Opinion and Special feature

Turning points in Africa’s oil game

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The hydrocarbon future should be a stellar one, given Africa's rich resource base and investors' interest. 

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Is Africa at a “turning point” in its oil and gas game, for which up to now has broadly been one of strong upward movement in acreage opening, drilling exploration success, oil and gas discoveries, net reserve additions, corporate and capital inflows with rising oil and gas production and growing net exports ?

In the last year or so, few independents have been able to raise easy capital for African upstream ventures while impending global monetary realignments soon to be expected, along with worldwide game-changers in energy (shale gas/oil, Mexico’s oil reform, potential Iranian re-opening) could make this predicament more constrained.

Winter of discontent

The downside in North Africa has had significant negative impact. Libya’s oil industry is in deep trouble. Militias control many oil fields and facilities, while production and exports have tumbled, now posted at below 50% of pre-regime change parity. Major right-holders (Marathon, ConocoPhillips) have signalled intent to exit the prolific Libyan play, with Marathon’s “exit” put on hold by NOC, as a likely precursor to lower-valued asset transfer (a situation that bedevilled Verenex in quieter times). In essence, Libya has acquired the characteristics of a failing state, and the border to the south is almost non-existent and porous, awash with arms and irredentism, plagued by Al-Qaeda’s affiliate notably.

Algeria is yet to fully recover from the In Amenas terrorist attack, while Sonatrach’s gas industry position has come under pressure, even while exercising pre-emptive rights on deals and transactions (recently Petroceltic).

Egypt is in aggravated political turmoil and key gas players have seen their LNG dreams fade while LNG imports or gas from East Mediterranean suppliers are now contemplated.

Tunisia’s oil fields are still unsettled; some encountering strikes and a range of difficulties in the post-Arab “Spring” milieu. A winter of discontent looks more likely than the flowering of investor-friendly stability across much of the Mediterranean shoreline.

Meanwhile exploration across the Sahel is taking strain from this imposed dilemma, as the Mali/Azawad quasi-balkanisation demonstrated: this a state fragmentation only saved with foreign intervention. Risks for holders of acreage and assets in the north of Mali, and across Niger too, have risen and Mauritania is still in the down-cycle that followed on from the Chinguetti failure.

Chad looks less promising than it once appeared and faces downside still in its oil production profile, for now, while it is awaiting new field developments from Caracal and CNPC with which Ndjamena remains in dispute.

The Central African Republic has descended into chaos under the command of insurgent Seleka rebels, instability is widespread, and acreage holders could be at risk.

Sudan is on a sharp economic slide with no ready exit, and Sudapet struggles to find a viable upstream strategy to compensate for the loss of two-thirds of its oil reserves and production to Juba.

Meanwhile the South Sudan authorities’ battle to cope with the establishment of new leasing arrangements for investors in to-be re-demarcated acreage and even to restore production and exports to levels achieved before the acrimonious split, engineered under agreements that rapidly turned to civil conflict around oil-rich Abyei where a recent referendum has not yet the force of law.

The Horn of Africa remains volatile in several locales, Somalia mostly, with risk profiles rising in and around this fragile cockpit of concern even while piracy offshore has partially diminished, only to rear its head in more prolific fashion in West Africa. Somalia is yet to run its mooted bid round and Al-Shabaab is yet to be defeated. Mogadishu has tenuous command of even Mogadishu. 

And then there is Eritrea, a state that has calculatedly excluded exploration players for the last couple of years on Presidential whim, for obscure reasons, and which appears to prefer to go without upstream ventures for the foreseeable future.

Algeria is yet to fully recover from the In Amenas terrorist attack, while Sonatrach’s gas industry position has come under pressure, even while exercising pre-emptive rights on deals and transactions (recently Petroceltic).

Egypt is in aggravated political turmoil and key gas players have seen their LNG dreams fade while LNG imports or gas from East Mediterranean suppliers are now contemplated.

Tunisia’s oil fields are still unsettled; some encountering strikes and a range of difficulties in the post-Arab “Spring” milieu. A winter of discontent looks more likely than the flowering of investor-friendly stability across much of the Mediterranean shoreline.

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