Côte d’Ivoire’s energy network is in need of diversification and further initiatives to expand power production. Capacity has reached just under 2000 MW, but the country is aiming for 4000 MW by 2020 and more than 6000 MW by 2030, to keep up with domestic economic growth and energy export commitments. With the Council of Ministers adopting six decrees aimed at liberalising the electricity sector in October 2016, the government is counting on private investment to reach these goals. It is also pushing for greater exploration and production of oil and gas. The government has set a bold oil production target and is looking to tackle a sizeable gas deficit.

History Of Production

Côte d’Ivoire’s oil production has varied significantly over the past two decades as existing fields have become depleted, closed for maintenance or development works, and as new discoveries have come on-line. The US Energy Information Administration (EIA) data shows a jump in production of crude oil between 2001 and 2006 from 11,000 barrels per day (bpd) to 62,000 bpd. Production then fluctuated between 62,000 bpd and 58,000 bpd from 2006 to 2009. At the end of December 2015 it stood at around 33,000 bpd, up 56% on the previous December.

Gas production, on the other hand, has oscillated between growth spurts and stagnation since 1995. According to the EIA it increased from 1.4bn cu feet in 1995 to 48bn cu feet in 2000. It then stagnated at around 46bn cu feet between 2000 and 2006. Annual production reached 57bn cu feet in 2009, fell to 53bn cu feet in 2011 and then jumped to 63bn cu feet in 2013, at which point it stagnated again.

Government figures differ slightly from the EIA data, putting oil production at 5.2m barrels, or 19,109 bpd, between September 2013 and 2014, down 28% year-on-year (y-o-y). According to the government, stoppages at the Baobab oil field in the first quarter of 2014 and depletion of the Espoir, Lion and Panther fields were responsible for this drop. However, oil production reached 7m barrels, or 26,000 bpd, in September 2015, a 36% increase y-o-y due to new wells starting production at the Espoir, Baobab and Marlin fields.

Gas production stood at 56.5m British thermal units (Btu) in September 2014, for a daily production rate of 154,948 Btu, up 1.7% y-o-y. According to the government, improved performance at oil and gas company Foxtrot International explains this growth. In September 2015 production rose to 58m Btu, up 2.8% y-o-y due to a production increase at the Espoir field.

Despite the recent growth in production, state revenues from hydrocarbons have been declining. Oil and gas production combined generated $165.3bn in the 12 months to September 2014, a y-o-y drop of 55%. Between September 2014 and September 2015 the state received $124.4bn in hydrocarbons revenues, a further y-o-y fall of 36%. In 2013 weaker performance of various oil and gas fields was responsible for lower income, but in 2014 the primary reason was a significant drop in international prices.

A continued rise in oil and gas output remains a key government goal. The authorities seek to increase oil production to 200,000 bpd by 2020. Recent oil finds, coupled with new exploration initiatives and investments, including a push for deep- and ultra-deep-sea efforts, which will be supported by the government and in particular a revised legal framework, are encouraging in this sense (see analysis).

Oilfields

According to the EIA, as of 2015 Côte d’Ivoire had 100m barrels of proven crude oil reserves and 1trn cu feet of proven natural gas reserves. As of mid-2016, 61 oil blocks had been identified, 29 of which were already attributed. Four are in production, two are under evaluation and the rest are still being explored.

The country’s two biggest oilfields, Baobab and Espoir, are operated by independent oil firm Canadian Natural Resources (CNR). Baobab is 25 km off the coast in block CI-40, with water depths ranging from 900-1300 metres. Recoverable reserves are estimated at 200m barrels. CNR operates the block, with a 57.61% stake, while Sweden’s Svenska Petroleum Exploration and national oil company Société Nationale d’Opérations Pétrolières de la Côte d’Ivoire (Petroci) hold 27.39% and 15%, respectively. Production was initiated at the field in 2005, and in 2011 it produced 7.2m barrels at a rate of 19,700 bpd.

The Espoir field lies 19 km south of Jacqueville and 60 km south-west of Abidjan in block CI-26, with water depths ranging from 100-600 metres. The field came on-stream in 2002 and has estimated recoverable reserves of 93m barrels of oil. CNR has a 58.7% interest in the project, Petroci 20% and Tullow Oil 21.3%. Production began in 2006, and the field has a 20-year life expectancy, with a peak oil production rate of more than 35,000 bpd. In 2011 it produced 22,600 bpd.

Active since 1995, the Lion field is 13 km off the coast and 100 km south-west of Abidjan in block CI-11, with water depths ranging from 50-200 metres. Petroci operates the field with the largest stake (68.1%), while SK Energy and the International Finance Corporation hold 13% and 18.9%, respectively. Petroci acquired a 48% stake from Nigeria’s Afren in August 2013, making it the company’s first operational upstream asset. In 2013 the field yielded 800 bpd.

Foxtrot International, which is part-owned by French industrial group Bouygues, has been operating the Foxtrot and Mahi fields in block CI-27 since 1999, with a 27.5% stake. In 2015, and prior to a new well commencing production, average production of oil and condensates in block CI-27 stood at below 1000 bpd.

Oslo-listed gas and oil investment company RAK Petroleum, which holds a 33.33% stake in Foxtrot International, announced the first oil production from a second platform in block CI-27 in October 2015. The Marlin-B1ST well, the first in an initial five-well drilling campaign to develop two previously discovered fields on the block, registered an average of 1100 bpd. Installed in April 2015, this second platform is part of a four-year, $1bn expansion programme, which aims to start production at the Marlin oil and gas field and the Manta gas field. The platform is expected to double block CI-27’s hydrocarbons treatment capacity, and increase the supply and reliability of gas deliveries.

Gas Fields

Côte d’Ivoire has gas fields in blocks CI-27, CI-26, CI-40 and CI-11. Production in the Foxtrot and Mahi fields, operated by Foxtrot International in block CI-27, averaged 142.6m cu feet per day in 2014, or around 70% of the country’s total. Up to the end of the third quarter of 2015 production in block CI-27 averaged 145m cu feet per day. An 80-km pipeline transports gas onshore to Vridi. From there it is sent to the Vridi and Compagnie Ivoirienne de Production d’Électricité (CIPREL) thermal power plants. Foxtrot International also sells gas to the country’s refinery, Société Ivoirienne de Raffinage (SIR), and Petroci, the latter of which then sells it on to industrial units.

The Espoir field, 60 km south-west of Abidjan and operated by CNR in block CI-26, produces 35m cu feet of gas per day. Production relies on the Espoir Ivoirien floating production, storage and offloading (FPSO) vessel, which has a 45,000-bpd oil production capacity and a gas compression capacity of 80m cu feet per day. Oil is exported by shuttle tankers and gas is sent to shore via a 19-km pipeline, feeding power generation in Abidjan. In 2016 CNR secured an extension for the ship’s original lease from 2017 to 2022.

Located about 25 km off the coast, the Baobab field, which is also operated by CNR in block CI-40, produces gas for power generation on board the Baobab Ivoirien FPSO vessel, which has a processing capacity of 70,000 bpd of oil and 75m cu feet of natural gas per day. Excess gas is sent to shore via the Espoir Ivoirien.

At the time Petroci acquired the Panther gas field in block C-11 in August 2013, the field yielded 20m cu feet of gas per day, compared to 14m cu feet of gas per day in 2011. The field has been active since 1995. Rich gas is supplied to the Lion liquefied petroleum gas plant, and after gasoline and butane have been eliminated, dry gas is sent onshore to the CIPREL and Azito power plants, and SIR.

Prospective Production

The third development stages at Baobab and Espoir, along with ongoing investment in fields including Marlin and Manta, could help boost the country’s hydrocarbons production. Another field is also expected to come on-line shortly. Vioco Petroleum (formerly Rialto Energy) operates the Gazelle field, 30 km south-east of Abidjan in block CI-202, holding an 87% stake, with the remaining 13% held by Petroci. Production is expected in 2016, and once it is on-line Gazelle will feed directly into a dual-fuelled independent power plant to be constructed by Société des Energies de Côte d’Ivoire – which is responsible for the planning and execution of transmission and distribution infrastructure investments – close to the field’s onshore gas-processing facilities.

Refining

SIR is in charge of refining and distribution of oil products in Côte d’Ivoire. The company commenced operations in August 1965 with an annual refining capacity of 700,000 tonnes. Today refining capacity stands at 3.8m tonnes. SIR processes light crude oil from Côte d’Ivoire, Nigeria and Cameroon, and heavy crude oil from Côte d’Ivoire and Nigeria, and produces a variety of end products, including butane, gasoline, kerosene, diesel, distillate fuel and fuel. In September 2014 SIR’s year-to-date sales totalled CFA1.65trn (€2.5bn), up 52% y-o-y.

Despite higher revenues, SIR is experiencing financial difficulties, having reportedly accumulated debts totalling CFA117bn (€175.5m) in 2014, in addition to the CFA65bn (€97.5m) in losses registered that year, which may impact the company’s ability to pursue its development plans in the short term. According to the government, refining demand is growing at an average rate of 2.5% per year. This takes into account both national and regional demand.

Oil Distribution

Petroci, the Oil Professionals Group (Groupement des Professionnels du Pétrole, GPP), Côte d’Ivoire Oil Professionals Association (Association Professionnelle des Pétroliers de Côte d’Ivoire, APCI) and some independents are responsible for marketing oil products in Côte d’Ivoire. GPP integrates some of the largest oil marketing firms in the country, including Total, Vivo Energy, Pétro Ivoire, Corlay and Libya Oil, whereas APCI is an association of small national oil marketing companies. According to APCI, GPP has a total of 507 service stations across the country, of which 210 are in Abidjan. APCI has 148, with 46 in Abidjan. Independents have a total of 30 stations, with seven in Abidjan, while Petroci, which at time of press was in talks with Puma Energy to sell its service station network, had 29, 16 of which are in Abidjan.

According to Ben Hassan Ouattara, managing director of Vivo Energy Côte d’Ivoire, “Ivorian oil marketing is going through a double dynamic, involving market growth and restructuring at the same time.” Sector restructuring is evident from the ongoing sale of a number of private or independent oil marketer service stations and, more generally, a falling market share for smaller firms. “APCI’s market share has declined from 25% to 12% since its creation in 2000,” Hilaire Sié, secretary-general of APCI, told OBG. Many APCI members have been forced to sell their assets in recent years to pay off debts accumulated during the crisis.

Moreover, while it is true that current economic growth – GDP growth reached 8.4% in 2015 and is projected at 8.5% in 2016, according to the World Bank – offers business opportunities particularly in dynamic sectors like construction, it is often difficult for smaller firms to secure them, in part due to a lack of financial resources. “Sector restructuring is likely to continue over the next three or four years,” Ben Hassan told OBG. Despite the slowdown in activity in the first quarter of 2016, Ben Hassan expected sector growth to pick up in the second quarter of 2017 as the authorities move forward with implementation of the 2016-20 National Development Plan (see Economy chapter).

Domestic Energy

Given growing domestic and regional energy needs, Côte d’Ivoire is estimated to have a gas deficit of around 6trn cu feet for the 2014-30 period, according to the Ministry of Petroleum and Energy. To meet the rising demand, the country is making efforts to develop its gas reserves and is turning to alternative sources of energy (see analysis). “Since 1993, Côte d’Ivoire has pushed to move away from wood as a source of household energy, and replace it with butane gas. Today, the market is worth about CFA200bn ($300,000) and is still growing,” Philbert Sinté Séka, chairman of Saphyr, told OBG.

Breaking up the long-standing monopoly of Compagnie Ivoirienne d’Électricité (CIE) by introducing competition is also expected to help address shortfalls in electricity supply. In October 2015 the Council of Ministers adopted six decrees aimed at liberalising and opening up activities from production to supply. The measures include repealing an earlier electricity decree, setting conditions for independent producers to be able to sell to the grid, dissolving the regulator and replacing it with a new one, a review of current power prices, and laying down guidelines on power marketing and distribution. Gas currently accounts for the bulk of the country’s energy mix. However, in line with government targets the share of gas is expected to fall by 2020. According to the latest government figures, as of September 2015 Côte d’Ivoire generated 6503 GWh, a y-o-y increase of 7%. Some 85% came from gas-fired thermal power plants and 15% from hydroelectric plants. In September 2014 domestic demand for electricity reached 4111 GWh, up 12% y-o-y and roughly in line with annual increases of 10% in recent years. Electricity exports were up 2% y-o-y, amounting to 632 GWh and generating CFA39.5bn (€59.3m), with increases in exports to Mali, Togo and Benin, as well as declines in exports to Ghana and Burkina Faso. Energy exports totalled 828 GWh in 2014.

Industrial sector growth – including activities in gold mining, manufacturing and food processing – is set to increase domestic demand for power. The mining sector in particular is expected to drive demand, as new mining projects come on-line over the next five years (see Industry & Mining chapter).

A government plan to liberalise the electricity and water markets should help reduce electricity prices, as supply expands and competition in the generating and distribution segments increases. Michel Sodjiedo Mian, chairman and CEO of local mining firm TD Continental, told OBG, “New energy projects developed with the help of the state are required to keep their prices under CFA70 [€0.11] per KW, which is not encouraging to private investors. For renewable energy projects to be more attractive, incentive measures need a boost.”

According to Petroci, the industrial sector will require 850m cu feet of natural gas per day by 2023, which is, 17 times higher than the estimated current demand. While planned investments in power production may help meet increasing demand for energy at home and abroad, it is also important to ensure electricity effectively reaches the population. The country has a lingering gap between electricity access – population living in electrified municipalities as a share of total population, 56% – and coverage – electrified municipalities as a share of total municipalities, 80%.

To help close the gap, the government has deployed a number of major initiatives that require private investment and aim to enhance access and coverage across the country, especially in rural areas. “Domestic demand for industrial machinery and equipment — like electrical products — has been steadily soaring in recent years, driven by the expansion of household consumption, increased electrification in rural areas, and the boom in manufacturing activity,” Hassan Ghandour, CEO of Sogelux, an Ivorian electronic firm, told OBG.

Thermal Power

The return to stability, investment and economic growth in Côte d’Ivoire has also led to a need for greater power production capacity. According to the country’s utility company, CIE, which has been responsible for electricity generation, transport, distribution, marketing and trade since the sector’s privatisation in 1990, Côte d’Ivoire had installed capacity of 1632 MW in 2014, the majority of which was thermal. The state-owned Vridi 1 plant generated 100 MW, while independent power producer (IPP) CIPREL, majority owned by French utility group Eranove, had 432 MW. IPP Azito Energy, operated by the UK’s Globaleq, generated approximately 300 MW, and British IPP Aggreko produced 200 MW. Backed by a favourable regulatory framework, various actors are investing in expansion works or new power plants. In this context, interest in combined-cycle power plants remains high, in light of the gas deficit. Following a CFA223bn (€334.5m) investment, CIPREL concluded the fourth and final phase of planned developments in February 2016, adding a combined-cycle feature to its power plant and increasing capacity from 432 MW to 543 MW in 2014. Investing $392m, in June 2015 Azito inaugurated the third stage of its combined-cycle plant, reaching 430-MW capacity, up from 300 MW in 2014. As for Aggreko, the company extended the contract at its gas-fired plant for three years in January 2015 and is currently working to add approximately 100 MW to capacity. Other projects are in the pipeline, such as a 372-MW combined-cycle power station in Songon. The US energy investment firm, ContourGlobal, signed a build-operate-transfer concession agreement in June 2012 for the construction of a 330-MW combined-cycle plant in Abatta. The CFA300bn (€450m) project was set to be ready by 2016. However, as of October 2016 construction had yet to start.

Recent investments have expanded thermal power from 1028 MW in 2014 to 1173 MW. Overall, this brings Côte d’Ivoire’s current installed capacity to 1777 MW, 604 MW of which is hydro-based. The government’s goal is to boost total capacity to more than 4000 MW by 2020 and 6000 MW by 2030.

Alternative Sources

Côte d’Ivoire is also looking to boost the share of renewables in its energy mix in response to rising energy needs. The goal is to have hydro and renewables comprise 23% and 11%, respectively, by 2020, and 26% and 16% by 2030. According to the Electricity Generation and Transmission Master Plan, renewables should account for 34% of the mix in 2020 and 42% in 2030. While renewable energy production at present is mostly delivered by hydroelectric dams, other sources also play a role in the government’s energy diversification and power capacity expansion efforts, especially solar and biomass. However, additional clarity concerning their deployment and integration into the energy network is required (see analysis).

As of December 2014 Côte d’Ivoire had six state-run hydro power plants: Ayamé 1 (20 MW), Ayamé 2 (30 MW), Kossou (174 MW), Taabo (210 MW), Buyo (165 MW) and Faye (5 MW). Ongoing projects are set to contribute to the pursuit of the diversification and capacity expansion targets. In July 2015 Africa Finance Corporation signed an agreement with Ivoire Hydro Energy to build the country’s first private hydropower plant in Singrobo. The three-year project will cost CFA60bn (€182.9m) and add 44 MW to installed capacity.

In February 2014 Morocco’s Platinum Power also signed an agreement to build three hydroelectric dams over the Bafing and Sassandra rivers in Gao, Koulikoro and Tayaboui, totalling 300 MW, at a total cost of CFA450bn (€675m). “Construction work is expected to start before June 2016, with delivery in 2021 at the latest,” Omar Belmamoun, president of Platinum Power, told Le Monde Afrique. Belmamoun is hoping for a 10-12% annual return on this public-private partnership (PPP) project. The country’s largest hydro-power plant is under construction in Soubré at a cost of CFA286bn (€429m). Once completed, it should add 275 MW to domestic installed capacity. Scheduled for delivery in 2018, the plant could be operational in 2017 thanks to speedy progress (see Construction chapter).

The government has announced the construction of seven dams before the end of 2019, with three over the Sassandra river in the south-west, totalling 548 MW of capacity, two over the Komoé river in the south-east, for a total 200 MW, and an additional two in the north-east, adding 206 MW of capacity.

Gas Deficit

Although in the medium to long term alternative energy sources can help meet growing demand for electricity at home and abroad, in the short term authorities are still seeking a solution to the country’s gas deficit. The government’s strategy aims at capping third-party market needs, including the industrial sector and SIR, as well as using relatively expensive heavy vacuum oil for power generation.

In the short to medium term, the government is also intent on accelerating the exploration of marginal gas fields, improving exploration activities and implementing a sustainable gas supply project, comprising the development of an eastern gas pipeline and the installation of a floating storage regasification unit (FSRU). The National Steering Committee for Public-Private Partnerships accordingly includes this gas supply initiative in its list of PPP priority projects.

The CFA110bn (€165m) project aims at ensuring liquefied natural gas (LNG) supply as a means of securing electricity generation needs and reducing dependence on the liquid fuel. To this end, it foresees the installation of an FSRU, with a storage capacity of at least 170,000 cu metres, 12 km off the coast of Grand-Bassam in the south-east of the country; the construction of a new onshore and offshore 42-km-long pipeline, connecting Grand-Bassam and Vridi; and LNG imports. The PPP project will rely fully on private investment, with a build-operate-transfer framework.

In 2015, StarEnergie 2073 announced plans for a 372-MW combined-cycle power station, in Songon, near Jacqueville. The project will include the construction of an FSRU, feeding LNG to the power plant. Preparatory work on the plant was scheduled to start in 2016, with a financial close on the project before the end of the year. However, issues with financing in August 2016 led to a postponement of the project launch date, although China Energy Engineering Corporation was eventually selected to carry out the build.

Exports

Côte d’Ivoire is a member of the West African Power Pool (WAPP), an ECOWAS institution designed to ensure regional power system integration and promote the creation of a regional electricity market. As such, the country exports electricity to the region, having recently increased exports to neighbours including Benin, Togo and Burkina Faso.

With the development of the WAPP Côte d’Ivoire-Liberia-Sierra Leone-Guinea Interconnection Project, this electricity trade network is expected to continue grow, creating room for the signing of additional electricity exchange agreements in the region.

Downstream

The post-production phase also stands to gain from the country’s energy sector investments. “The development of the downstream sector offers a real opportunity in terms of job creation, especially in rural areas. Each gas station can create around 10 jobs and we may see more of them sprout up across the country over the next few years,” Ben Hassan told OBG. “Today, some of the companies operating in the downstream sector are building next generation gas stations, made out of prefabricated blocs and which use solar panels as an energy source. Their advantage is that they can also be built in off-the-grid locations.”

Additional trickle-down effects can be seen in other industries in regards to further international cooperation. Dalil Paraiso, CEO of Schneider Electric CI, told OBG, “Given the complexity of the expertise needed in some fields related to energy and their recent evolution, there are very few local workers trained as energy specialists. Therefore, some jobs require foreign workers from more mature countries. Given the lack of regulation with regards to local content, workforce and knowledge transfer, foreign companies do not necessarily invest in capacity building. As the country expands its energy sector, the West African region would benefit from investing in education.”

Outlook

The government’s push for oil exploration and production, coupled with recent discoveries, is attracting renewed investment into Côte d’Ivoire’s energy sector and is likely to contribute to growth in oil production on many levels. The sizeable domestic gas deficit is also stimulating investment in gas exploration and transportation infrastructure, particularly in LNG.

 

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The Report: Côte d'Ivoire 2017

Energy chapter from The Report: Côte d'Ivoire 2017