“One cannot resist the lure of Africa.” as Rudyard Kipling once said.
Africa’s land area exceeds that of China, Europe, and the United States combined. Its 54 countries have a collective population of 1.2 billion and huge diversity in income levels, natural resources, infrastructure development and business styles. This fascinating continent with its fast-growing population and markets present important opportunities and challenges for the energy sector with Africa emerging as a major force in global oil and gas markets. Over the coming weeks, we will be sharing insights for a spotlight series on Africa – the last energy frontier.
Africa is home to five of the top 30 oil-producing countries in the world. In 2019, it accounted for more than 7.9m barrels per day, which is about 9.6% of world output. Yet plummeting oil prices triggered by COVID-19 have raised fresh challenges for oil and gas firms operating on the continent. Despite the difficulties of the current climate, there are still plentiful opportunities in Africa for oil firms to investigate, but these vary greatly from region to region. Here, we have highlighted some key exploration sites:
Whilst Namibia does not yet produce any oil, it is estimated to contain up to 11 billion barrels of recoverable reserves off its shores. First production was planned for the mid-2020s, with interest from major operators such as Total and ExxonMobil. As the country aims to utilise its hydrocarbon resources for economic growth and prosperity, it is currently reviewing its policies in order to attract further investment from the private sector. Moving forward, exploration interest is likely to grow.
Ethiopia has a huge hydrocarbon potential but is gravely underexplored. In April, the country’s first petroleum policy draft was presented, covering issues such as how companies should conduct their business as well as the benefits local communities will reap from the industry. Currently, Poly-GCL is engaged in test production of natural gas and crude oil in the Ogaden basin, which is expected to have 4.7 trillion cubic meters of natural gas reserve and the Ministry of Mines and Petroleum recently granted mining exploration licenses for eight new companies. Firms should watch Ethiopia closely as its nascent industry continues to develop. Since 2015 GPB Ethiopia Resources B.V. is exploring the Gewane-El Wiha block in the northeast of the country for possible reserves.
Kenya and Uganda
In East Africa, Kenya has the most natural resources and is the most explored country in the region. COVID-19 has put Kenya’s oil and gas industry is in a state of transition, as its major development — Blocks 10BB and 13T in Turkana — have been put on hold, with Tullow Oil submitting a notice of force majeure to the Kenyan Ministry of Petroleum and Mining. Meanwhile, Uganda’s Lake Albert Project is moving ahead, with Total announcing plans to acquire Tullow Oil’s stake in the project. The massive development in Uganda, which is set to include a pipeline and refinery, will likely have a large impact on regional oil and gas developments and opportunities.
Angola offers access to abundant offshore and deep-water oil reserves in the South Atlantic. Oil accounts for 90% of the nation’s exports and a third of the nation’s GDP. This means a slowdown in the oil industry has had a very profound effect on the overall economy and those whose livelihoods depend on the industry. Oil firms already operating in the country should look to use this time to investigate alterative opportunities in Angola’s renewable energy sector. The country has an incredible reserve of wind, sun, and water, all of which can be harvested by firms looking to invest in power sources which will not only help to save the planet, but support Angola’s economy too.
There is a diverse array of opportunities across the whole oil and gas value chain in Africa, with experts predicting an increase in offshore exploration and mega gas finds, along with the development of trans-continental pipelines, gas-to-power initiatives and refining potential. However, with opportunities come challenges such as an infrastructure deficit, corruption, and a lack of transparency. Though these are not new issues, they do become an additional strain on the market as various political and financial trends impact policy making.
There is a great African saying: “In Africa, if you are not fast, you are food”, meaning agility, innovation and superior command of knowledge is essential for progress. By running a cycle of innovation and adapting the entrepreneurial mindset, oil firms can navigate some of these challenges, particularly in the use of technology. Our next chapter in our Africa series will look into how digitalisation is set to disrupt the continent’s oil sector.