EXXON Mobil, the world's biggest listed oil and gas company which last month signed an agreement to start offshore exploration activities on the east coast of South Africa, is just one of the many major and sub-major energy companies that are increasing their footprint off the coast of the continent.
Under the agreement, Exxon Mobil will operate in the Tugela South Exploration Right, which covers about 2.8-million acres off the coast of Durban. According to exxonmobil.com, the company's exploration wing also has the right to buy 75% interests in future exploration rights in three offshore areas, subject to South African government approval.
Oil exploration is also big news up the west coast of Africa.
Global experts are betting there are about 75-billion barrels of untapped oil worth about $7.5-trillion in this geological zone, a possibility that would have significant implications for Namibia - and rest of the SADC region - within the next four to five years.
Stakeholders, potential investors and experts gathered in Windhoek, Namibia, early last month to discuss the opportunities and ramifications of the exploration plans, which involve drilling wells deep into the sea bed.
The "pre-salt" layer, believed to contain oil, is part of a geological formation that corresponds to oil-rich basins off the coast of Brazil. The thesis is that west and southwest Africa were once conjoined with Brazil. In 2007, the discovery of the "pre-salt" Tupi oil field (now the Lula oil field) 250km off the coast of Rio de Janeiro was the biggest offshore find in the Americas in 30 years.
Pre-salt exists up to 6km below the sea bed under layers of rock and salt and is vastly expensive to extract.
Stephan Kornelius, senior executive of management consulting at Accenture, put the figure at about $150-million to drill a single well. However, if the prospects are as vast as these energy companies believe, the break-even point will come relatively quickly.
Stuart Joyner, head of oil and gas at Investec, said Brazil's pre-salt oil - the nearest geological analogy to the west Africa formation - is some of the lowest cost of any off-shore oil in the world.
The hype about the west African pre-salt oil was dealt a serious blow early last year when British energy explorer Chariot Oil & Gas failed to make a commercial find in either of its two exploration wells at its Tapir South or Nimrod prospects off the Namibian coast, costing the company 85% of its market value in addition to the drilling expense. But so confident is management about the existence of oil that two more exploratory wells are planned for this year.
In addition to Chariot, many other independent and national energy companies are pouring billions of dollars into seismic and other forms of research into the region. Some of these include BP, Petrobras, HRT Participacoes em Petroleo SA, Galp Energia and Chevron.
Brazilian company HRT will be sinking four exploratory wells off the Namibian coast starting next month, two in the Walvis Basin and two in the Orange Basin.
CEO Marcio Mello is anticipating more than a billion barrels a well. The water depth of the sea bed at the well sites ranges from 150m to 1600m and the depth of the wells will be between 3km to 5.5km.
In November, HRT announced that new research using top-quality 3D-seismic equipment had shown an increase of 6.6% on previous oil estimates in the company's Namibian prospects. The company is now looking at about 5.1billion barrels of crude oil and condensate, and 2.3-billion barrels of oil equivalent associated and non-associated gas.
One of the biggest concerns for the energy companies, according to Accenture's Mr Kornelius, is that the wells will produce more gas than oil. This would result in a "major derailment" of drilling operations, he said.
Mr Kornelius said that while gas might become more commercialised in the Southern Africa region in the future, there is little demand at the moment and the finds would have to be astronomically big to make them financially viable.
The US, the world's greatest consumer of gas, has its own source in the Atlantic Basin.
Europe sources its gas from North Africa, and in terms of distance, east Africa is more competitive for China than west Africa would be.
In contrast, the oil market is liquid, there is high demand and it can be loaded onto tankers at the well head and taken directly to market.
For the countries concerned, oil finds of the size estimated offer an opportunity for phenomenal amounts of cheap money. Generally there is zero cash outlay from the country off whose coast the oil is extracted, and funds flow in through taxes or production- sharing agreements.
But Nigeria and Angola, oil-rich countries where the vast majority live in grinding poverty, have not inspired a great deal of confidence that the finds will benefit any more than a select few.
* This article was first published in Sunday Times: Business Times