Covid-19: A historical opportunity for the transformation and diversification of CEMAC economies
June 1, 2020 | 0 Comments
By Leoncio Amada NZE
|The CEMAC region is made up of 6 countries with an approximate population of 54 million people, and an economy dominated mainly by the oil sector|
In Chinese, the word crisis is made up of two characters. One means danger and the other opportunity. Even though in the middle of a crisis one never sees opportunities, crises lead us to situations that we would never have anticipated and force us to make decisions that we would never have made otherwise. In such situations, developing Appreciative Intelligence is what allows us to see the opportunities that accompany a crisis.
A good example is the following story: in the 18th century, a Spanish ship arrived on the shores of Dundee, in Scotland, with a shipment of oranges. The ship’s captain offered to James Keiller the shipment of oranges and quickly reached a good deal. However, Keiller discovered that most of the oranges were overdone and had turned sour, and that it would be impossible to sell them. Until then, oranges were only consumed in juice or fresh. But all of this was to change thanks to James Keiller’s Appreciative Intelligence.
Marmalade comes from “marmelo”, a Portuguese word that means quince, a fruit that in the 18th century was ideal for preparing preserves or making marmalades. Keiller put his Appreciative Intelligence to work, using oranges instead of quinces to prepare marmalade, and realized that the new jam had a very characteristic flavor. For all these reasons, he set up a company that changed the future of the Keiller family, dedicating himself to the business of what we know today as “bitter orange marmalade”.
Looking back on another historical example, we can quote the British economist John Maynard Keynes, who appeared before a committee of the British government. As the world was sinking into the Great Depression, he exhorted those who listened to him to overcome the narrow mentality of the bureaucracy and to look at the bigger picture. It was still six years before Keynes published his General Theory, but he already anticipated the sharp observations that he would later capture in his book: “We enter a vicious circle: we do nothing because we do not have money, but it is precisely because we do nothing that we don’t have money,” he said.
Keynes wanted to save the market economy, and, in an era of communism and fascism, he was frightened by the political consequences of not doing so. His call to overcome narrow interests found no echo. Governments’ reaction to the Depression was ineffective. Nations indulged in competitive policies of national selfishness. And the catastrophe came.
However, Keynes’s ideas, arising from the opportunity imposed by the crisis, still influence today’s world events. He and other men of his generation created the multilateral system that still lasts and to which African countries in general and those of the CEMAC zone have to adhere without the slightest guarantee that their interests will necessarily be considered and evaluated at their fair value in this global chess game.
What Keynes and the others accomplished, even in the heat of World War II, was due to the combination of ideas backed by action. They helped create the post-war economic structure. They laid the foundations for the formation of the World Bank Group, the International Monetary Fund and what later became the World Trade Organization.
In times of deep crisis, people are more psychologically prepared to face and accept structural reforms and changes that their leaders propose to them for the operation and articulation of a new socioeconomic structure. It is in this sense that the Covid19 crisis represents a historic opportunity for CEMAC countries to initiate deep structural reforms in their economic and social models. Reforms that in another historical context would be very difficult to undertake and implement in order to permanently align themselves with models that guarantee sustainable economic growth, prosperity and well-being of the people.
Today we should not shy away from the task of uniting ideas and actions. In a time when trust has been lost, we need facts that restore the faith of the public, private companies, civil society, foreign investors, etc … The governments and institutions of the CEMAC subregion are ready to tackle that challenge ahead of them. In the face of a crisis of the magnitude and implications such as that of Covid19, it is riskier, irresponsible and dangerous to do very little than to do much.
The CEMAC region is made up of 6 countries with an approximate population of 54 million people, and an economy dominated mainly by the oil sector, which represents 80% of exports and 75% of fiscal income according to World Bank and the IMF. It is one of the areas most exposed to fluctuating oil prices in international markets and will be the most affected economic zone by the Covid-19 crisis in the entire African continent due to the low integration and diversification of its economies.
In the Central African subregion, countries such as Gabon, Congo, Chad and Equatorial Guinea will be among the most affected in economic terms given the weight of oil exports in their total exports. In a scenario of $30/barrel, this represents a 50% reduction in oil export earnings caused by a contraction in demand and price, with its negative implications for states social programs.
The economic situation of the subregion described above requires a pragmatic and courageous analysis to undertake structural reforms that would allow it to emerge from the state of lethargy in which it finds itself. Despite the current situation of the oil industry, oil & gas will continue to be the locomotive of economic activity in the CEMAC subregion. However, oil revenues should from now on be used under a new economic-financial paradigm, to fund the kind of economic diversification that would allow the creation of a regional business fabric capable of competing at the highest level with other companies from other economic poles.
The implementation of policies to diversify economic activity, in combination with a strong Local Content component within the oil sector through the implementation of downstream projects to maximize local value of our resources hence become imperative. A strong, dynamic and innovative regional and indigenous oil industry with access to financing will act as a catalyst and drive that will allow other economic sectors to take off in all CEMAC countries. Local Content policies must go from being mere regulations and laws adopted by national parliaments, to actually being implemented and enforced without thereby jeopardizing the continuity of operations in the oil sector.
Accelerating the physical and commercial integration of the entire Central African subregion, especially that of CEMAC member states, must be prioritized by all economic and political actors. This must be done in favor of economic diversification and industrialization induced by more relaxed cross-border trade and taking advantage of the opportunities and synergies offered by digital transformation and regional integration promoted by the African Continental Free Trade Area (AfCFTA). Only in this context can oil sector consolidation become a true locomotive that would allow the resurgence of other economic sectors.
Central Africa cannot advance considerably with national and intraregional projects in their current state of low economic diversification. The institutions of the subregion must have the courage and the will to deepen economic and financial integration among all the countries of the economic pole through policies that promote a greater distribution of income, fiscal coordination and a common budget, in order to mitigate the “country risk” criteria when negotiating with international creditors or companies from other economic blocks for the financing and implementation of projects in the CEMAC region.
Economic integration within CEMAC may be favored by the implementation of the African Continental Free Trade Area (AfCFTA); which requires a paradigm shift towards greater horizontal and vertical diversification of export products. AfCFTA has immense potential to contribute to the diversification of CEMAC economies and deepening the sophistication of export products.
In this new stage of continental changes such as the implementation of the AfCFTA, Central African countries must dare to use expansionary monetary policies, including the quantitative easing that involves the injection of money into the productive ecosystem by governments and other stimulus, as short-term measures. These are only temporary measures to navigate the crisis. In the end, getting out of this vicious circle of external shocks vulnerability will require of CEMAC countries to invest in the fundamentals of diversifying their economies. Such investments must be made both horizontally through the increase in the number of products destined to exportation, and vertically to delve into the added value of goods and services. Therefore, governments must intervene to create the enabling environment for these changes to happen, improving the positions of CEMAC countries in the “Ease of Doing Bussines” index, instituting and monitoring local content policies with the aim of localizing the acquisitions of services, which in several cases represent 60% of the OPEX of the large companies that operate in the continent.
Governments should also facilitate the participation of small and medium-sized enterprises (SMEs) in local and regional value chains by dismantling tariff and non-tariff barriers and working towards and for a real integration of CEMAC economies. These initiatives must have the private sector in the driving seat when designing them, to make sure that government bureaucracy does not derail the proposed objectives. The participation of local and regional companies in the redefinition of the economic architecture of the subregion towards the long-awaited economic diversification must be based on meritocracy and the competences that these economic actors have.
It is utopian to speak of economic diversification of the CEMAC subregion in the absence of a solid banking and financial sector that lives up to the challenge and is capable of accompanying the transformation of the region’s economies. The BEAC and all financial institutions in the CEMAC subregion must review and redefine their role on how they are financing economic activity. The implementation and use of new technologies such as mobile banking platforms, mobile money and other technological innovations in the financial sector will allow and facilitate the creation of new SMEs. Banks have to abandon their comfort zone in which they have been acting until now and move to real banking activity that is none other than to properly finance economic activity and favor conditions in the financial market that allow sustainable economic growth.
Compared with the banking sectors of other economic subregions on the African continent, it can be concluded that the banking sector of CEMAC is the least developed and requires a profound structural reform to face the subregion’s economic situation.
We cannot get tired of repeating, emphasizing and advocating for economic diversification and industrialization in Central Africa, because if CEMAC countries do not address their structural problems now, the problems we face today will only get worse. That is the vicious circle of dependence on the sale of raw materials in the CEMAC area that the Covid19 crisis has exposed.
It will be up to us to turn this crisis into a historic opportunity that will allow us to definitively transform the economies of our subregion, harmonize and converge our economic and financial systems, and create a regional business fabric capable of competing in the international arena.
If we do not do so now, we may possibly have lost forever the train that leads to sustainable development.
Crisis, as our Chinese friends say, are accompanied by opportunities.
*African Energy Chamber.Leoncio Amada NZE is President for the CEMAC Region at the African Energy Chamber and CEO of APEX Industries.
To Finance its Energy Transition and Industrialization, Africa needs to Think Local
May 19, 2020 | 0 Comments
For Africa, the COVID-19 pandemic is turning into a wake up call to find better ways to industrialize, chief amongst them being access to reliable, cheap and clean energy
As global markets think of the post-Covid-19 world and how the pandemic will reshape business models worldwide, African countries are coming to terms with a bitter reality: the continent has still not entered the Fourth Industrial Revolution and is heading towards its first recession in 25 years.
While the impact of the pandemic on African economies is expected to be lesser than in Europe or North America, it still puts to the forefront the continent’s overdependence on key commodities for its economies to function, and under-investment into social infrastructure. For Africa, the COVID-19 pandemic is turning into a wake up call to find better ways to industrialize, chief amongst them being access to reliable, cheap and clean energy. Given global liquidity constraints however, financing Africa’s energy transition and supporting industrialization will require becoming more competitive and finding new ways to mobilize capital across key industries and projects.
The topic was at the center of a leading webinar discussion between Kola Karim, Managing Director and CEO of Shoreline Energy International, Vitol Senior Investment Manager Steven Brann, and Bambili Group Managing Director Nyonga Fofang. The webinar was organized by the African Energy Chamber (www.EnergyChamber.org) and hosted by Africa Oil & Power.
The key to industrialization in Africa is access to power, which heavily relies on Africa’s ability to get its natural resources right, especially natural gas. Up until now, most of Africa’s gas has been produced for the benefits of foreign markets in Asia, the Americas, Europe and the Middle East, where it is shipped as LNG. LNG prices have dropped to historic lows and are currently below the $2 threshold in Europe and Asia, while African power producers still pay above that price to get natural gas in their turbines. Current market prices for natural gas are expected to remain depressed for a while, and should be a strong incentive for African power producers to use LNG as a feedstock and switch their fuel oil or coal plants to LNG which can be easily procured on the continent.
However, proper management of Africa’s natural resources does not stop at switching existing power plants to gas in order to benefit from a cheap and locally-available resource. It rather requires a profound transformation of how African countries see energy and how they plan to power up their economies moving forward.
In doing so, financing will become an even greater challenge as capital becomes scarce and investors look for only very resilient assets to invest in. In that regard, participants noted that it is currently challenging to monetize Africa’s LNG across industries because industrial customers are reluctant to signing the kind of multi-year commitments required by gas producers to raise debt. Because potential industrial users do not know what the future holds and do not get a clear vision on what their country’s energy mix will look like, their reluctance to switch to gas is directly impacting the attractiveness of the sector and has them keep paying expensive energy instead. Similarly, the imports of fuel oil and coal to power industries has become such a habit that making a long-term commitment on developing LNG receiving and processing infrastructure is now a matter of debate.
Participants highlighted the responsibility of both African sovereigns and the private sector in maintaining the continent in that energy status quo. In a post Covid-19 world, a situation in which Africa exports its energy while its people are in the dark, and imports finished products while its youth is unemployed is not longer viable. The industry is calling for a strong sovereign participation on establishing a connection with the private sector and thinking holistically about the development of the continent. While foreign exchange and international capital will continue to be needed, there is an urgent need to energize African communities and neighbors first. Nigeria cannot think of its gas development without keeping in mind the energy needs of its immediate neighbors for example. Similarly, South Africa cannot plan for its energy future without taking in consideration the vast gas reserves of its neighbors. The list of examples goes on.
Africa needs to use the solid base of its natural resources to create opportunities and change the narrative around its industrialization by making a difference in its own energy space. For such a paradigm shift to happen, African sovereigns need to take the lead. Only at the sovereign level can a country raise several billion dollars from multilateral agencies and invest in the necessary projects and infrastructure that will support private sector investment and growth. Only political will can truly unlock the value of African cross-border energy cooperation and open up the doors for a wider African private sector cooperation across industries and within a prosperous free trade continent.
Meanwhile, additional efforts need to be done to mobilize local and patient capital from domestic funds and African family fortunes. Participants concluded on the fact that there is a lot of do-good capital sitting all across the continent, but its mobilization requires the presentation of above-standards bankable projects run by outstanding leadership teams. It is up to African leaders and African private sector executives to put the continent on a new path to prosperity.
Namibia’s Ministry of Mines and Energy is optimistic about the future
May 15, 2020 | 0 Comments
|Although Namibia is largely a consuming country, it hopes to grow its upstream industry, improve energy security through diversifying its energy mix|
With the recently introduced reforms in Namibia’s renewable energy sector and the growing presence and entry of international oil companies entering the hydrocarbons sector, the Ministry of Mines and Energy is optimistic about the country’s energy future.
“There are very positive and encouraging signs when we talk about the hydrocarbons sector. We have had a couple of investors that are keen on entering the market and potentially finding something,” said Hon. Tom Alweendo, Namibia’s Minister of Mines and Energy during a webinar hosted by the African Energy Chamber (www.EnergyChamber.org) in partnership with Africa Oil & Power on Friday. “On the renewable energy sector, we have been able to introduce some reforms that have made it possible for independent power producers to come into the sector and produce clean energy, especially through solar and wind,” he added.
Minister Alweendo was joined by the Chamber’s Executive Chairman, NJ Ayuk, who encouraged a practical and realistic energy transition that addresses the continent’s energy needs first. “Oil and gas are going to be around for a long time and will remain a major part of many countries across Africa. The same can be said for clean energy. We have to be environmentally conscious and ensure that lowering carbon emissions remains a key priority,” said Nj Ayuk. “But, we have to also look at where we stand as a continent and address our needs first,” he added.
Although Namibia is largely a consuming country, it hopes to grow its upstream industry, improve energy security through diversifying its energy mix. In achieving this, the country is looking forward to collaborating with the private sector to review its policies in order to attracter further investment.
Other topics explored during the discussion guided by the theme: The Future of the Namibian Energy Industry included plans on the development of the Kudu gas project to which the minister provided that the ministry is currently relooking the project’s business model and hopes to move forward thereafter.
On other key projects, Minister Alweendo said the 37,500 bpd barge-mounted refinery in Walvis bay was due to finalize in March this year but, was deterred by the pandemic. Despite this, the ministry is exploring other avenues in order to reach completion on the $370 million project by the end of 2020.
The Angola-Namibia cross border Baynes hydroelectric dam is currently undergoing feasibility studies and is planned to commence with construction in June this year. The 600MW output will be split in 300MW for Angola and 300MW for Namibia.
The African Energy Chamber will continue with its Africa energy series of webinars. To stay updated on upcoming webinars, visit www.EnergyChamber.org.
*African Energy Chamber
Equatorial Guinea awards Contract to American Company Nexant for Methanol-to-Derivatives Plant
May 14, 2020 | 0 Comments
|The project is part of the Year of Investment and was previously agreed during a meeting last January|
The Ministry of Mines and Hydrocarbons (MMH) of Equatorial Guinea, in collaboration with the Atlantic Methanol Production Company (AMPCO), awarded American company Nexant the feasibility study for the construction of a new formaldehyde production plant in Punta Europa.
The project is part of the Year of Investment and was previously agreed during a meeting last January between H.E. President Teodoro Obiang Nguema Mbasogo, H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons, Marathon Oil Chairman, President and CEO Lee Tillman and Executive Vice President Mitch Little.
Formaldehyde is a key component in the manufacturing of plastics, clothing, paper, and is widely used in industries derived from wood. The construction of such a facility in Equatorial Guinea would open doors for the establishment and growth of such related industries in the country. The feasibility study for the project is expected to be ready by mid-June 2020, and is part of the ongoing Year of Investment 2020.
“We are on track to deliver several projects under the Year of Investment 2020 following the award of the feasibility study for a 5,000 bpd modular refinery to VFuels last month, and the award of the feasibility study for the methanol-to-derivates plant this week,” declared H.E. Gabriel Mbaga Obiang Lima. “These are two landmark projects of the Year of Investment that will boost the local transformation of domestic oil and natural gas and create substantial jobs for the country,” he added.
The Year of Investment 2020 projects aim at attracting investments across Equatorial Guinea’s midstream and downstream industries and promote infrastructure that adds value to the hydrocarbons industry of the country through job creation. In light of the ongoing economic crisis in the region, the Year of Investment has also become a way for Equatorial Guinea to ensure a quick and sustainable recovery of its economy by promoting investments in key infrastructure projects that can create local value and generate revenue for the country. Key projects being promoted under the Year of Investment notably include a modular refinery for domestic supply, an additional modular refinery which could be destined for exports, storage tanks for refined products, methanol derivatives manufacturing, an industrial mining area with a gold refinery, and a urea plant project.
*Africa Energy Chamber
New Angolan budgetary restrictions underline government’s determination to support Organization of the Petroleum Exporting Countries (OPEC) and boost industry
May 14, 2020 | 0 Comments
|These budgetary restrictions do not only represent the government’s attempt at fiscal responsiveness and responsibility|
Angola’s minister of finance H.E Vera Daves signed on April 22nd a ministerial order suspending the implementation of all contracts signed under the Public Investment Programme whose source of funding has not yet been definitively secured. This is one of a number of emergency measures, including a freeze in public sector hiring that was announced in recent weeks in response to the oil price crash and the expected reduction in government revenue for 2020. Minister Daves’s order is in line with Presidential Decree no. 96/20 of April 9th which declared a state of emergency in response to the Covid-19 pandemic, which it considered a case of force majeure.
These budgetary restrictions do not only represent the government’s attempt at fiscal responsiveness and responsibility, they also give credence to Angola’s commitment to adhere to its most recent engagements within the Organization of the Petroleum Exporting Countries (OPEC). On April 9th, following an oil price crash that drove down oil prices to historic lows below $20/barrel, oil producers including Angola within the framework of OPEC+, led by Russia and Saudi Arabia, agreed to cut their supplies to the global market by an overall 23% compared to October 2018. These cuts are intended to reverse the downward trend in prices when combined with an expected recovery in crude oil demand in the aftermath of widespread relaxations in Covid-19 related restrictions, expected later this year. Angola, which is currently Africa’s second largest crude producer behind Nigeria with an estimated average daily production pre-agreement of 1.4 million barrels per day, is set to drop production to and average daily output of 1.18 million barrels per day.
“Compliance is key for the credibility of OPEC and their ability to deliver on stable crude prices. We salute the resolute action of the government of Angola and the efforts of H.E Diamantino Pedro Azevedo, Minister of Mineral Resources, Petroleum and Gas, in delivering the April 9th OPEC deal,” said Sergio Pugliese, President of the African Energy Chamber for Angola. The cuts are due to last for an initial two-month period through May and June. By the start of June, reports about compliance in the month of May are likely to be key in achieving the intended effect.
H.E. Mohammed Sanusi Barkindo has been successful in steering the organisation during periods of heightened geopolitical tensions, bringing together producers with opposing interests in the interest of market stability. African producers like Angola and Nigeria continue to be key in ensuring that OPEC is effective. In that light, decisions towards ensuring compliance like those made by Angola are important for the entire industry globally.
*African Energy Chamber
New Gas Master Plan to boost Africa’s First Offshore Gas Mega Hub in the Gulf of Guinea
May 14, 2020 | 0 Comments
|Offshore gas mega hub will be the first such venture offshore Africa and aims at pooling stranded gas across the Gulf of Guinea|
Equatorial Guinea continues to lead the development of natural gas production and monetization in the Gulf of Guinea, with the award of a new contract for a new Gas Master Plan to support the ongoing development of its offshore Gas Mega Hub.
In collaboration with Marathon Oil Corp and EG LNG, the Ministry of Mines and Hydrocarbons (MMH) awarded a contract for the development of a Gas Master Plan to British company Gas Strategies on Tuesday. The work is part of the development of Equatorial Guinea’s Gas Mega Hub, for which Definitive Agreements towards the monetization of the Alen unit were signed in April 2019.
The offshore gas mega hub will be the first such venture offshore Africa and aims at pooling stranded gas across the Gulf of Guinea by maximizing existing infrastructure at Punta Europa. While key facilities there, such as EG LNG and Marathon’s methanol plant, have traditionally been relying on gas feedstock from the Alba Field, declining output requires to gather gas from additional fields and reserves in the region.
“Equatorial Guinea has given natural gas a priority in terms of development and monetization, and we believe gas is the key to industrialization and jobs creation,” declared H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons. “With key initiatives such as LNG2Africa, the ongoing offshore Gas Mega Hub and the Year of Investment 2020, we are going to complete key gas projects in upstream, midstream and downstream that will further diversify our economy, provide opportunities for our local companies, and create jobs for our citizens,” he added.
Under the development, Punta Europa is set to become a gas processing center for all stranded gas fields in the Gulf of Guinea, and could open up economical avenues to monetize offshore gas in Cameroon and Nigeria as well.
The new Gas Master Plan represents an important step towards the realization of this vision, and will help in accelerating and coordinating offshore gas developments, which could eventually lead to the construction of additional liquefaction capacity on Punta Europa.
*African Energy Chamber
Namibia’s Minister of Energy and the Oil and Gas sector to discuss the Future of the Namibian Energy Industry in Exclusive Webinar
May 12, 2020 | 0 Comments
The free webinar will be hosted under the theme, The Future of the Namibian Energy Industry; Hon. Tom Alweendo will be joined by Executive Chairman of the African Energy Chamber (www.EnergyChamber.org), NJ Ayuk; The discussion will be moderated by Africa Oil & Power Field Editor, Thomas Hedley and Lawyer and Energy Specialist, Gawie Kanjemba; Follow the conversation through the #AECWebinars and #AOPWebinars.
Continuing its Africa energy series webinars, the African Energy Chamber will present an exclusive webinar with the Nambian Minister of Energy. Hon. Tom Alweendo on Friday, May 15, 2020 at SAST. Hosted by African Oil & Power, the open to public webinar will explore the future of the Namibian energy industry in the context of the current global climate.
As 2020 was planned to be a strong year for exploratory drilling in the country, the conversation will look at the state of the country’s upstream industry and its development potential. Hon. Tom Alweendo will be joined by Nj Ayuk, Executive Chairman of the African Energy Chamber, in the discussion moderated by Namibian Lawyer and Energy Specialist, Gawie Kanjemba, and Africa Oil & Power Field Editor, Thomas Hedley.
In light of Namibia’s push to develop a sustainable and clean energy industry, participants will also discuss the country’s key energy infrastructure and power projects with a particular focus on gas-to-power and renewable energy.
“In Namibia particularly, after 30 years of independence, we have grown the economy over ten folds and remain one of the countries with the highest GDP per capita in Southern Africa,” said Hon. Tom Alweendo. “Exploring resources like oil & gas can translate into a tool for transforming the economy even further. The shareholders of Namibian resources are the Namibian people, it is thus important to work with organizations like the Africa Energy Chamber and Africa Oil & Power, to map out a future that speaks best for Africa,” he added.
“Our next Africa energy series of webinars takes us to a true African energy frontier and we are honored that Hon. Tom Alweendo is joining us in this conversation,” declared NJ Ayuk, Executive Chairman at the African Energy Chamber. “Namibia has a tremendous potential for energy investments across the value-chain and should not be overlooked when it comes to building a sustainable and inclusive growth in Africa.”
As international oil companies farmed-down their interests in Namibia’s offshore, a series of leading independents came in and invested, raising hopes to see world class disocveries in the near future. These notably include Chariot Oil & Gas, Tullow Oil, Africa Energy Corp, AziNam, BW Energy, Chariot Oil & Gas, Eco Atlantic Oil & Gas, Global Petroleum, Impact Oil & Gas, Maurel & Prom and Tower Resources. The country is also home to the giant Kudu gas field, where 1.3 Tcf was gas was discovery in 1974. The block is currently operated by BW Energy, who remains committed to finding a viable commercial development option for the field. Kudu’s development is seen as key to resolving the energy crisis in Namibia and developing strong gas-to-power capacity.
African Energy Chamber issues Urgent Advisory Guidelines for the Management and Safety of Oil Workers during the COVID-19 Pandemic and Africa-wide Lockdowns
May 12, 2020 | 0 Comments
|This is aimed at mobilizing, demobilizing and putting back our energy sector to work safely across the continent|
Amid the ongoing effects of lockdowns in oil and gas-producing countries such as Nigeria, Angola, Algeria, Egypt, Libya, Congo, Gabon, Ghana, Equatorial Guinea, South Sudan and Cameroon, the African Energy Chamber (www.EnergyChamber.org) hereby issues pragmatic commonsense advisory guidelines for governments, oil companies and personnel.
This is aimed at mobilizing, demobilizing and putting back our energy sector to work safely across the continent. The guidelines are open for free consultation on www.EnergyChamber.org.
In light of the prolonged Covid-19 pandemic, the oil & gas industry has been heavily strained, increasing the need to pay critical attention to workers’ safety and putting in place procedures to ensure their transitioning in and out of the workplace. Currently, travel restrictions have forced oil operators to maintain their personnel for extended periods of time on remote sites, increasing the risks of Lost Time Injury.
“We must always prioritize the health, safety and well-being of brave oil workers who continue to defy insurmountable odds to keep energy production ongoing across the continent,” stated NJ Ayuk, Executive Chairman at the African Energy Chamber. “All upstream oil & gas operators are experiencing similar challenges due to reduced workforces and extended periods of lockdown and travel restrictions. Our guidelines put the safety of workers, host communities and oil operators at the core of the industry’s operations and sector recovery.”
“These non-exhaustive guidelines will assist operators and governments in ensuring the movement and safety of offshore and onshore oil workers so oil & gas operations can continue while preventing any additional spread of Covid-19,” concluded Ayuk.
In order to ensure that oil & gas health and safety standards and practices adapt to a new normal, the African Energy Chamber has worked with its partners to issue this new set of advisory guidelines. These guidelines notably take into account local regulations in host countries, and are heedful of the need to protect local communities from exposition to any potential Covid-19 transmission.
Such advisory guidelines notably include a series of agreements and protocols governing health monitoring and travel authorizations given to oil workers before, during and after their mobilization on site. They take into account the best international healthcare practices in order to ensure both a safe continuation and resumption of onshore and offshore activities, while preserving the health of oil workers, host countries and host communities.
*African Energy Chamber
Energy Lobby to Host Webinar on Financing the Recovery of African Oil and Gas Markets
May 7, 2020 | 0 Comments
The webinar is part of the Africa Energy Series, and will be hosted by the African Energy Chamber in partnership with Africa Oil & Power on May 15th at 12:30 London time (GMT+1)
In line with its recently-released Common-sense Energy Agenda that calls for banking and financial support to the oil & gas sector, the African Energy Chamber (www.EnergyChamber.org) will be hosting a webinar exploring the role of Private Equity, gas monetization and African marginal oilfield producers in supporting economic recovery. The webinar is part of the Africa Energy Series, and will be hosted by the African Energy Chamber in partnership with Africa Oil & Power on May 15th at 12:30 London time (GMT+1).
The webinar will benefit from the participation of Kola Karim, Managing Director and CEO of Shoreline Energy International, a leading Nigerian independent oil producer; Nyonga Fofang, Managing Director of Bambili Group, an Africa-focused private equity firm; and Steve Brann, Senior Investment Manager at Vitol. It will be moderated by Shawn Duthie, Managing Director of Inyani Intelligence, and James Chester, Acting CEO of Africa Oil & Power.
“We have to come to terms with the new realities of our energy sector and it is time to explore concrete solutions to finance and support our recovery and ensure future sector growth,” stated NJ Ayuk, Executive Chairman at the African Energy Chamber. “The future of our markets relies on mobilizing capital in innovative ways and structuring deals that work for our companies and our industry,” he added.
The discussions on May 15th will notably center on the role private equity can play in ensuring the come back of Africa’s energy sector, along with exploring ways African independents can navigate the current climate and position themselves for future recovery. In addition, a highlight will be given to gas by debating on the future of African and global LNG trade.
As global markets face a shortage of liquidity in years to come, the African Energy Chamber believes that only stronger industry cooperation and dialogue can result in maximizing capital inflows into Africa. This requires new ways of thinking and new financing strategies to develop assets, get projects off the ground and ensure that the recovery of the sector translates into local jobs creation and revenue generation.
African Oil Producer Urges Nigeria and African Countries to Take a Position on Energy and Economic Diversification
May 5, 2020 | 0 Comments
|Economic crises in African oil producing countries this year will be so severe they could reach double digit economic recessions|
If there is one thing that the current COVID-19 and oil prices crises have demonstrated, it is that African oil-producing nations are still not economically diverse. Despite repeated actions taken by governments over the past decade to diversify their economies, especially following the 2014-2016 African recessions, not enough has been done. Economic crises in African oil producing countries this year will be so severe they could reach double digit economic recessions.
As countries like Nigeria, Angola, Gabon, Congo or Equatorial Guinea deal with unprecedented lows in oil prices and struggle to keep their economies afloat, the current downturn could well be the historic turning point these economies need to seriously put diversification at the top of economic policies priorities.
To be clear, diversification does not mean the end of oil, quite the contrary. Efficient diversification goes through a better use of oil revenues to fuel other sector of the economy, build a stronger industrial base and create jobs. But it also means diversifying national hydrocarbons output and increasing production, monetization and valorization of natural gas. In fact, for many African oil producers, successful economic diversification depends on their abilities to increase hydrocarbons production and make better us of flared and associated natural gas to generate power for industries, produce fertilizers for farmers and manufacture petrochemicals for their growing domestic markets.
With 188.8 Tcf of proved natural gas (BP, 2019), Nigeria has Africa’s largest discovered gas reserves and the 10th biggest in the world. In 2019, it was the world’s sixth largest LNG exporter with a 6% global market share, ahead of Algeria (3%), Angola (1%) and Equatorial Guinea (1%). Yet, out of the 20.8 million tonnes of LNG Nigeria exported last year (IGU, 2020), 54% went to Europe, 37% to Asia, and the rest to the Americas and the Middle East. In short, none of Nigeria’s LNG goes to Africa. The only Nigerian gas that reaches African markets is the limited, and often interrupted, supply that goes through the West African Gas Pipeline (WAGP) to Benin, Togo and Ghana. Even then, the lack of stable gas supplies from the pipeline has forced these countries to rely on additional domestic or international sources of gas to fuel their power plants.
“The current situation in global and African energy markets is giving tremendous opportunities for Africans to take a strong position on economic diversification. In that aspect, Nigeria is the country that could take the lead position in becoming the African gas producing platform the continent needs,” stated Kola Karim, CEO & Managing Director of Shoreline Natural Resources during an Invest Africa podcast last week. He is right, and unless the current crisis leads to serious gas-market policies and initiatives to monetize gas across Nigeria and Africa, oil dependence-related hardships will continue and only get stronger.
More needs to be done to monetize gas in Africa. Thankfully, the continent has demonstrated several successful gas monetization projects across industries and beyond just electricity generation. In Benin City, Nigeria, NICPO has been developing for years a network of CNG outlets that take customers beyond petrol and diesel and offer them a domestic, more cost efficient, and cleaner fuel to put in their cars. On a bigger scale, domestic gas is already being valorized in the Indorama Eleme fertilizers plant in Port Harcourt, currently under expansion, and in the soon-to-be commissioned Dangote Fertilizers plant in Lekki. In neighboring Cameroon, Victoria Oil & Gas has been supporting the development of a strong industrial and manufacturing base on the outskirt of Douala by connecting several customers to natural gas. Also in the Gulf of Guinea, Equatorial Guinea is building a regasification terminal to process its own natural gas across several industries such as power and cement on its mainland. Further North in Abidjan, the government has been pushing for the procurement and deployment of CNG buses that also run on domestic natural gas. Success stories abound all around us, yet they need to be expanded and replicated for Africa to truly embrace the benefits of economic diversification.
For this ambition to be achieved, the development of enabling environments and sound market policies is crucial to facilitate investments into gas production and gas transportation and processing infrastructure. “Nigeria has already taken the opportunity to maximize its gas with the West Africa Gas Pipeline. As an industry, if we are able not only to ensure stable gas supplies through that pipeline but also lay additional connections to North Africa and Europe through Niger, and to East and Southern Africa through the Central African Republic, then a country like Nigeria gives itself the opportunity to industrialize the whole continent through the production and export of its domestic gas while creating several thousands jobs,” Kola Karim added. In that regards, incentives to be given to such critical midstream infrastructure, along with market policies to support gas valorization, form key parts of the African Energy Chamber’s Common-sense Energy Agenda released this month.
Africa needs to get used to a post-COVID-19 world where $50/barrel is the new $100, and where diversification needs to be the key priority in order to create a new hedge and natural buffer against future downwards cycles. “Diversification needs to become our new reality,” added Kola Karim. “For Nigeria, it is time to stand up and focus on gas to become the gas platform producer that the continent needs. This pandemic should afford us all the opportunity to view our countries from an internal point of view and prepare ourselves and our economies for the next big crisis,” he concluded.
*Africa Energy Chamber
American and African Oil and Gas Players propose regulatory measures to ensure sustainability in response to COVID-19 and beyond
May 4, 2020 | 0 Comments
|These measures are intended to mitigate the expected loss of jobs and abandonment of erstwhile viable projects in the African oil and gas sector in the face of a global recession|
In response to the current global COVID-19 pandemic and the associated crash in the price of oil, the African Energy Chamber (AEC) (www.EnergyChamber.org) and the IAGC have proposed a number of mitigating measures on behalf of the oil and gas industry. These measures are intended to mitigate the expected loss of jobs and abandonment of erstwhile viable projects in the African oil and gas sector in the face of a global recession.
Whilst African oil producers might not be able to change the current market and global health dynamics individually, they have the ability as regulators to positively influence the business environment in their respective countries with common sense policies. It is this ability to mitigate the negative effects of the global crisis, that the AEC and the IAGC are calling on governments to put to use.
The AEC and the IAGC are calling on African governments to take swift action to ensure stability in the African oil and gas industry, especially in the geophysical & exploration (G&E) sub sector, in order to maintain a pipeline of projects that will maintain or even increase output levels. Ultimately, African countries continue to depend on revenue generated from the sector, jobs created by the sector for, affordable energy from the sector and the ability to generate one’s own energy needs.
These demands are in-line with the recently released Common-sense Energy Agenda for Africa released by the AEC and available on www.EnergyChamber.org. Such key demands and measures notably include waiving taxes on service companies for six months; waiving withholding taxes, especially for not resident companies, for six months; urging banks to provide no interest loans and loan guarantees for local service companies with ongoing projects with IOCs; granting extensions on all exploration projects for 24 months; extending the non-exclusive geophysical data confidentiality periods to a minimum of 15 years where such is not already in place; waiving part of the work project commitments for exploration companies; setting up and implement government and private sector discussions on revising some of the fiscal terms in the PSC that make it difficult for explorers to meet commitments in today’s market environment and aid capital fundraising; cutting in half (50%) fees due to the state like training funds, surface rental, social projects etc.; bring champions of the industry by encouraging various farm-in and farm-out discussions on current licenses; ensuring state backing on midstream projects so FID’s are not cancelled; making diversification of the economy a priority; looking at local content measures that are not working and try to encourage or implement a more regional African content approach; and considering cutting departmental spending and reduction of unnecessary travel expenditure.
“As the voice of the African Energy industry and it is at the core of our mandate to fight for the comeback of the African Energy industry post Covid 19 and the price war, by making practical proposals on how to navigate the current crisis. We are bullish by the response so far from many African oil producers that include adopting some of our proposals above. However, we call for everyone to continue doing more. Our American friends from the IAGC have been a strong and steadfast ally in helping us make a case for Africa and its energy sector” said NJ Ayuk, Executive Chairman of the African Energy Chamber.
On her part, Ms. Nikki Martin, President of the IAGC highlighted the importance of the geophysical and exploration (G&E) industries in maintaining a stable energy industry. “National Authorities should be working to maintain expected timelines for licensing rounds, including all review periods and award announcements which contribute to business certainty and a stable pipeline for future oil production. Energy security for the continent will only be ensured with continued exploration,” she said. “The G&E industry provides the key to unlocking energy resources that will allow for rebuilding economies when the COVID-19 virus has run its course, however, in order to rebuild, there must be a viable energy industry when that time comes.”
The African Energy Chamber (www.EnergyChamber.org) is the voice of the African energy industry and represents companies and organizations in the upstream, midstream and downstream sectors of the energy business in Africa.
About the IAGC:
Founded in 1971, the IAGC is the global trade association for the geophysical and exploration industry, the cornerstone of the energy industry. With more than 80 member companies in 50 countries employing an estimated 87,000 people with revenues exceeding 11.5 Billion (USD), Membership includes onshore and offshore survey operators and acquisition companies, data and processing providers, exploration and production companies, equipment and software manufacturers, and industry suppliers and service providers. IAGC member companies play an integral role in the successful exploration and development of offshore hydrocarbon resources through the acquisition and processing of geophysical data.
*Source Africa Energy Chamber
The Way Forward: How Africa Can Make a Comeback from the Oil & Gas Downturn
May 4, 2020 | 0 Comments
By NJ Ayuk *
|There has been a ray of hope: a landmark production-cut agreement among OPEC, OPEC+ and G20 stakeholders on April 12 put an end to the oil price war|
Stunning drops in crude oil prices—the result of COVID-19-related declines in demand and an oil price war between Saudi Arabia and Russia—have been taking their toll around the globe this spring. For Africa’s oil-producing countries, where crude oil exports make up a large portion of their revenue, the situation is especially dire.
In Nigeria, for example, Finance Minister Zainab Ahmed recently warned of an imminent recession and requested billions of dollars in international emergency funding. As of the second week of April, national oil production in Angola was expected to fall from 1.8 million to 1.36 million barrels per day as the government prepared to freeze 30% of its goods and services budget. And Ghana, according to the Africa Centre for Energy Policy, stands to see a 53% shortfall this year in projected revenue from crude oil sales. There are similar difficulties across the continent.
There has been a ray of hope: a landmark production-cut agreement among OPEC, OPEC+ and G20 stakeholders on April 12 put an end to the oil price war. Shortly after that historical agreement, the African Petroleum Producers Organization (APPO) committed to significant crude production cuts of its own, effective May 1. While demand remains a concern, the production cuts will help lower oil inventories and should bring some stability to the oil market.
I am not saying we can expect smooth sailing from this point on. There’s no denying that the COVID-19 pandemic will continue to test African countries on multiple fronts, from the health and safety dangers it poses to our people to the economic devastation and low demand for crude. The situation is painful, but it’s not permanent. And when this chapter is over, African countries will recover.
This is the time to lay the framework for that recovery. When demand for crude oil increases again, and it will, Africa will need exploration and production activities to resume. That means oil and gas ministries should be working now on regulations that foster a more enabling environment for investors and businesses. We should be fine-tuning our local content policies and exploring technologies that can contribute to a leaner, more profitable petroleum sector. Last October, I released a book that explains how we can accomplish these things, along with other measures that will help Africa better capitalize on its oil and gas resources. The ideas and examples it provides remain on point. We can still do this.
With demand for oil at a historic low, it may seem odd to talk about E&P activity. But, as I have said, the situation we find ourselves in now is temporary. After we get through the current crisis, production will play a critical role in our economic recovery. We need indigenous companies involved so employees, business partners, and suppliers can benefit from these activities. We also need foreign companies that are willing to share knowledge and technology—and to create economic opportunities in the communities where they operate. That’s why it’s vital that government leaders take steps now to remove obstacles to launching production, from red tape and lengthy delays to excessive taxes. Governments also need to support smaller independent companies by breaking exploration maps into smaller sections. And we need better fiscal terms for companies like breaks on import duties.
This isn’t my first time to call for these things, I cover them in-depth in my book, Billions at Play: The Future of African Energy and Doing Deals. But in the COVID-19 era, they’ve become more important than ever.
Local Content: Striking a Balance
African countries need to develop fair, balanced local content policies that create economic and educational opportunities for Africans without overly burdening foreign investors and discouraging them from operating here. A shining example of this kind of balance can be found in Equatorial Guinea, which I wrote about in Billions at Play. “The government enacted requirements for international companies to hire Equatoguineans, contribute to training programs, and work with local subcontractors. They were careful to balance the need to boost local industry, however, with the limitations of the current local industry. They understood how unrealistic it was to require 100 percent local content until more training, education, and local capacity in that field is created.”
I’d like to see more African countries consider the example of Equatorial Guinea, along with successful local content policies in Nigeria and Angola, also covered in my book. Effective local content is key to helping everyday Africans realize the benefits of Africa’s oil and gas resources. This is a good time for leaders to look at what works and what doesn’t in their own policies and make the necessary adjustments.
It’s Time for More Tech
COVID-19 has forced companies around the globe to rely on technology to function, whether they’re using it to hold virtual meetings or monitor vital assets. I’m confident that technological solutions will play an important role in the comeback of Africa’s oil & gas industry, too. In my book, I described technology’s potential to help indigenous African oil & gas companies operate more efficiently and boost profits, which in turn, benefits their communities and promotes economic growth. “Innovations such as the development of new ways to drill wells and handle equipment, the design of new seismic data collection programs, the management of petroleum data systems, and the monitoring and protection of internet-connected equipment have the potential to redefine how business is done in this sector.”
Now, with economic difficulties and low oil prices, benefits like these could be more valuable than ever. I encourage African oil and gas companies to work with one another, and with local tech firms, to augment their technological capacities. African companies also should be pursuing partnerships with foreign investors that are open to technical knowledge and skills transfers. Billions at Play describes the successes that Angola-based Friburge Oil & Gas has had partnering with international technology providers to drive efficiency and environmentally friendly production methods. We need to see more companies doing the same. Governments can support these efforts through local content policies that call for knowledge sharing, along with the creation of educational initiatives and public-private partnerships.
Long before the unthinkable happened, and COVID-19 changed our world, I made a case for strategically harnessing Africa’s oil and gas resources to create stability and economic growth. Now, because of the pandemic, we find ourselves in a difficult place with extremely low oil prices and faltering economies. As a result, some of those strategies I’ve recommended may have to go on hold. Nevertheless, the steps I’ve put forth to help us reap the full benefits of our petroleum resources will still have merit when we emerge from this trial. If we start preparing now to set them in place, they’re even more likely to be successful.
*NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group, and the author of several books about the oil and gas industry in Africa, including Billions at Play: The Future of African Energy and Doing Deals.
The Book Can Be Found Here: https://amzn.to/3b2Szk9
*Source Africa Energy Chamber
The Ministry of Mines and Hydrocarbons grants Historic Two-Year Extensions to Oil & Gas Exploration Companies in Equatorial Guinea
May 4, 2020 | 0 Comments
|The MMH will also ensure flexibility on the work programmes of producing companies to ensure growth and stability in the market|
MALABO, Equatorial Guinea, May 4, 2020/ — In the face of the COVID-19 global pandemic and its consequences on oil prices and African economies, the Ministry of Mines and Hydrocarbons (MMH) of Equatorial Guinea has signed a Ministerial Order granting oil & gas companies a two-year extension on their exploration programmes. The MMH will also ensure flexibility on the work programmes of producing companies to ensure growth and stability in the market.
“The Ministry of Mines and Hydrocarbons remains concerned about the resounding impact of the drop in oil prices, Covid-19 and its dramatic consequences on our hydrocarbons industry. At a time of great uncertainty, we have an obligation to make bold, decisive, and pragmatic policy decisions to get the industry moving again,” stated H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons. “Our government is fully committed to safeguard our local oil & gas industry, its companies and its employees. The granting of these extensions has been deemed suitable to create an enabling environment for international and African companies to keep investing in Equatorial Guinea and ensure a quick recovery of our industry.”
In addition, the MMH will continue working with oil companies benefitting from such incentives to make sure that the recovery of Equatorial Guinea’s oil sector is made on the back of local content promotion, increased technology transfers, and procurement of additional local goods and services. A particular emphasis will be put on educating, training and promoting local workforce to help further reduce operational costs for international companies while maximising the creation of local value and revenue.
With these proposals, the MMH maintains and guarantees existing investments into Equatorial Guinea, while empowering local companies to assist their foreign partners in safeguarding and increasing their operations in the country. Some of these companies operating in Equatorial Guinea notably include ExxonMobil, EGLNG, Marathon Oil Corp, Atlas Petroleum, Kosmos Energy, Noble Energy, Glencore, Royal Gate Energy, Gunvor, Trident Energy, etc.
Such historic measures are being rolled out as Equatorial Guinea implements a series of landmark projects across its upstream, midstream and downstream industries. The backfill project is already ongoing to pool supply from stranded gas in the Gulf of Guinea and replace declining output from the Alba Field. Meanwhile, the ongoing Year of Investment has generated strong interest from various existing and new players in Equatorial Guinea to build and expand midstream and downstream infrastructure and maximise local processing and transformation of domestic crude oil and natural gas.
Coupled with a friendlier business environment and market-driven policies allowing companies to operate amidst current market conditions, Equatorial Guinea is positioning itself for quick recover and already laying the bases of a strong economic growth in the years to come.
Africa’s Commonsense Energy Recovery: How Africa’s Oil & Gas Industry can bounce back from the COVID-19 and the Oil Price War
April 28, 2020 | 0 Comments
|The impacts of the current crisis are wide and affecting both Africa’s most promising exploration prospects, but also its multi-billion-dollar landmark projects|
The double crisis of the COVID-19 pandemic and the collapse in oil prices is taking a toll on African economies and the African energy industry. An unstable and precarious oil prices environment has resulted in substantial cuts in state budgets and public spending, in losses of contracts and hundreds of thousands of jobs put at risk. Because bouncing back from this historic crisis will require strict and bold government action, the African Energy Chamber has released today its Call to Action, detailing 10 measures that form a commonsense energy agenda for Africa, which is now accessible to download for free at www.EnergyChamber.org.
The impacts of the current crisis are wide and affecting both Africa’s most promising exploration prospects, but also its multi-billion-dollar landmark projects such as BP and Kosmos Energy’s Greater Tortue Ahmeyim (GTA) LNG project in Mauritania and Senegal or ExxonMobil and Eni’s $30bn Rovuma LNG project in Mozambique. Oil projects are suffering even more. In Ghana, the development of the Pecan Field has been thrown into very uncertain waters. Aker Energy cancelled its letter of intent sent to Yinson Holding this year to charter, operate and maintain the Pecan FPSO, set to be Ghana’s next big oil offshore development. Woodside Energy’s Sangomar Offshore Oil Project, Senegal’s very first oil venture that was sanctioned early this year, will be facing financing delays. FID on Shell’s Bonga South West Aparo project in Nigeria, for which the invitation to tender was released to contractors early last year, could also not see FID this year. Delays in the execution or sanctioning of these projects will severely impact African economies whose local goods and services were set to benefit from billions of dollars of subcontracting opportunities.
“Our commonsense approach advocates for measures that will support the continuity of business operations and future sector growth. The oil and gas industry will only work for Africans when we set fair policies and treat oil and gas companies as partners who drive our progress,” declared NJ Ayuk, Executive Chairman at the African Energy Chamber. “As the voice of the energy industry, we will continue to work with the public and the private sector and other stakeholders to revitalize the African oil and sector by putting Africans back to work,” added Ayuk.
While the immediate impact on the continent’s biggest oil & gas project is already being felt, a much bigger one will result from the deferral or cancelling of drilling plans. Across oil & gas basins, drilling projects are being put back on the shelves or terminated. It is the case of Valaris’ drilling activities for Chevron in Angola, of BW Energy’s drilling operations on the Marin Dussafu Permit in Gabon, of the much-awaited exploratory drilling by FAR in The Gambia, of early termination of drilling works of Maersk in Ghana’s Jubilee and TEN Fields, or of Tower Resources’ force majeure on the Thali PSC in Cameroon. No country is sparred, and such delays will further defer discoveries of new fields, and development drilling to ramp up Africa’s daily output.
Since the beginning of the COVID-19 pandemic and its subsequent effect on oil demand and prices, the African Energy Chamber has been leading the dialogue between the public and the private sector on advocating for measures to support our industry and its jobs. While the Chamber believes that market forces need to determine the industry’s future and advocates for limited government across the industry, the time calls for urgent actions. We cannot let our companies and industry collapse for the fear of loosing jobs and investments that would sustain our economies for decades to come. It is worth bearing in mind, that activity in and income from Africa’s energy sector generates significant amount of demand and services from other non-oil and gas sectors of the economy.
Key measures amongst the Africa’s Commonsense Energy Agenda released today are the extension of PSCs and work program adjustments to boost exploration and ensure the resumption of drilling activities. While exploration is a major part of our Call to Action, the Chamber also strongly advocates for tax relief on services companies, reforms of upstream fiscal regimes, banking and financial support, regional content development, incentives to infrastructure projects, and bold actions on removing fuel subsidies.
The African Energy Chamber will continue to call on governments, regulators and private companies to work together on finding the right solutions that work for their country and operations. We have the tools in our hands to quickly open new markets for our oil and gas businesses and create new jobs for our continent.
*Africa Energy Chamber
Uganda underlines its intention to become a major oil and gas player
April 28, 2020 | 0 Comments
This will automatically catapult Uganda to become East Africa’s biggest crude producer and provide much needed income for development and good paying jobs
President Museveni, Tullow Oil and Total’s CEOs could not have chosen a better time to announce their agreement to resolve a long-standing capital gains tax dispute that had earlier prevented Tullow Oil from farming out its Lake Albert licenses to Total.
Oil junior Tullow Oil announced that it has agreed the sale of its entire stake in the Lake Albert Development Project in Uganda to oil major Total for US$575 million in cash plus post first oil contingent payments. This is welcomed news for both companies, Uganda, and the oil industry globally and in Africa in particular, all of which are going through a period of distress in the face of Covid -19 and crude oil prices crash.
This will automatically catapult Uganda to become East Africa’s biggest crude producer and provide much needed income for development and good paying jobs. Current estimates by the world bank expect Uganda to register growth rates of over 10% per annum resulting from oil production and associated activity. “This deal shows a lot of foresight to make an acquisition of this nature for such an amazing but reasonable price. The resolution of disputes that paved an opening for this deal should be commended. President Museveni, Tullow Oil and Total understood that being proactive and making concessions is good for Uganda, jobs, contracts for locals and regional growth,” stated NJ Ayuk, Executive Chairman of the African Energy Chamber.
Most importantly, the deal sends the right signals to the market and investors, that despite the current challenges, Uganda is open and ready to do business. In line with the African Energy Chamber’s appeal to governments to show flexibility in appraising existing projects within the realities of the current business environment, the Government of Uganda with the direct involvement of H.E President Yoweri Kaguta Museveni was willing to cede ground and close the deal. This is good for Uganda and an example for other African countries facing the oil crisis to follow. It is likely to have positive effects far beyond the current crisis, with ever more explorers and oil companies likely to take another look at Ugandan acreage in an attempt to replicate Tullow Oil’s discovery successes.
The deal is also a huge boost for the construction of a pipeline that will transport the crude to international markets. “The proposed Uganda/Tanzania pipeline (East Africa Crude Oil Pipeline) in itself will not only lead to additional jobs being created, it will also render the entire country viable as a major oil frontier. It is a big win for the local and regional oil and gas industry and propels the East Africa region in playing a role in helping the energy sector rebound,” said Elizabeth Rogo, President of the Africa Energy Chamber for East Africa.
We are likely to see other oil companies like Oranto Petroleum drill additional exploratory wells in adjacent blocks, in an effort to take advantage of the pipeline infrastructure. The pipeline also increases the attractiveness of oil blocks located in the south of oil producing neighbouring South Sudan. Potential discoveries there are now likely to fetch a lower breakeven point, due to reduced piping costs via Uganda.
Whilst acknowledging the willingness of the Government of Uganda to compromise on this particular tax dispute, thus enabling this ground breaking transaction. The African Energy Chamber continues to advocate for additional special measures that will facilitate a Final Investment Decision by Total and its partners, and the deployment of capital to other drilling and geophysical projects in Uganda in the current business climate. We urge the government to continue working with the industry to improve the business climate for more oil and gas investments.
Equatorial Guinea to grant extensions to Exploration companies and flexibility to producing companies on work programs and capital expenditures
April 28, 2020 | 0 Comments
|Equatorial Guinea will launch new petroleum regulations to support its hydrocarbons industry with emphasis on improving local content|
H.E. Gabriel Mbaga Obiang Lima shares Equatorial Guinea’s plans in working through the current state of global oil markets in a webinar hosted by Africa Oil & Power in partnership with the African Energy Chamber (www.EnergyChamber.org) on 27 April 2020; Equatorial Guinea will launch new petroleum regulations to support its hydrocarbons industry with emphasis on improving local content; The Ministry of Mines and Hydrocarbons is pushing forward with its Year of investment initiative and plans to make project announcements in Q4 2020.
During a webinar hosted by Africa Oil & Power in partnership with the African Energy Chamber and the Ministry of Mines and Hydrocarbons of Equatorial Guinea, H.E. Gabriel Mbaga Obiang Lima, the country’s Minister of Mines and Hydrocarbons (MMH) provided key insight on the country’s plans in working through the current state of global oil markets and the COVID-19 pandemic.
Considering 2020 and 2021 ‘the lost years’ amid the low oil price and COVID-19, H.E. Gabriel Mbaga Obiang Lima, stressed the importance of flexibility and taking a realistic approach in order for oil producers all over the world and, especially in Africa to recover from the downturn – a message well in line with the African Energy Chamber’s Commonsense Agenda for the Oil & Gas Industry, released today.
Maintaining his optimism, the minister said to the attendees of the webinar that: “I believe this pandemic presents new opportunities for the African continent. It is a new opportunity because some of the historical services operators are leaving countries with the resources and they are having to realize that they have to do the work themselves.”
“This is a chance for African entrepreneurs to enter the market and operate their installations themselves rather than waiting for the pandemic to end. It is a great opportunity but, with this great opportunity, we still need to be realistic,” he added.
In taking a realistic approach, H.E. Gabriel Mbaga Obiang Lima said with the second half of the year rapidly approaching, small African oil producing countries needed to focus on research and development, give license extensions and look at 2021 as the year of rethinking. In doing this, the minister provided that Equatorial Guinea would see new legislation announcements which would include the limitations of expatriates which will be for three years and, encouraging the national service industry to take responsibility and prepare for the rebound.
“The other regulation that we are planning to launch this week is mineral and petroleum regulation,” the minister announced. The launch of this regulation will allow the MMH to develop on its mining industry and see that there is a good deal of local participation in the sector.
Next month, the MMH will also release a new petroleum regulation that will focus on its downstream sector. “This is really what we believe will be the future for our oil and gas industry. The refining and downstream is key because it can create a lot of jobs and it is about time that we processed our resources in-country,” said the minister.
On how local content policy will change under new legislation for IOCs and NOCs , he said there will be contracts and projects that will have to be 100 percent Equatoguinean. This will be implemented in the upstream, downstream and petrochemicals sector.
Moving ahead, the MMH will push three key messages to national oil companies (NOCs) and international oil companies (IOCs):
The need to maintain shareholder value which will benefit the people of Equatorial Guinea and ensure that revenue generation is maintained.
Ensuring the safety of operations for the workers who have continued amid the COVID-19 pandemic.
The importance of maintaining and supporting the relationships between NOCs and IOCs, certifying that both sides work through the challenges together.
With a central focus on now being the time for local industries to enter the business of oil and gas, H.E. Gabriel Mbaga Obiang Lima said for Africa to be competitive in the global oil and gas industry, it needed to get in control of its resources.
“We could take this opportunity and not just be involved in the extraction of our resources but in the processing and the marketing sectors because, very few Africans are involved in this aspect of the oil and gas business,” explained the minister.
With 2020 having been declared as Equatorial Guinea’s Year of Investment (YoI), the MMH had maintains that the initiative is still important for the country’s development and it will continue and lead into 2021 focusing on its petrochemical advancement.
“By the fourth quarter of this year, I should be able to announce the different projects that we will be doing. For example, the [gas] backfilling, we will have the first production of [gas] backfilling in November and we expect to have the ground breaking on some of our refinery projects,” he revealed.
“The African Energy Chamber congratulates H.E. Gabriel Mbaga Obiang Lima for the measures he has taken to assist exploration companies with extensions and production companies with delaying work programs,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “This is in line with our African Energy Commonsense agenda for the oil and gas industry released today that aims to support the continuity of business operations and future sector growth,” he added.
The African Energy Chamber’s African Energy Commonsense Agenda is now available for free download on the homepage of www.EnergyChamber.org
The African Energy Chamber (AEC) (www.EnergyChamber.org) is the voice of Africa’s energy sector
The leading chamber of successful networks, transactions and partnerships at the helm of Africa’s growing energy industries. The AEC actively promotes the interests of the African continent, its companies and its people.
Partners of the African Energy Chamber have the power to shape Africa’s energy future by promoting growth, fostering collaboration, shaping policy, and providing leadership and guidance in the fast-growing energy sector.
A Second Term for a Champion of African Energy, Entrepreneurs and Everyday Africans
April 19, 2020 | 0 Comments
|The President of the African Development Bank (AfDB), Dr. Akinwumi Adesina, is running for a second term.|
JOHANNESBURG, South Africa, April 19, 2020/ — The African Energy Chamber (www.EnergyChamber.org) supports the re-election of Dr. Akinwumi Adesina for a second term as President of the African Development Bank; Under his leadership, electricity access and sustainability have been key to the bank’s financing and development strategy; AfDB must understand that it is a free enterprise system based on the values of individual initiative, hard work, risk innovation and profit that will build our continent and help us achieve economic empowerment, become self-sufficient and walk away from aid. Mr Adesina represents the future.
The President of the African Development Bank (AfDB), Dr. Akinwumi Adesina, is running for a second term. The African Energy Chamber has from time to time disagreed with the AFDB, but we believe it is a force for good in Africa and we have seen a lot of changes under Dr Adesina. The African Energy Chamber endorses and supports the candidacy of this champion for energy in Africa, based on a sterling record in his first term, and his prioritizing of electricity access as a pillar of the bank’s activities. Energy poverty is a challenge and he is the best suited person to confront this challenge.
Dr Adesina brought strong experience of private-sector led growth and wholesale reform from his successful tenure as Nigeria’s minister of agriculture from 2011 to 2015. As president of AfDB from 2015, he led comprehensive much needed reform programs and new initiatives that have put the bank at the forefront of African development financing on the global stage. Dr. Adesina has worked hard to bring an independent voice to the African Development Bank that believes in free markets principles and good governance. His fight for accountability and responsibility in all facets of the AFDB have brought positive changes not only to the AFDB but to everyday Africans and the results are impressive.
Key initiatives have included the decentralization of AfDB’s activities to regional offices, the launch of the Africa Investment Forum in 2018, and significant progress towards meeting the African Union’s 2063 goals through the bank’s High 5 strategic priorities – one of which is ‘Light Up and Power Africa’. Through its work in this area, AfDB has helped bring power access to 18 million people.
The Africa Investment Forum, held for the first time in 2018 in Johannesburg, mobilized $38.7 billion of investment into Africa, and $40.1 billion in its 2019 edition.
“Dr. Akinwumi Adesina’s achievement is twofold. He has positioned and firmly established the African Development Bank as the primary actor in development financing in Africa, with a huge emphasis on energy and a reform-based, private-sector led approach. He has matched this with a commitment to putting people first.,” said NJ Ayuk, Chairman of the African Energy Chamber.
“For many years, the AFDB did not mean much to everyday Africans, the energy sector and African businesses. Dr Adesina changed that and over the last few years, his uncanny ability to transcend and embrace Africa’s diversity has been a huge plus to the continent. The coalitions he has built with Americans, Europeans, Asians have all been for the benefit our continent and improving quality of life in a huge way for millions of people through investments in electricity access and its advocacy for energy sustainability.” Added Ayuk
Under Dr Adesina’s leadership, the AfDB has supported the building of renewable energy facilities. It has been a steady voice in promoting the responsible use of Africa’s energy resources and action on mitigating the impact of climate change on African economies.
“Africa should use what it has and not what it doesn’t have. We have limitless sunshine and great potential for wind, hydro and geothermal,” he said on the sidelines of the COP22 climate change conference in 2016. “We need a balanced energy mix. Some African countries have gas and coal, which can be used in a clean way, and they should use it.”
The challenges facing millions of Africans with from Covid 19, infrastructure deficit, energy poverty, transparency and economic diversification are greater than ever before, and Africa needs individuals like Dr Adesina in leadership positions to help the AFDB better serve this continent that many of us call home.
It is with careful consideration that the African Energy Chamber and the private sector supports another term for Dr. Akinwumi Adesina, a man of compassion, integrity, and action as President of AfDB for a healthier and a more hopeful Africa
God Bless Africa
|*African Energy Chamber|
The African Energy Chamber interviews Leoncio Amada NZE, its new Executive President for the CEMAC region
April 14, 2020 | 0 Comments
|He addresses key topics including the inclusion of women in the energy industry, the importance of local content policies|
MALABO, Equatorial Guinea, April 14, 2020/ — The African Energy chamber’s new Executive President for the CEMAC region, Mr. Leoncio Amada NZE examines the current state of the Equatoguinean energy industry amid the COVID-19 pandemic and the oil price war. He addresses key topics including the inclusion of women in the energy industry, the importance of local content policies and the creation of enabling environments that are attractive to foreign investors.
Under the leadership of H.E. President Teodoro Obiang Nguema Mbasogo, Equatorial Guinea has grown and still has a bright future for its oil and gas industry. As the Ministry of Mines and Hydrocarbons of Equatorial Guinea pushes forward with its Year of Investment campaign, what can we look forward to?
The Year of Energy initiative launched in 2019 by the Government of the Republic of Equatorial Guinea through the Ministry of Mines and Hydrocarbons was a great success for the country. This initiative made Equatorial Guinea the hub of the oil and gas industry at an African level, through the organization and hosting of conferences with international reach, including the APPO CAPE VII Conference, The Oil and Gas Meeting Day and the 5th GECF Summit.
These international events showed the world the great potential of the country as a destination for foreign investment and put into perspective the opportunities and benefits that Equatorial Guinea offers to foreign investors.
With the efforts deployed by the Ministry of Mines and Hydrocarbons during the Year of Energy, EG-Ronda (the bidding round) carried out in 2019 was successful. It notably resulted in the concession of 9 oil blocks to internationally-renowned companies and, for the first time the country’s history, 15 mining blocks were granted.
The Year of Investments 2020 is build-up on the Year of Energy, through which the government intends to diversify and strengthen the national oil sector through the implementation of downstream and infrastructure projects such as the construction of two modular refineries, of a methanol-to-gasoline plant, of strategic storage tanks for refined products, etc. All these projects are aimed at creating jobs for the locals, promoting energy security in the country, and achieving the transfer of technology in favor of local companies that would work in collaboration with large multinationals in the execution of these projects.
All these initiatives allow us to affirm that the hydrocarbon sector will continue to be the locomotive of the Equatoguinean economy for many years to come.
For many years, Equatorial Guinea has been exploiting its resources and exporting them. What is the importance of the country focusing on developing its midstream in order to add value to its industry?
Oil has been and remains a blessing for Equatorial Guinea. Revenues from oil exploitation have allowed the country to build basic economic infrastructures such as airports, ports, highways, power plants, drinking water systems, social housing, etc. However, upstream activities are capital intensive. Although they generate a lot of money for the companies involved and the host governments, they do not generate many jobs as most of the operations are automated.
Hence the importance of promoting and developing the midstream segment in order to locally process and transform part of the crude oil and gas that the country produces. In doing so, related sectors and industries are created, generating more local jobs and encouraging the creation and entry of local companies in the value chain.
Last year, the Department of Local Content launched its first ever CSIR book in order to highlight the socio-economic contributions of the oil and gas industry over the last 25 years. How can Equatorial Guinea build on the contributions of projects such as the Bioko Island Malaria Elimination Project, the Bioko Biodiversity Protection Program and the Baney District Hospital Project which covered malaria reduction, healthcare, access to clean water and infant mortality rates?
Equatorial Guinea’s oil and gas industry has been very instrumental in supporting the national government in the realization of projects with a social impact throughout the national sphere. This includes the construction of educational centers, hospitals, playgrounds, drilling of water wells and more. The Malaria elimination project in Equatorial Guinea, financed by the Ministry of Mines and Hydrocarbons together with the oil companies and implemented by the Ministry of Health, is also of great importance to the country.
Furthermore, with the support of the government, the laboratory in the city of Baney (also financed by the oil sector) has become the spearhead in the strategy for the fight against COVID-19. The center has been certified by the WHO and has the capacity to carry out more than 150 COVID-19 tests per day.
These type of social policies and projects must be equally supported, financed and accompanied by national companies in the oil sector. To do this, it is necessary to look further into local content policies and encourage the creation of dynamic, efficient, and profitable local companies that are capable of competing at the international standards levels required by the sector in which we operate.
Through its Gas Mega Hub project, Equatorial Guinea plans to deliver on expectations of successful cross-border gas cooperation. How do you foresee the COVID-19 pandemic impacting these plans?
The Mega Hub Gas Project is an ambitious and innovative project within the policy of zero gas flaring promoted by the Ministry of Mines and Hydrocarbons.
Its conception, planning, and execution are being carried out within the framework of the expectations that the parties involved agreed upon. The destruction of global oil demand caused by the COVID-19 pandemic, combined with the oil price war between Russia and Saudi Arabia, have brought oil prices to very low levels in the international markets. This dynamic can jeopardize certain investment projects that many companies have in their portfolio. The current situation will force many companies to cut investment projects to try to navigate the crisis that is plaguing us if the host governments do not activate supportive mechanisms in favor of the oil sector. We trust that this is not the case of the Gas Mega Hub project, since it is of great significance for Equatorial Guinea and the subregion.
The Ministry of Mines and Hydrocarbons announced that it was waiving fees for oil and gas services companies operating in the country amid the oil price war and the ongoing COVID-19 pandemic. How does this move encourage further investment and continued relationships with major companies?
We are facing an unprecedented crisis with disastrous and unpredictable consequences to the oil industry, in combination with the historical fall in crude oil prices in the international markets to levels only seen during the Gulf War.
The measures adopted by the Ministry of Mines and Hydrocarbons come at a time when both the service companies and the oil industry in general are going through very difficult times.
The Ministry of Mines and Hydrocarbons has been very proactive. However, we believe that other institutions and departments of the public administration should adopt similar reactions and initiatives to support the oil and gas sector as a whole. This could occur through production and service companies safeguarding the operations and stability of the oil sector, on which the country’s GDP depends at 91%. This is a task that appeals and requires the sense of responsibility of all the actors involved.
Governments play a key role in seeing through the growth and development of the sector. What can African governments do more to support oil and gas companies in order to increase the pace of exploration and production?
In any sector or economic activity, foreign and local investment are directed to those areas and places where the returns on investment are acceptable for people who decide to risk their capital. The same is true in the oil sector. African governments need to be much more flexible when it comes to fiscal terms of oil contracts, especially in the exploration and development phases to attract investment. To maintain the production plateau over time, investment in exploration is required. For this to be possible, the fiscal terms of oil contracts must be even more flexible in these times of crisis.
In encouraging investors to enter African markets for the development of the oil and gas industries, what is the role of policy certainty in creating enabling environments and boosting investor confidence?
Foreign investment is directed to places where there is a perception that the invested capital is protected, and the rules of the game are transparent, respected, and applicable to everyone. It is in this sense that African countries must insist and work on the consolidation of the rule of law, transparent, stable and predictable fiscal frameworks, and finally, respect for the sanctity of contracts. All these factors contribute to the creation of a stable business environment that attracts foreign investment and generates confidence.
Where does change need to begin in order for us to see more women in senior-level positions in Africa’s energy industry?
A society that marginalizes half of its population cannot reach its full potential.
We can extrapolate the same analysis to the oil and gas industry. We believe and know that women have a lot to offer to our industry. There are talented women on the African continent, capable of holding positions of leadership and direction in the African oil industry. We have started to see few women in management positions, but we believe that is not enough. We might need to have a local content policy based on women empowerment in the oil and gas sector. More can and should be done.
We men in the African oil industry are fathers of women, sons of women, and husbands of women. We would like our daughters and spouses to access leadership positions in any sector as long as they have the necessary skills and experience for such a position. Men have a responsibility to model this change.
Africa still lags behind the rest of the world in education and skills development, how can the continent utilize its hydrocarbons industry to foster wider economic growth?
The African oil sector can and has the necessary capacity and resources to improve and promote quality education, the use of new technologies, and the promotion and incentivization of private initiative. All of this is possible through the implementation of a rigorous and coordinated local content policy to ensure technology transfer.
As the climate change debate continues, what does global pressure to move towards a renewable energy focused energy mix mean for countries across Africa that are still plagued with energy poverty?
The debate on climate change is very important and with far-reaching socio-economic implications for all countries and continents.
From my point of view as an African businessman in the hydrocarbon sector, I would say that climate change is undoubtedly real and affects us all. Arguably, we all have a moral obligation to do something to reverse the situation.
We also have to be aware of our socioeconomic reality. Africa is the continent that pollutes the least. Yet, it is the least industrially and technologically-developed continent. It is also the continent with the least financial resources to invest considerably in renewable energy in such a way that they have a real impact on our energy basket. Oil and gas continue to be the main source of income and engine of development for African countries. We can be asked to contribute to the fight against climate change, but we do not believe that it is reasonable to ask our governments and people to compromise or risk economic development under the pretext of fighting against climate change.
We have to strike a pragmatic balance between the efforts we have to make in the fight against climate change and the real needs of our people.
*Africa Energy Chamber
COVID 19 AND PRICE WAR: WHY NOW COULD BE A GOOD TIME FOR U.S. INDEPENDENT OIL AND GAS PRODUCERS TO CONSIDER OPPORTUNITIES IN AFRICA
April 14, 2020 | 0 Comments
By NJ Ayuk*
It isn’t breaking news that the world is currently in “lock-down mode.” Around the globe, the COVID-19 pandemic has made conditions dire and triggered global economic shutdowns.
For the oil and gas market, it has been an especially trying time. As our global society battles the virus, demand for oil and gas has plummeted. In fact, April 2020 could see a drop in oil demand by more than 30 million barrels a day. To put that into perspective, that represents a third of the world’s daily use.
Now add an oil price war that has had Saudi Arabia and Russia increasing oil production and battling for market share since March 8, and you have a perfect storm. In March, the benchmark WTI and Brent each fell more than 50 percent. In the first quarter overall, WTI fell 66 percent and Brent dropped 65 percent.
The once-prolific shale operations across the U.S. are now seeing abandoned projects that have little to do with social distancing. Generally speaking, the hydraulic fracturing (“fracking”) process that has become the industry standard in shale production is expensive—meaning the ultralow oil prices make the process cost-prohibitive at the moment. Whiting Petroleum in North Dakota’s Bakken is today’s poster child for the current state of that segment: After topping $150 a share just a few years ago, the producer’s stocks took a nosedive to close at 67 cents on March 31. The following day, the former shale giant filed for bankruptcy.
I won’t deny that this situation is grim, but it is not a reason to panic. The oil and gas industry is cyclical by nature, and downturns come with the territory. While the situation we find ourselves in now is unusual, there certainly is precedent for recovery.
Already, we’re seeing reasons to be hopeful: The oil price war appears to be drawing to a close. Russia and Saudi Arabia reached a tentative deal on production cuts during an April 9 OPEC meeting, and other producers may soon follow suit with cuts of their own. The situation is still fluid, but it looks promising. As for the lack of demand caused by COVID-19 lockdowns, no one can say how long it will last. But it won’t last forever.
For now, I have some advice for the U.S. drillers striving to get through this challenging period: This could be a good time to take a fresh look at Africa. When I wrote my book, Billions at Play: The Future of African Energy and Doing Deals, I explained how the American shale boom affected the presence of American oil and gas companies in Africa. By that time, 2019, many U.S. companies had exited or reduced their footprint in Africa to focus on U.S. shale production. It could be that the factors that made shale a more profitable option than production in Africa no longer exist.
I realize overseas operations may sound counter-intuitive to companies that are slashing their budgets, but there are sound business reasons behind my recommendation. In particular, the low cost of production should be considered: Deepwater wells have been drilled for less than $50 million in Angola. Plus, Africa’s rich resources still represent opportunity, including a wealth of natural gas waiting to be discovered.
Lower Profit Price Point
Oil produced in the U.S. needs to sell for at least $30 to $50 to be profitable. In contrast, I believe that it’s possible to make a profit selling African oil for $25 to $30. Quite simply, it’s cheaper to obtain assets like oil and gas mineral rights and oil field licenses in Africa. What’s more, the revenue that can be obtained from the assets is higher. The cost of production is typically much cheaper. As I noted in my book, the past few years have seen significant drops in E&P costs in Africa: Rig rates have come down, and the efficiency of drilling has improved. Plus, drilling is being conducted in more favorable conditions: Drillers are avoiding high pressure, high temperature, and ultra-deepwater plays.
Less red tape
U.S. Independent producers doing exploration and production activities have fewer regulations in Africa, which potentially could make operations less costly. Plus, one positive “side effect” of our current economic challenges is a renewed dedication on the part of several African petroleum and energy ministers to strengthen cooperation, promoting synergies, intra-African trading, and knowledge exchange. This could spell significant ease for multinational efforts in Africa.
Africa is Still Underexplored
Possibly the best case for encouraging activity among African fields is all this untapped potential. The continent is truly one of the last promising regions for both offshore and onshore oil production. Four years ago, the U.S. Geological Survey estimated that were 41 bbo and 319 tcf of gas waiting to be discovered in sub-Saharan Africa. It’s still waiting!
Even during times of economic difficulty, including the Great Recession, natural gas consumption has increased. Natural gas prices are down at the moment, but that could change. Social distancing and shutdowns won’t necessarily impact demand for natural gas long term, since it is widely used to generate electricity; for heating, cooling and cooking; waste treatment and incineration; and as feedstock for a wide range of chemicals and products from butane and propane to fertilizers and pharmaceutical products.
What’s more, the current low prices might actually foster its demand in a post-virus market where we see power generation switching increasingly from coal to natural gas or where natural gas is used as feedstock for hydrogen generation.
These near-term fuel-switching opportunities are expected to be followed by robust LNG market growth in the medium-to-long term.
Consider a Closer Look
My book has in-depth, and very honest information, about the risks of operating in Africa and the opportunities for significant returns. Before dismissing my suggestions, I encourage drillers to utilize this resource.
In short, it would be a mistake for international oil companies to ignore Africa. Many of Africa’s oil and gas fields were discovered and/or established by U.S. companies, from Kosmos Energy’s discoveries in Ghana and offshore Senegal to VAALCO Energy’s success offshore Gabon. They took a chance in these frontier markets—and their investments have really paid off.
*NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group, and the author of several books about the oil and gas industry in Africa, including Billions at Play: The Future of African Energy and Doing Deals.
The Book Can Be Found Here: https://www.amazon.com/Billions-Play-Future-African-Energy/dp/1913136345
Oil Industry Welcomes Re-Appointment of H.E. Diamantino Pedro Azevedo in Angola
April 9, 2020 | 0 Comments
|The industry has welcomed the Minister’s reappointment and the continued confidence and trust placed on him by President João Lourenço|
| LUANDA, Angola, April 8, 2020/ — The Angolan and African energy industry has welcomed the reappointment of Diamantino Pedro Azevedo as Minister of Mineral Resources, Petroleum and Gas of the Republic of Angola by President João Lourenço today.|
The industry has welcomed the Minister’s reappointment and the continued confidence and trust placed on him by President João Lourenço. Diamantino Pedro Azevedo was first appointed in September 2017, and has since then overseen a complete regulatory overhaul of Angola’s oil & gas sector. This notably includes new frameworks for marginal fields development, gas developments, licensing rounds and domestic capacity building.
“Minister Diamantino Pedro Azevedo has always ensured that our industry has a strong voice in Angola, Africa and across the world. We have seen him advocating for our interests and those of the continent at OPEC, and ensuring that our positions are heard and respected,” stated Sergio Pugliese, President for Angola at the African Energy Chamber. “Meanwhile, his support for a stronger industry dialogue between local companies, international oil companies and state institutions has renewed interest into major projects across the value-chain in Angola. We are delighted to see him continue leading our industry,” concluded Mr. Pugliese.
Under the leadership of President João Lourenço, Diamantino Pedro Azevedo has been a champion of key industry reforms in Angola, and managed to put back Angola’s oil & gas sector on track. The country has renewed its collaboration with all major investors over the past few years, including Total, Eni, BP and Chevron. Renewed engagement has translated into new discoveries, new final investment decisions and new fields being brought on stream.
At the end of 2017 for instance, Angola agreed on the contractual conditions for the development of Total’s Zinia Phase 2 development and its entry into block 48 with Sonangol. The negotiations resulted in the FID on the $1.2bn Zinia Phase 2 deep offshore development in May 2018, and the extension of the block’s license until 2045. Total also eventually started up production of Kaombo in Block 32 in July 2018 with the bringing on stream of the Kaombo Norte FPSO, followed by that of Kaombo Sul in April 2019. In December 2019, the French major further acquired interest in Blocks 20/11 and 21/09 on the back of more attractive fiscal and regulatory terms.
The same goes for BP, who signed an agreement with Sonangol in 2018 paving the way for an FID on the Platina field development in Block 18 and the extension of the bloc’s license until 2032. Finally, Angola formed a Natural Gas Consortium joint-venture last year with Eni, Chevron, Total and BP to to invest $2bn in gas exploration and LNG development projects and ensure supplies to the Soyo LNG plant.
*Source Africa Energy Chamber
Centurion Law Group Launches COVID-19 Legal Updates Series
April 9, 2020 | 0 Comments
|Centurion Law Group has launched a series of legal updates where it will be providing the latest updates and insights on in-country changes in legislations and regulations|
|JOHANNESBURG, South Africa, April 8, 2020/ — The series will provide an overview of the current state of affairs in Equatorial Guinea, South Africa, Mauritius, Ghana, Cameroon, Angola, Nigeria and Zambia; Centurion (https://CenturionLG.com) continues to push its on demand legal service, Centurion Plus during the COVID-19 pandemic.|
In the midst of the COVID-19 pandemic, Centurion Law Group has launched a series of legal updates where it will be providing the latest updates and insights on in-country changes in legislations and regulations.
Centurion will focus on categories including employment, tax, immigration, corporate and general matters in Equatorial Guinea, South Africa, Mauritius, Ghana, Cameroon, Angola, Nigeria and Zambia. The series which provides an overview of the current state of affairs in these countries can be accessed on the company’s website (www.CenturionLG.com) and is now available for free download in PDF format.
“While we continue to urge African governments to roll out measures that ensure that individuals and businesses are able to weather the Covic-19 pandemic with the least amount of distress, we have assumed the duty to progressively provide useful information on the potential impacts of this period, as well as the buffers that exist or are being deployed across the continent, said Zion Adeoye, Managing Director, Centurion Law Group. “We hope these updates will go some way in assisting businesses and individuals to prepare for the fallout of this pandemic and where necessary, our Centurion Plus lawyers are available to assist in real time,” he added
“In addressing the COVID-19 pandemic, a number of African countries have made changes to operations in their key economic pillars,” said Anselmo Eworo, Partner, Centurion Law Group Equatorial Guinea. “As a pan-African law firm, it is our responsibility to ensure that beyond our clients and peers, the people on the ground are also aware and have access to this information. We hope this series can effectively communicate the latest developments in each sector.” He added.
Centurion (https://CenturionLG.com) is a pan-African corporate law conglomerate. Operating at the cutting edge of business practices today, Centurion stands ready to provide outsourced legal representation and a full suite of legal services to new, expanding and established corporations.
Across Africa, Centurion provides a service tailored to your operating environment, the nature and structure of your business, your level of risk tolerance, and your overall objectives. Our alternative billing arrangements provide our clients with a greater degree of certainty about their legal costs.
*Centurion Law Firm
Former Director of State Oil Assets and Entrepreneur Appointed to Lead African Energy Industry Lobby in the Central African Economic and Monetary Community (“CEMAC”) Region
April 9, 2020 | 0 Comments
|Leoncio is based in Malabo where he will act on behalf of the Chamber across all public and private sector energy initiatives in the region|
MALABO, Equatorial Guinea, April 7, 2020/ — The African Energy Chamber (http://EnergyChamber.org) has appointed Leoncio Amada Nze, Founder & CEO of APEX Industries, as its Executive-President for the Central African Economic and Monetary Community (“CEMAC”) which is made up of six states: Gabon, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo and Equatorial Guinea. Leoncio is based in Malabo where he will act on behalf of the Chamber across all public and private sector energy initiatives in the region.
Leoncio’s appointment comes at a strategic time when African oil markets need leadership and unity to preserve the continuity of oil & gas operations across the industry as oil prices crash and economies suffer from lockdowns. It also represents the next phase of growth of the African Energy Chamber in the CEMAC region, where it has already been active for several years.
The CEMAC region is a well-established petroleum province in Africa and one of the biggest producing region of oil and gas on the continent. The region has been at the core of several pan-African energy cooperation efforts over the past few years, especially in the area of gas monetization, and its local services industry has been growing steadily on the back on solid but pragmatic local content regulations. CEMAC countries are currently focusing on gas monetisation efforts to power industries and create jobs, which are key priorities shared by the Chamber and its partners.
In his role, Leoncio will be contributing to key development priorities for the Chamber, especially developing local content and building domestic capacity, gas monetisation, empowering energy investors, and advocating for policy reforms. Furthermore, Leoncio will support initiatives that ease doing business in the region, and promote investments in oil & gas and key segments of the energy industry. He joins the Chamber after a successful career in the public sector as former General Director of State Entities at the Ministry of Mines and Hydrocarbons, and more recently as founder and CEO of private services company APEX Industries.
“Leoncio brings the perfect balance of public and private sector with a strong track record of working collaboratively to resolve industry issues” declared NJ Ayuk, Executive Chairman at the African Energy Chamber. “He understands what it takes to build a private company from the bottom up in our industry, and knows how to engage with government authorities so the interests of the industry are heard. He will be key in the Chamber’s efforts to spearhead a productive public-private dialogue in our industry, and to further promote capacity building and investment around Africa,” he added.
“This appointment is an honour for me and I look forward to working with the most influential energy industry organization in Africa that represents all facets of the oil and gas and renewables industries,” Leoncio Amada Nze said. “What is exciting at this moment are the initiatives and reforms that will make our industry stronger and more resilient that ever. It is time for the local and international private sector in the region to come together and advocate for the future of our industry,” he added.
*Africa Energy Chamber
South Sudan Petroleum Minister Holds Talks with OPEC to Find Solutions on Oil Price War
April 6, 2020 | 0 Comments
|Hon. Puot Kang notably expressed South Sudan’s willingness to work with OPEC and OPEC+ to end the price war in any way possible|
JUBA, South Sudan, April 6, 2020/ — While oil prices rebounded last week on hopes of successful negotiations between Saudi Arabia and Russia, they went back down again today following the negotiations’ delay. Oil prices currently average $25 to $30 a barrel, maintaining their historic low and hurting producers around the world.
Recently appointed Minister of Petroleum of South Sudan, Hon. Puot Kang had talks over the phone with H.E. Mohammed Sanusi Barkindo, Secretary General of OPEC today, to try to find an exit out of the current crisis. Hon. Puot Kang also pledged to join the OPEC negotiations on Thursday April 9th, with the hope of reaching a favorable agreement that will stabilize the market and bring benefit to South Sudan and its producing companies.
South Sudan has been part of the OPEC Declaration of Cooperation and OPEC+ for years and a consistent supporter of OPEC’s measures to prevent volatility and maintain market stability. Because 98% of the economy of South Sudan depends on oil production and revenue, the country is one of the hardest hit by the current crisis and prices war.
“South Sudan believes that market volatility is negative for every player in the market and hurts out ability to attract new foreign investment, diversify our economy and promote peace,” stated Hon. Puot Kang. “South Sudan is focused on boosting exploration and opening up new oil & gas fields, and the current scenario hampers our growth targets significantly,” he added.
Hon. Puot Kang notably expressed South Sudan’s willingness to work with OPEC and OPEC+ to end the price war in any way possible. He also further welcomed OPEC’s support in the exchange of information and best industry practices on key matters pertaining to local content development, domestic capacity building, technology transfers and oil revenue management.
*Africa Energy Chamber
Juggling at the Top: What it Takes to Manage a Pan-African Energy Law Practice in 2020
April 6, 2020 | 0 Comments
|Zion believes that a practical mindset and local understanding is how African lawyers can make the difference in a very competitive industry|
|JOHANNESBURG, South Africa, April 6, 2020/ — At 35, Zion Adeoye is the youngest Managing Partner at an African multi-national law firm. Appointed in 2020 to head the Centurion Law Group (https://CenturionLG.com), Zion embodies a new generation of African lawyers leading the continent into the transformations that will place Africa as the 21st century’s success story. As he reflects on his professional journey so far, he shares his lessons to any young Africans in search of a meaningful legal career on the continent.|
Called to the bar in 2011, Zion holds an LLB from the University of Ibadan in Nigeria and a BL from the Nigerian Law School. Having spent most of its early legal career in Nigeria working on cross-border energy transactions, he moved to South Africa in 2017 to take on the position of Senior Associate Attorney at Centurion, before being promoted to Managing Director this year. “By my third year at the University of Ibadan, I knew what I wanted to do was specializing in Energy Law. In fact, I had an unconventional journey because I completed by NYSC programme at the Nigerian Petroleum Development Company (NPDC) before proceeding to Law School,” he recalls. His early career in Nigeria would then take him to the Tax division of KPMG and eventually to top law firms in Nigeria such as Terra Cotta Legal, Olaniwun Ajayi LP and Templars, before moving in-house at the Transnational Energy/Bresson Power Group. Such experience has offered Zion a decade of expertise in energy, finance and taxation law, which has been the pillar of his success at the Centurion Law Group.
Swimming Against the Current: Beware of the Underdog
As a young Nigerian lawyer working for a pan-African energy law firm, Zion has been in the position of the underdog more than once in his career. “When you are a relatively young energy lawyer in Africa and practice law on a meaningful level, you get used to walking into a room and having people questioning your credibility,” he explains. “This is especially true of the oil & gas industry where a lot of deals are still made outside the continent in big places like Paris, London or New York by lawyers who are twenty to thirty years older than you and very often educated in big international universities. I have quickly learned to trust my African education and experience gained from doing deals on the ground. Trusting your abilities is key if you want to make it in this industry.”
From his experience gained doing deals in Nigeria but also Zambia, Uganda or South Sudan, Zion believes that a practical mindset and local understanding is how African lawyers can make the difference in a very competitive industry. “Do not let your age or gender bring you down. At the end of the day, clients will be judging you on the quality of the work you do. Do not be afraid of being the underdog,” he says.
Leading in Unchartered Territory: the Challenges of a Changing Legal Profession
As the legal profession worldwide enters unchartered territory, it is in need of leaders who understand both the evolving needs of clients, but are also willing to adopt new technologies and innovate to make their practice more efficient.
With the launch of its new on-demand legal services platform, CenturionPlus, the Centurion Law Group is bringing to Africa a new legal approach to solving clients’ requirements on a need-basis. “CenturionPlus is an answer to clients’ demand for more flexibility in the delivery and billing of their legal requirements, but also responds to the increasing complexity of corporate and commercial transactions made in Africa,” explained Zion. “Managing an African law firm in 2020 presents a lot of challenges, especially because our continent is growing so rapidly. You need to make sure your team stays ahead the curve and that your practice is constantly innovating to deliver on clients’ expectations. As a team leader, this requires you to build consensus and align your team around one vision and determination,” he added. Despite a challenging environment these past years, Centurion has remained ranked Band 1 law firm in its key jurisdictions such as Equatorial Guinea while its senior lawyers are constantly recognized for their contribution to the industry. At the end of 2019 for instance, Zion was recognized as an ESQ 40 under 40 Lawyer at the Nigerian Rising Stars Award.
Adapting to Change: Managing Multi-Cultural Relations with Clients and in the Workplace
Often described as one entity, Africa is one of the most culturally-diverse continent on the planet. Its 54 countries speak hundreds of languages, have their own particular legal regimes, and are at different stages of economic growth. Growing a pan-African practice requires a deep understanding of social and cultural nuances across Africa, which many executives often under-estimate. “The oil sector is one of the most internationalized industries so by nature you will be dealing with clients from all over the world willing to invest and do business in African jurisdictions that can be very different from one another,” declared Zion. “Do not make the mistake of thinking that because you have done a deal in Ethiopia, you can do the same deal easily in Ghana. Similarly, having as a client a major American oil company is not the same as working on a transaction for a major Chinese oil company. I have seen many law firms and lawyers making these costly mistakes,” he added.
To address this issue, Centurion has kept regionalizing over the years and currently has offices in Equatorial Guinea, Cameroon, Ghana, South Africa, Mauritius and Germany. It has also diversified its lawyers and attorneys, who currently come from over 10 countries and notably speak English, French, Spanish and Portuguese. “If you want to be successful at managing your law firm, you need a multi-cultural mindset and an understanding that people from different countries and background do business differently and communicate differently,” declared Zion. “I always found that my legal background has been useful in this regard. As lawyers we are used to finding the right balance between technical, financial, commercial and legal aspects of a transaction. Managing your team takes the same approach of arranging different pieces together to attain a common goal.”
With this leadership style, Zion has earned himself a strong reputation among its peers and the firm’s leading clients from across the continent. When asked about what his biggest challenge was on accepting the responsibility of managing the firm earlier this year, he said: “The biggest challenge when you manage a law firm is having two jobs at the same time. As a Managing Director, I have to oversee several support departments such as business development and marketing, along with supporting other lawyers at the firm and coordinating our strategy. But I am also a lawyer with my own practice having to retain our biggest clients.”
*Centurion Law Firm
CenturionPlus helps companies Stay Ahead of the Curve as we grapple with Covid-19
April 1, 2020 | 0 Comments
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.
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
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.”
Angola, Senegal, Cameroon, Ghana and Nigeria among the most hard hit amid Covid-19 and oil price plunge
March 31, 2020 | 0 Comments
|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.
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.
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 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.
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.
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
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