Article written

  • on 21.09.2010
  • at 11:44 AM
  • by Staff

Africa expected to become the third largest producer of oil 5

The African oil and gas energy sector has experienced a certain degree of economic balance on the continent, as most African economies continue to buck global trends by achieving modest GDP growth.

This according to a PricewaterhouseCoopers’ (PwC) survey ‘Energy & Utilities: The Africa Oil & Gas Survey 2010‘.

However, the sector was not immune to the global recession and the uncertain oil price which has resulted in cancellation and deferral of projects, layoffs, cost cutting measures and a general re-evaluation of many companies’ strategies.

Chris Bredenhann, Energy Southern African Leader of PwC says, “International oil consumption decreased approximately 2% in 2009, yet in Africa it remained steady and is expected to grow globally and in African regions by around 2% this year. This means that strategy and long range planning are going to play an important role as oil and gas companies must control costs to bolster growth.”

Africa is rich in untapped natural oil and gas reserves. With recent finds in Uganda and Ghana, the continent is certain to experience a flurry of exploration activity. Furthermore, Africa is expected to pass North America in 2011 and become the third largest producing area after the Middle East and Central/Eastern Europe.

“The energy and enthusiasm surrounding oil and gas in Africa is almost palpable at the many industry events and in our conversations with clients across the continent”, said Bredenhann.

There are constraints to growth that must be carefully considered, however, including: the Proposed Petroleum Industry Bill in Nigeria; the dispute between the government of Uganda and Heritage Oil related to the tax implications of a $1.5 billion deal between Heritage Oil and Tullow Oil; government’s commitment to cleaner fuels and reducing emissions in South Africa; ‘fledging’ Oil & Gas economies in Uganda and Ghana formulating new policies; and Environmental policy changes such as proposals on zero gas flaring in many countries.

Other constraints to growth include the traditional African limitations of poor infrastructure and corruption, attracting and retaining key talent and high set-up costs.

Regulatory concerns are one of the biggest challenges facing respondents to the Energy & Utilities survey, and many participants in the industry have adopted a wait and see approach. But some commentators have a more optimistic view and see the above mentioned regulatory developments as a genuine attempt by African governments to ensure a fairer deal for access to their assets.

The downstream segment of the market in Africa saw BP, Chevron and Royal Dutch Shell announcing exits from the smaller markets in Africa. These assets are being obtained by competitors and new entrants to this segment, leading to a change in the traditional competitive landscape.

Globally, the refining market is in the doldrums with Europe, US and Japan experiencing an oversupply. A drop in refining margins, availability of cheaper alternatives, bio fuels taking some market share from petroleum products, and improved fuel efficiency in passenger vehicles have all contributed to the strain in the refining market. Some refineries in the above markets have been put up for sale or mothballed.

In stark contrast the Middle East, Asia (excluding Japan), Africa, Russia and Turkey have proposed increased refining capacity. Many African countries see increased refining capacity as essential to their own national interests as it allows for a greater security of supply as well as a mechanism to reduce foreign exchange outflows.

Source: Africa The Good New

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  1. […] “Africa is rich in untapped natural oil and gas reserves. With recent finds in Uganda and Ghan…“ […]

  2. david glenn says:

    The issue is not oil,the oil is there,it is too bad that African countries will continue exporting their oil without taking into account Africa’s future needs of energy.How can Africa industralize in the future,when oil -wells dry?
    These quick profits will deprive Africa’s future generations of the energy they will need to survive or do we want to remain importers of indutrial goods,paying for them all our income from oil?


    I congratulate your success in your effort being an oil
    and gas in Africa.

  4. Nancy says:

    irst i completely agree with Glenn Second will Africa new found resource become an golden opportunity to drive its economic engine or just another Resource curse?

  5. great post, i clearly love this web site, continue on it.

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