By Alex C
Natural resources-oil and gas specifically-have played a pivotal in the African growth story. As African countries continue to increase their production of oil and/or gas, revenues from higher prices and the investment that new discoveries are attracting have made a key contribution to growth and developmental initiatives.
As of the end of 2013, proved African oil and natural gas reserves are estimated to be almost 228 billion barrels of oil-equivalent (boe), according to Ernst and Young (EY) latest report tagged “Oil and Gas: driving sustainable growth”. Total reserves were up sharply from the 2012 total of 213 billion boe, due largely to revisions in proved gas reserves, according to the report.
Elias Pungong, Africa Oil & Gas Sector Leader says the African continent has continued this impressive upward trajectory, led by game-changing opportunities in East Africa with Mozambique, Tanzania, Kenya and Uganda leading the way.
While other regions have not been left behind, Pungong says that there have been significant findings in the West Africa transform margin and deep waters along the West African coast.
“We expect this trend to continue, mainly driven by East Africa: both with proven and exploration assets in countries like Mozambique, Tanzania, Uganda and Kenya for proven assets and Ethiopia, Madagascar and the Seychelles for exploration assets. South Africa would become increasingly important with significant exploration activities and we expect to see results during the back end of 2014 and early 2015. With this positive outlook, it is certain that Africa Oil & Gas will continue to play an important role in the African growth story in the foreseeable future as outlined in our report,” Pungong explains.
African drilling activity accounts for a relatively small portion of the global industry total — typically ranging between 4 to 7 percent of the global total. Beginning in late-1999, drilling activity has increased fairly steadily, but sharp downturn following the collapse of oil and gas prices in late-2008.
As of the end of 2013, Baker Hughes reported 138 active rotary rigs in Africa, out of a global total of 3478 rigs. Rig activity in Africa is dominated by land drilling, but in recent years, offshore activity has notably increased, particularly off West Africa.
Accompanying the sustained growth in the upstream segment of the African oil and gas industry is strong growth in the associated midstream and downstream ‘infrastructure’ parts of the business — terminals, storage capacity and, most critically, pipelines and refineries.
New infrastructure may be necessary particularly where new production is “land-locked” as in Chad, South Sudan and Uganda or to increase refining capacity where current capacity cannot satisfy domestic or regional demand (as in Nigeria and Uganda). The most significant infrastructure will be in East Africa where massive liquefaction plants will be needed to liquefy the natural gas for export to global markets.
The majority of reserves and production remains concentrated in six countries — Nigeria, Libya, Algeria, Angola (oil), Sudan (oil) and Egypt (gas). There have been ever-increasing discoveries of new oil and gas (for example, in Ghana, Tanzania, Mozambique and Uganda) and prospected fields in many countries (including Sierra Leone, Mali and Kenya).
However, there are significant challenges, which remain for the sector and are slowing down rapid development, particularly in terms of infrastructure that typically requires significant amounts of funding. In spite of this, the potential rewards and opportunities outweigh these challenges.
Image Source: nexioprojects.com