African petroleum producers must adapt themselves or will become uncompetitive

By Jorge Joaquim

African petroleum producers must adapt themselves or will become uncompetitive, as the global energy transition and decarbonization drive are putting pressure on oil demand while shale has unlocked abundant resources, said the African Energy Chamber (AEC) on its new report.

Called African Energy Outlook 2021 and released on Tuesday, the report says that the coronavirus pandemic has accelerated this underlying pressure by causing unprecedented havoc on global energy markets that Africa is not insulated from.

“Conventional petroleum resources such as those in Africa should be competitive in the global supply stack, but above surface conditions related to fiscal regimes, carbon emissions and general difficulty of doing business are holding projects back,” it states.

Outside COVID-19, the report continues, regulatory matters have also unnecessarily delayed major projects in Nigeria, Kenya, Uganda and Tanzania.

This situation “represents big opportunity losses for local content development, delayed job creation and further deteriorated Africa’s competitive position versus resources elsewhere.”

Fixing the situation

The African Energy Chamber believes that the short-term outlook can be remedied by applying more competitive fiscal regimes that can help unlock 4.4 billion barrels of liquids and $100 billion of additional investments by 2030; curbing flaring and monetizing gas, which will help improving the carbon emission profile of African petroleum production that currently bottom tier among the continents.

Other measures include the developing gas to power infrastructure that will increase access to affordable energy to all sectors of the economy and reducing lead time as higher risk premiums are put on long cycle projects versus short cycle projects.