Comparative Analysis of Barite Production in Africa
Thesis
Successful oil and gas well drilling require hole stabilization. Barite comprised of barium sulphate is a common mineral chiefly used by oil and gas companies in their drilling operations. Barite is used in the drilling fluids to maintain the pressure in the wellbore and prevent intrusion of unwanted fluids from the formation being drilled. Most African countries hold significant reserves of barite but a number of challenges have limited local production resulting in poor quality which does not meet industrial standard and low quantity deficient of local demand. Mining of barite is left in the hands of unskilled and poorly resourced small-scale artisanal miners. The aims of this work are to identify and analyse barite producing countries in Africa, and compare the demand and supply as well as import and export of barite in Africa. This project seeks to study barite industry in selected African countries such as Morocco, Algeria, Nigeria and Angola to comparatively study their barite production capabilities and assess the economic viability of developing their barite mineral deposit to meet their local demand. The economic viability of barite production in Algeria, Nigeria and Morocco had been evaluated using a constant dollar and after-tax discounted cash flow methodology. The method of valuation uses oil and gas drilling well consumption forecasted for a ten-year period in the economic analysis. Profitability is calculated from revenue generated less cash outflow such as operating cost, capital cost, taxes applicable and reclamation cost. The net present value (NPV) and internal rate of return (IRR) were calculated for the selected countries. The study showed that apart from Morocco with high export potential, the other three countries rely on imported barite. Angola remains 100% import reliant; the import reliance for Algeria and Nigeria ranges between 1% to 74% and 27% to 94%, respectively. The project economic metrics are most sensitive to changes in barite price and less sensitive to operating and capital costs. Commercial barite productions for the four countries are economically viable since the IRR for Algeria, 44%, Nigeria, 33%, Morocco, 13%, and Angola, 47%, exceeded the minimum rate of return of 12% used for the assessment. Additionally, the NPV was $29, $13, $0.21 and $10 million for Algeria, Nigeria, Morocco and Angola, respectively. This research therefore recommends that further exploration and laboratory work should be done to help delineate the barite ore, estimate actual grade, specific gravity and tonnage and ascertain the mineralogy within Africa.