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CenturionPlus helps companies Stay Ahead of the Curve as we grapple with Covid-19
April 1, 2020 | 0 Comments
CenturionPlus Director Leon Van Der Merwe
CenturionPlus Director Leon Van Der Merwe

Amidst this time of crises and the restrictions put on travel and mobility, we have attorneys on the ground that can assist your company with its tailored legal needs

JOHANNESBURG, South Africa, April 1, 2020/ — The CenturionPlus team (https://CenturionLG.com) and our on-demand lawyers are working around the clock to help clients navigate the uncharted legal waters sparked by COVID-19. Amidst this time of crises and the restrictions put on travel and mobility, we have attorneys on the ground that can assist your company with its tailored legal needs. This includes in-house and remote legal assistance.

“As we face a new global crisis, we have been overwhelmed by questions and concerns from clients and individuals all around the African continent,” explained CenturionPlus Director Leon Van Der Merwe. “With CenturionPlus, we have developed and adapted a new approach of on-demand, on-the-ground lawyers in all jurisdictions across Africa. This platform is even more relevant given the current global situation and travel restrictions across Africa.”

The need for in-house legal support is indeed now greater than ever. This includes not only assisting clients seeking to address supply chain disruptions, but also those needing guidance on an out-of-court debt restructuring amid financial challenges. “Companies are actively seeking guidance on whether a pandemic allows for contractual obligations to be voided, and we are here to assist them in addressing this challenge,” added Van Der Merwe.

There is no doubt that long after this global health crisis is over, courts will be grappling with untold numbers of litigation disputes concerning whether parties are excused from performance of their contractual obligations. Companies should hence be pro-active in restructuring and re-visiting their current approach and policies. This includes the mobilization of a dedicated legal team that understands your business and can get the job done with flexibility in services and pricing.

During this uncertain period, remember to make this time serve you, don’t serve the time.

*Centurion Law Group

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What oil companies need to know to maintain resilient energy assets amidst a global pandemic
April 1, 2020 | 0 Comments

Most economic analysts and energy asset operators now agree that 2020 could see negative demand growth for oil globally

C. Derek Campbell

JOHANNESBURG, South Africa, April 1, 2020/ — In this time of depressed oil Prices and raging scourge of COVID-19, most economic analysts and energy asset operators now agree that 2020 could see negative demand growth for oil globally as industries shut down and countries around the world go on lockdown. Negative economic impacts are also being forecasted for the electricity, renewable energy, and mining industries. This current state of play demands that companies who control and manage the critical energy infrastructure and natural resource assets maintain their vigilance against physical, cyber, and technical security threats as they deal with these colliding “Black Swan” events.

The resilience of oil companies’ operations is essential to the economy, security and overall quality of life for all citizens in Africa and worldwide. “Indications and warnings are illuminating the fact that terrorists, hostile state actors, criminals, hackers for hire, and vandals are currently planning to take advantage of our current state of chaos,” declared C. Derek Campbell, CEO of US-based Energy & Natural Resource Security Inc (ENRS). “We continue to support a lot of energy companies in Africa to mitigate the hostile actions of those with ill-intent. In uncertain times like these, it is companies’ efforts against unexpected threats that ensure that their assets maintain continuity of operations during these trying times,” he added.

Key recommendations oil companies and their contractors should follow to ensure their assets achieve resilience and maintain continuity of operations notably include:

  • Assess and Review your current cybersecurity posture against protocols such as NIST-800-171, ISO27001, and CIP Cybersecurity Frameworks.
  • Monitor your employees and be cognizant of the IT methods and platforms they use to access your corporate networks while working remotely.
  • Via your local national staff, engage the local populations/communities within a 5 to 10-mile radius of your operations to gain an understanding of the atmospherics around your asset.
  • Spot check your existing physical and technical security measures to make sure they are fully functional.
  • Request a security assessment during your operational down time in order to gain an understanding of your asset’s current vulnerabilities and levels of assumed risk.

“The African Energy Chamber takes security threats in Africa extremely seriously and such risks should not be downplayed when our industry faces turmoil and prices instability,” commented Nj Ayuk, Executive Chairman at the African Energy Chamber. “ENRS is a key partner for us and their best-in-class security solutions are what owners, operators, investors and insurers should be implementing to maintain the continuity of their operations and mitigate risk throughout their asset’s operational life cycle.”

*Africa Energy Chamber

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Angola, Senegal, Cameroon, Ghana and Nigeria among the most hard hit amid Covid-19 and oil price plunge
March 31, 2020 | 0 Comments
Offshore oil rig worker prepare tool and equipment for perforation oil and gas well at wellhead platform. Making up a drill pipe connection. A view for drill pipe connection from between the stands.

The African Energy Chamber analyses the most vulnerable African countries amid the Covid-19 pandemic and low oil price.

JOHANNESBURG, South Africa, March 31, 2020/ — Angola revises national budget and suspends CAPEX; Senegal’s first oil development faces debt arrangement challenges; Nigeria poised for a major revenue loss; Analysts predict Ghana will get half its projected revenue; Cameroon can expect to see a three percent drop in economic growth.

African oil-producing and reliant countries have been among the most hard hit by the COVID-19 pandemic and declining oil price. In particular, Senegal, Nigeria and Angola continue to face new challenges each day amid the threat of economic fallout.

Angola

In 2020, the Angolan government led by H.E. President João Lourenço, had set out to focus on economic diversification and uplift the country from nearly five years of recession. However, in the face of the oil price slump, the oil-reliant country has slowed the implementation of its planned economic reform strategy, which had included the privatization of state-owned companies and plans to reduce public debt to less than 60 percent of GDP by 2022 from approximately 90 percent in 2018 and, over 100 percent in 2019.

In response to the current market instability, the Angolan government which relies heavily on oil revenue has declared a state of emergency and made the decision to review its national budget. With this, it will object its budget on a reference oil price of $35 per barrel maximum – a significant cut from the initially drawn up $55 per barrel, Finance Minister Vera Davis de Sousa revealed on Friday, explaining that the country’s oil production is expected to tumble to 1.36 million barrels per day(bpd).

Further, Davis de Sousa shared that Angola would also be freezing 30 percent of its goods and services budget and its CAPEX would be suspended pending completion of the budget review. Meanwhile, the Angolan sovereign wealth fund has agreed to offer $1.5 billion on condition of future repayments through increased tax in the Bank of Angola’s growing debts.

“In this time, the Angolan economy will be best served by swift government action,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With the finance minister already confirming that the country’s economy will shrink by 1.21 percent this year, signally a fifth year of recession, Angola needs a solid action plan that involves intense renegotiation strategies with domestic and foreign creditors, if it is to make it out on the other side,” he added.

Senegal

Since discovering oil and gas in 2014, the West African country emerged as a major player in the global oil and gas industry, with it moving rapidly on setting up a new Petroleum code in 2019, creating new entities such as COS-Petrogaz and revising local content regulations. As a result, the country has enjoyed increased foreign investment and entry of international majors. However, global market turbulence has had a hard knock-on effect on Senegal’s promising oil future.

In particular, the country’s first oil development, the $4.2 billion Sangomar deepwater offshore project has suffered immense pressure as project partner FAR Ltd fails to finalize debt arrangements. Citing current environment as a major contributor, FAR said: “the company’s ability to close the Sangomar Project debt arrangements that were ongoing during this time have been compromised such that the lead banks to the senior facility have now confirmed that they cannot complete the syndication in the current environment,” adding that neither the junior nor mezzanine facilities that were being arranged will be able to be completed for the foreseeable future. Project operator, Woodside and partner Cairn, continue to explore other options to see through project development.

The current global environment also stands to slow down the country’s other activities in the sector specifically, the country’s first offshore licensing round which was launched earlier this year by the national oil company, PETROSEN as a means to further push the countries exploration and production.

Though the government is yet to share incentives for companies to continue activities, it has set up a fund to support the local economy.

“Senegal is undoubtedly one of the most promising oil and gas producers Africa has to offer. Led by H.E. President Macky Sall, the country is primed for new growth and investment. Despite what is happening in the global market, we hope to see Senegal build on its eight oil and gas discoveries, and enjoy first oil from the Sangomar oil field and first gas from BP’s Greater Tortue Ahmeyim LNG project,” said NJ Ayuk, Executive Chairman of the African Energy Chamber.

As it stands, Senegal has also seen Cairn Energy reduce its planned investment to below $330 million from the initial forecast of $400 million.

Nigeria

Nigeria is projected to suffer substantial revenue losses. With it having planned for an oil  price of $57 in 2020, the low oil price presents massive struggles for Africa’s largest oil producer. To this point, Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari said at a crude oil price of $22 per barrel, high-cost oil producers like Nigeria should count themselves out of the business.

To this, the Atlantic Council has predicted that COVID-19 would cause the country to suffer the biggest lost in the continent with $15.4bn, representing about 4% of the nation’s GDP, a fair assessment considering the country has over $58bn in oil projects set to suffer delays or cancellations.

Though the country is yet to announce incentives for continued oil exploration and production, it is set on protecting its oil production which contributes generously to its economy. Specifically, the country’s petroleum regulator has, according to Reuters, ordered oil and gas companies to reduce their offshore workforce and move to 28-day staff rotations in order to avoid the spread of coronavirus.

“Nigeria is at risk to suffer the biggest loss. With the low oil price pushing the country to cut its budget and companies to reduce their CAPEX, the global is waiting to see Nigeria’s next move,” said NJ Ayuk, “Although it is hard to see the light for Nigeria, with the commitment of companies and resilience of the government, the country can certainly weather the storm, “ he added.

Ghana

The fall in oil prices coupled with COVID-19 has also had heavy impacts on Ghana’s oil industry, which has been on a path of steady growth for over 10 years since Kosmos Energy’s oil discovery west of Cape Three Points in the country’s offshore. And, more recently, Springfield Group’s historic 1.5 billion barrels.

Having set a benchmark of $58.66 oil price per barrel until the end of 2020, Ghana’s projected oil revenue is set to take a hit, with analysts already predicting the country will get half its projected revenue.

Oil production activity is also expected to see delays as Tullow Oil revises production targets and terminates the drilling contract with Maersk Drilling for the Maersk Venturer drillship offshore Ghana.

“If prices should stay around the US$30 mark, then the government is less likely to get half of the revenue that it projected. Already, we’ve seen Tullow cut back it’s production. So aside the international fall in crude oil price that we have to match with in selling our own bit of oil that we get as a country, production is also falling in our own shores,” said Paa Kwasi Anamua Sakyi, Executive Director at the Institute for Energy Security.

Cameroon

According to an analysis of the economic and financial impacts released by the Press Secretariat of the CEMAC Economic and Financial Reforms Programme, Cameroon can expect a three percent drop in growth in light of the global crisis.

Operations in the oil also stand to be affected with the country already seeing a turn. Specifically, with companies such as Tower resources declaring force-majeur on its development in the Thali block in the country’s offshore. The company also revealed that activity on the NJOM-3 offshore well may also be suspended.

Although the government has not announced any incentives for continued activity in the sector, it has acknowledged the non-oil commodities that will contribute the most to the country’s economic decline.

Now is an extremely challenging time for African oil development, the African Energy Chamber encourages Africa’s oil producing countries to adapt to the changes, implement incentives and plan for the future. This global crisis can only be worked through with continued commitment, support and collaboration.

*Africa Energy Chamber

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When Covid-19 and OPEC Price War strikes Africa’s Oil & Gas Sector
March 26, 2020 | 0 Comments
The immediate effect of Covid-19 for the sector has been on the demand for crude oil, and on its prices

JOHANNESBURG, South Africa, March 26, 2020/ — African governments set to see decline in revenues; Exploration projects put on hold; Thousands of local jobs at risk if nothing is done.

While the short-term effects of Covid-19 on world economies are already being felt and put millions in a situation of economic distress, their long-term ones are yet to be fully grasped. In sub-Saharan Africa, the impact will be felt even stronger because the pandemic is being combined with a historic crash in oil prices, putting pressure on state budgets and testing the resilience of the continent’s strongest energy companies.

The immediate effect of Covid-19 for the sector has been on the demand for crude oil, and on its prices. Most analysts and operators now agree that 2020 could see a negative demand growth for oil globally as industries shut down and countries around the world go on lock down. The effect on prices has been nothing short of devastating: they have reached their lowest levels since 1991 and currently stand at below $25 a barrel.

For Africa, this means an immediate pressure on state budgets and macro-economic stability. Apart from South Africa, the continent’s biggest economies rely heavily on oil revenue to fuel state budget and public spending and ensure macro-economic stability. All sub-Saharan Africa’s producers had budgeted 2020 with an oil benchmark well above $50, from $51 in Equatorial Guinea all the way up to $57 in Nigeria. With predictions that oil prices won’t go anywhere above $30 for the rest of the year, most budgets need to be re-adjusted and public spending needs to be drastically cut.

According to the Atlantic Council, major African producers could expect multi-billion dollar losses in state revenues this year. Congo-Brazzaville could take the hardest hit, with a loss representing 34% of its GPD, in a country where debt-to-GDP ratio is already around 90%. The same applies to Angola, where oil prices at $30 would generate a revenue loss of almost $13bn, or 13% of GDP. Equatorial Guinea, Gabon and Chad could see losses of almost 10% of GDP due to the ongoing crisis. Nigeria finally would suffer the biggest lost with $15.4bn, still according to the Atlantic Council. While it would represent only 4% of its GDP, the impact on marginal producers and local jobs would potentially be devastating. Newer producers would also suffer revenue losses: in Ghana, the the Africa Centre for Energy Policy (ACEP) estimates a potential revenue loss of 53% down to $743 million instead of the $1.567bn the country expected to receive this year.

“Thousands of Africans and expats are going to be laid off in oil-producing countries as companies shut down their drilling rigs and planned projects. We need to face the reality as these times are unprecedented. The uncertainty is even more frustrating for oil companies and the workers. Forgive me but there is blood on the streets, in the water and the air has the coronavirus,” said NJ Ayuk is Executive Chairman of the African Energy Chamber and Petroleum industry lobbyist. “Petroleum-producing countries need to come together and work with the private sector in order to get us through the COVID 19 crisis and mitigate the economic fallout as much as possible. When the US and Europe are talking about a recession, most African countries and the common man on the streets have likely already entered a depression,” added Ayuk.

The long-term effects that Covid-19 will have on the sector in Africa depends on what happens this year and in the following month. Cuts in exploration spending and cancellation of drilling plans today could potentially mean years of delay in new discoveries, reserves replacement and new fields being brought on stream. The biggest international oil companies operating in the continent are all cutting spending by an average of 20% globally, which is set to impact exploration and projects in Africa. While ExxonMobil considers several reductions in spending, Shell has already announced a reduction of underlying operating costs by $3 to $4bn and a reduction of cash capital expenditure of $5bn. Total’s organic capex is being cut by more than $3 billion, representing 20% of its planned 2020 capex. Chevron is also reducing capital and exploratory spending by 20%, including a $700 million cut in upstream projects and exploration.

These IOCs were expected to take major final investment decisions this year or in the near future on multi-billion dollar projects in Africa. These include Shell’s Bonga South-West project, ExxonMobil’s Bosi, Owowo West and Uge-Orso projects, or Chevron’s Nsiko project. regardless of how close each of these were to FID, they are very unlikely to get sanctioned this year. Recent statements from independents are going in the same direction. Woodside Energy for instance is currently reviewing all options to preserve and enhance the value of its Sangomar Offshore Oil Project in Senegal, whose first oil was expected in 2023.

Beyond oil, natural gas and LNG projects are also already being delayed. ExxonMobil’s announcement that it would postpone the green-light on Mozambique’s multi-billion dollar Rovuma LNG project is sending worrying signals for instance. Similarly, BP and Kosmos are already working to defer the 2020 Tortue Phase 1 capital spending for their multi-billion dollar FLNG project in Mauritania and Senegal. Together, Rovuma LNG and Greater Tortue Ahmeyim represent the biggest hopes Africa had to strengthen its position as a new global LNG export hub. Delaying such projects will have significant consequences on forecasted economic growth in each country.

Finally, the long-term impact of Covid-19 is taking shape right now, as exploration programs are put on hold. Much-awaited drilling like FAR’s plans in The Gambia this year have been suspended. Other planned seismic acquisition projects have also already been cancelled, such as EMHS’ CSEM Survey offshore Senegal and Mauritania for BP which was set to begin this month, or Polarcus’ 3D seismic acquisition project offshore West Africa. Meanwhile, most licensing rounds that were set to confirm Africa as a global exploration frontier this year will most likely not live up to expectations. South Sudan for instance has already announced the suspension of its oil & gas licensing round this year.

While African nations grapple with the crisis brought by Covid-19 and the OPEC price war between Saudi Arabia and Russia, the initiatives they take today will determine the future of their oil & gas industries for years. Local companies, be they producers or services providers, are at the frontline and need all the possible support they can get to avoid cutting jobs and survive the crisis. As Shoreline Energy CEO Kola Karim recently phrased it, “when the elephants fight, it’s the smaller producers that suffer.” Supporting these smaller producers and their local contractors should be a priority to preserve the long-term future and prosperity of Africa’s oil & gas sector.

*Source Africa Energy Chamber
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