Shell's alternative west African foray

According to the 2014 BP Statistical Energy Survey, Equatorial Guinea and Gabon had combined proven oil and gas reserves of 3.7bn barrels. That's roughly equivalent to the reserve base of Egypt, or around 700m in excess of the United Kingdom's. It's hardly noteworthy by global standards - the Saudis lay claim to 266bn barrels - but prospects for the oil industry in the two west African nations are on the up.

Last year, analysts at BNP Paribas ranked Gabon among the top three African countries where huge oil and gas deposits are likely to be discovered, while Equatorial Guinea has been a target for explorers ever since US major ExxonMobil discovered oil and gas there in 1994.

And two London-listed drillers provided promising updates earlier this week. Drill work at Royal Dutch Shell's (RDSB) Leopard-1 exploration well, offshore Gabon, has turned up a huge 200-metre gas column in a pre-salt geological formation. Shell and its partner in the well, Chinese state-owned giant Cnooc, are now planning an appraisal programme to determine the resource volumes. The Anglo-Dutch major's success came as news emerged that it is moving ahead with deals to sell off the bulk of its Nigerian assets.

Meanwhile, after some pretty discouraging drill results in the region this year, Ophir Energy (OPHR) revealed that it has successfully flowed gas at the Fortuna-2 well off Equatorial Guinea. A drill stem test achieved a flow rate of 60m cubic feet a day, which effectively improved the economics of Ophir's LNG development project there. We reiterate our respective buy calls for Ophir and Shell.