Galp Energia plans to expand frontier exploration in Africa amid strong demand for oil

Portuguese integrated energy company Galp Energia is planning to expand frontier exploration in Africa amid continuing strong demand for fossil fuels in Europe, according to Executive Vice President for Upstream Nuno Bastos.

“The world has changed,” Bastos told media representatives in Lisbon on October 21, commenting on how the Russia-Ukraine war has heightened global concerns about energy security. “The energy transition is happening, but it will take more time than we thought. Europe still needs fossil fuels,” he stated as reported by Bloomberg.

Last year, the Lisbon-listed company carried out an exploration and appraisal campaign offshore Namibia in the highly prospective Orange Basin, where Galp holds an 80% interest in PEL 83 alongside NAMCOR (10%) and Custos Energy (10%). Following multiple light-oil and gas-condensate discoveries in the Mopane field, Galp raised its contingent resource estimate by about 700mn barrels of oil equivalent (boe), to roughly 2.8bn boe.

While the company continues to assess the commercial potential of these finds, it is also advancing negotiations with several parties to sell half of its stake in PEL83, as it plans to move from “discovery to production as quickly as possible,” according to Bastos. “We want to have someone on board by the end of the year,” he was cited by Bloomberg as saying

This year, Galp expanded its exploration portfolio in São Tomé and Príncipe, an island country off the west coast of Africa. In September, the company announced a farm-in agreement with KE STP (a Shell affiliate) for the acquisition of a 27.5% stake in Block 4, forming a joint venture with Shell (30%, operator), Brazil’s Petrobras (27.5%) and São Tomé’s national oil company ANP-STP (15%).

Bastos told reporters that Galp would continue seeking opportunities for growth as demand for oil and gas remained stronger than expected. “Success rates in exploration are low - typically 10% to 20% if we’re optimistic - so we must pursue multiple licenses,” he explained.

According to Galp, the company’s upstream portfolio currently comprises 17 projects in various phases, from exploration to production. Key assets include a 20% stake in the Bacalhau field, “one of the largest oil and natural gas discoveries in recent decades,” in the pre-salt Santos Basin in Brazil.

Last week, Galp and partners - Equinor (operator), ExxonMobil and Pré-sal Petróleo S.A. (PPSA) - announced the start of production from the Bacalhau FPSO, one of the largest units operating in the world, with a production capacity of 220,000 barrels per day (bpd).

According to Bastos, Bacalhau will allow Galp to increase its production by about 40% and may generate some $400mn a year in free cash flow. He sees Brazil, Namibia, and São Tomé and Príncipe as a “balanced portfolio,” with Bacalhau in production, Namibia under appraisal, and São Tomé offering long-term growth.

As Galp’s upstream division generated 63% of group earnings last year, Bastos pointed out that cash flow from Bacalhau and future projects would fund investments in renewables, biofuels, and hydrogen.

“We’re not addicted to oil - we’re experts in developing complex energy projects,” he said, as quoted by Bloomberg. “We’ll keep doing what we do well while investing in the next generation of energy.”