2022 Oil and Gas Market Trends, Vision and Focus

A lack of adequate investment in exploration, production and transmission infrastructure continues to disrupt energy markets growth across Africa, highlighting the need for leading and emerging African hydrocarbon producers to establish capital attractive regimes that can help increase the participation of investors and international majors for industry expansion. In an exclusive interview with the African Energy Chamber  (AEC), Hendrik Malan, CEO of strategy consulting and market intelligence firm, Frost & Sullivan Africa, discussed Africa’s energy trends and how the partnership between the two organizations will benefit market players.

Please provide an overview of Frost & Sullivan including company mission, vision and 2022 objectives.

Frost & Sullivan Africa’s aim is to help Africa grow. We are a strategy consulting and market intelligence firm that helps companies and governments identify growth opportunities and assist them to take advantage of those opportunities through innovative but practical strategies developed in the region, for the region. Our 2022 focus specifically is to help companies rebound from the COVID-19 pandemic. What we are seeing in the market now is that a lot of companies are making a transition from the response phase and are seeking measures that enable them to move beyond crisis management to a growth mindset. We are helping firms to leverage their investments in digital capabilities and processes to take advantage of new business, new supply chains and how to engage with customers to create sustainable and flexible value propositions.

Is Africa’s oil and gas market growing?

The Eastern Europe situation is obviously causing a lot of disruption on the global oil and gas industry which may provide growth opportunities for Africa. The energy sector, in the broader sense in Africa, is definitely growing. The untapped energy potential in Africa is absolutely enormous and we saw a lot of very interesting and positive dynamics even before the current events. A significant portion of the population is still heavily reliant on biomass for heating and cooking. As a result, there is a massive growth opportunity for the oil and gas sector as Africa seeks to address energy poverty, energy access and to improve economies. For Africa to become a fully industrialized continent, it needs to leverage its oil and gas resources. We are not currently in a position to rely on renewable sources alone for this purpose.

What are some of the pressing issues or challenges facing players in the energy, oil and gas market in Africa? How can they be addressed?

The vast majority of the current infrastructure is focused on extraction. Significant investments will have to be made in refining/processing and transmission to fully utilize our resources and maximize beneficiation opportunities. This has been a major constraint especially on the gas sector where local processing and transmission infrastructure is virtually non-existent across the region despite its potential to address a significant proportion of Africa’s energy challenges. To that end, the window of opportunity for utilizing private sector funding for gas related infrastructure projects is closing with a number of key Development Finance Institutions (DFIs) already excluding gas in their funding portfolios. The lack of cross-border collaboration is another big challenge in the region. Given the size of many African economies, their ability to fund large infrastructure projects or act as sole off-takers is limited. Regionally focused opportunities are therefore more attractive, but only if good levels of cooperation can be established early in the process. If the effectiveness of the regional power pools is anything to go by, we have work to do. Lastly, Africa is in no position to leapfrog directly to Renewable Energy to address its energy and more specifically its electricity requirements. Gas is the perfect transitionary feedstock with a significantly smaller carbon footprint and the possibility to convert some of the generation infrastructure to run off Hydrogen at a later stage. We need to balance our reduced carbon aspirations with our industrialization requirements. Energy is also not the only way to address carbon emissions.

What are the trends that will shape the oil and gas market as a whole in the next decade? Which of these trends will you be sharing with industry stakeholders at AEW 2022 in Cape Town?

Events around China, the US, Russia and western countries will obviously have a significant impact on the continent’s oil and gas market in years to come. We will most likely experience high oil prices over the foreseeable future because of the turbulence in Russia. However, there are other issues such as an increased focus on localization of oil and gas fields and services in African economies. The transition to electric vehicles will also have a significant impact on oil and gas demand over the next 10 years as Europe leads the charge. However, with the increase energy prices, we expect a lot of African hydrocarbon producers to do well and improve production. The question is whether they will utilize these revenues to localize refining and processing, and invest in transmission infrastructure to stimulate local demand. It is critical for African producers to invest more in local infrastructure and use the capital gains to drive economic diversification in other industries. It is also critical to ensure that local companies participate in this process in partnership with multi-nationals. Skills transfer is critical to ensure local value retention in the long term and sustainable beneficiation of raw materials and the extraction industry as a whole.

What are the key objectives behind the partnership between AEW and Frost & Sullivan? How will the partnership benefit oil and gas energy market players?

The collaboration is a knowledge partnership that allows sharing of information around how best Africa’s oil and gas and energy sector can be optimized. Platforms such as AEW will enable us to inform and connect with energy stakeholders across the continent. Conferencing, especially in places like Africa, have got a really important role to play to inform individuals about what Africa is about. Africa is large and complex market. Bringing stakeholders together under one roof enables market challenges and opportunities to be identified, discussed.

*Source African Energy Chamber