Windhoek – South Africa’s Minister of Energy, Jeff Radebe, has called on Africa to confront the need for oil exploration and production facilities with investment in refining capacity.
“We are optimistic that at the end of this conference we will convince a number of oil and gas investors that South Africa, and indeed the rest of this continent, is ready for investment not only in production but also in refining power-producing infrastructure,” said Radebe at the Africa Oil Week in Cape Town on Tuesday.
The Africa Oil Week (AOW), running for its 25th year, took place from 5 to 9 November and saw government ministers, presidents and CEOs, thought leaders, leading geoscientists to financial deal-makers from all over the world meet to discuss topics pertaining the oil and gas industry.
The AOW is also the meeting place for Africa’s upstream oil and gas markets, creating a platform for business intelligence and transactions.
“It’s important that we locate our discussions within the aspirations of the African Union’s Agenda 2063, which requires us as policymakers to ensure that Africa is connected through a world-class energy infrastructure that criss-crosses the continent,” Radebe emphasised.
The energy minister said the potential for oil and gas resources in a number of countries in Africa was no longer in doubt, but the challenge to policymakers was how to convert that potential to a tangible benefit to all inhabitants on the continent.
“We need to harness the endowment of Africa with oil and gas to ensure that modern energy services are available to African households and business,” he stressed, adding that the AOW conference was taking place at a time when the world is grappling with challenges of the impact of geopolitics on crude oil prices and the weakness in the currencies of emerging markets.
Paul McDade, CEO of Tullow Oil said that he believes in Africa’s ability to compete against all other oil and gas producing regions.
“Africa has natural advantages that other markets simply don’t have. There is no reason for Africa to do anything but growing market share, and Tullow is committed to being a substantial part of that story” he said.
McDade noted this during a panel discussion on the challenges and opportunities the African oil and gas industry is currently facing.
The session also highlighted how Africa can remain competitive in this global oil and gas landscape.
The main contributors of oil and gas are Nigeria, Angola, Algeria, Libya and Egypt, according to PricewaterhouseCoopers’ (PwC) Africa Oil & Gas Review 2018 released during the conference.
At the time of compiling the report, PwC predicted a positive and more optimistic outlook amid difficult operating and economic headwinds for Africa’s oil and gas industry, with the Brent oil price having broken through the USUS$80 mark.
Brent crude oil was trading at US$72.53, WTI at US$63.06, while natural gas was trading at US$3.17 per million BTU, as per Africa & Oil Power figures on Wednesday.
“Tough economic and external conditions have put pressure on oil and gas companies to be more cost-effective and efficient. Companies have adopted to a low-cost environment, which promises to be even more beneficial given the current recovering oil price,” read the report.
PwC further stated that the current oil price recovery reflected a tight supply and demand balance – “an indication that we are heading towards a potential global supply crunch in the early 2020s”.
“While exploration spent in Africa and globally is starting to pick up as well, it is safe to assume that this trend will continue if the current higher price environment is sustained,” the report emphasised.
The PwC report further revealed that at the end of 2017, Africa was reported to have 487.8 tcf of proven gas reserves, 7.1% of global proven reserves, while its share of global oil production has slightly increased by 0. 3% since last year to 8.7% standing at 8.1 million bbl/d.
But despite positive developments, the oil and gas industry still faces numerous and persistent challenges around talent shortages, regulatory uncertainty, political instability, corruption and fraud, and a lack of infrastructure.
“Notwithstanding the challenges, Africa does offer plenty of opportunities in the form of unexplored hydrocarbon demand fuelled by population growth, urbanisation and the emergence of a growing middle class,” stated the PwC report.
“Africa’s oil and gas companies have weathered the downturns and capitalised on the upswings focusing their efforts on new ways of working, reducing costs and utilising new technology,” said Chris Bredenhann, PwC Africa Oil & Gas Advisory leader.
He added that as oil prices were steadily rising towards pre-collapse levels, the outlook for the industry is hopeful. “It is, however, important for companies to avoid falling into the cost-inflation trap that could eat into the profitability gains that should follow from the rising oil price. Keeping up capital discipline and further improving productivity will yield sustained results for the industry,” Bredenhann added.
Although there has been a significant increase in the number and size of final investment decisions (FIDs) in 2018, the industry is not what it was and new finds are much smaller and leaner than they were in prior years.
“Deepwater oil has been given preference over gas, and oil fields offering the highest rates of return are attracting investment. There is also a preference for brownfield over greenfield developments,” reported the PwC.
The Africa Oil Week witnessed a bidding round from the Republic of Congo, a licensing round announcement from Madagascar and a country roadshow from Uganda, while South Africa joined the International Energy Agency (IEA) as an Association Country, which would that country become the first Sub-Saharan country to become an association member of the IEA. Congo launched its phase II licensing round for 13 new open blocks during Africa Oil Week with five blocks located in the shallow, deep and ultra-deep areas, three onshore in the coastal basin and five in the Cuvette Basin, covering Koba, Mbesse, Mboloko, Mboto and Ntsinga.
The coastal basin produces 350,000 bpd and is the third largest in Sub-Saharan Africa.
Companies have until 30 June 2019 to submit their offers in Brazzaville. The results of the phase II licensing round will be awarded in September 2019.
Congo’s oil reserves stood at 496,847,000 bbl (1P) and 2,613,793,000 bbl (2P) and gas reserves 200bn m3, according as at 31 December 2017.
Madagascar also opened its 44 offshore blocks at the in the Morondava Basin at the Oil Week and the rounding is open from 7 November 2018 to 30 May 2019, followed by a three-month awarding period.
Madagascar has a prolific geology and a diversified portfolio of exploration and production opportunities, announced that country’s ministry of mining and petroleum through its partners.
“We strongly believe that the 2018-2019 promotional campaign will mark the intensification of exploration activities in Madagascar,” said the ministry.
Namibia’s Minister of Mines Energy Tom Alweendo encouraged investors at the 25th Africa Oil Week conference and exhibition to take advantage of Namibia’s stability and investor-friendly policy, while the country’s Petroleum Commissioner Maggy Shino encouraged investors to strongly consider hydrocarbon investment as Namibia remains underexplored.
Shino told delegates that Namibia has one of the fastest turnaround times for Exploration Production License applications in Africa with the process only taking a maximum of six months, while encouraging companies to apply for new blocks that would become available.