top 10 factors changing the landscape of africa oil and gas industry

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Top 10 Factors Changing the Landscape of Africa Oil and Gas Industry __________________________________________________________________________________

SSCG Market Brief

At SSCG, we support our clients to do business in Africa and navigate market challenges, de-risk operations, increase their capabilities and strengthen value chains to enhance efficiency. We provide focused managerial perspectives and analytics to help our clients understand their market and consumers, enhance decision making, performance and growth.

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African oil and gas industry is on an upward growth curve. The growth is real, fast, competitive and sustainable. This rapid drive is underpinned by long term economic reforms and stability, continuous discovery of new hydrocarbons resources and influx of investment into the industry across the continent in addition to rise in global energy demand. Changes in the global energy landscape including shift in demand-supply dynamics, increased discovery and production of shale oil and gas in developed economies, and advances in technology are providing significant opportunities for investment while also driving sustainable economic growth. As the changes unfold, have enhanced competitiveness and responsible development of energy resources. These changes have reduced inflation, foreign debt and budget deficits, increased privatisation of state-owned assets and entities, regulatory and legal systems strengthened. In addition, many economies have opened up their markets and projects to international trade, bidding competition and investment. SSCG Market Brief: June 2014




1. Policies, Fiscal Terms and Reforms A widespread reforms of petroleum policies and industry bills; introduction of new local regulatory laws, Production Sharing Agreements (PSAs), Production Sharing Contracts (PSCs), M&A deals and Joint Ventures (JVs) Contracts have resulted in an ever improving business environment and restructured the way oil companies do business in Africa. Furthermore, localisations of projects to increase beneficiation and government participation in managing the resources have been made top priorities to foster sustainable and inclusive economic growth.

2. Technology and Innovation The advancement of Exploration and Production (E&P) technologies have enhanced seismic imaging, reservoirs exploration and development, digital oilfield data capture and analytics, oil recovery and production optimisation capabilities. Reservoirs previously identified to contain recoverable hydrocarbons quantity below commercial level have now been reviewed to higher levels. To date, high density and heavy crude oil such as Lake Albertine Rift Basin resources in East Africa can be produced efficiently and effectively. Moreover, companies are leveraging innovation and technologies to enhance their operation capabilities and to boost performance.

3. Global Demand and Price of Energy

An increase in global energy demand, rising prices and supply insecurity have obliged international oil companies (IOCs) to identify alternative, cheap and stable sources of energy. The discoveries of Shale gas and oil have reshaped the future of global energy market and supply chain. This revolution will contribute to North America energy independence and offers new opportunities for local energy industry growth. Further, will lead to reduction in energy import from Africa. As result of the shift, African oil and gas producers are working to use their resources for local consumption, electricity production and export Liquefied Natural Gas (LNG) to emerging Asian markets such as India and China.

4. Political Instability, Safety, Risk and Security On-going political instability and insecurity in OPEC (Organization of the Petroleum Exporting Countries) members and North African countries have shifted investors and oil companies’ attention to new and stable frontier markets such as Eastern African Region. Likewise, Sub-Saharan Africa (SSA) countries are experiencing diverse market and industry challenges such as: inadequate crude oil production, processing, transportation and storage infrastructure; on-going regional conflicts in South Sudan, rising terrorist groups such as Al Shabbab and Jihads attacking facilities and oil bunkering in Nigeria. This continues to raise concerns amongst stakeholders and global business community.




5. Human Capital, Talent and skills Inadequate qualified, experienced personnel and industry professionals is impacting operations and recruitment in the region. The drive to enhance industry human capital and the capability of local professionals is high on the agenda and a regulatory requirement. Regional governments, National Oil Companies (NOCs) and IOCs have increased their training budgets and investment strategies to drive talent development, enhance operation capabilities and performance. New petroleum training institutions and faculties amongst African universities and technology institutes have risen.

6. New Discoveries of Resources Continuous discovery of new resources especially oil and gas reservoirs in SSA countries have played an important role in regional economic growth. The resources continue to drive investment into the industry and attracting influx of E&P companies into the region. Growth potential and expectations are high amongst stakeholders both local and in the global space. More than half of identified wells in SSA remains unexplored and yet to be allocated.

7. Infrastructure and Facilities On-going development of E&P infrastructure, LNG processing facilities, expansion of African refineries and storage facilities present future industry growth potential. Current oil producers such as Cameroon, Gabon and Congo are working to upgrade depleting facilities to optimise production. Plans to build regional gas and oil transportation pipelines are underway such as Zambia-Angola Pipeline and The Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor project.

8. Globalisation and Competition

The shift in global economy and financial crisis in developed economies created new opportunities and alternative investment destinations in Africa for investors. Global investors view Africa as the last frontier for investment, thus appetite to create and capture opportunities in the region is on a rise and the competition is increasing. Oil and Gas industry is regarded as one on the fastest growing industry in the region, creating new opportunities, disrupting markets and competition amongst players.




9. Investment and Economic Growth As the industry evolves, oil and gas companies are positioning for success with support from innovative financing solutions and investment vehicles. Increasing project financing opportunities have contributed to rapid growth of E&P activities in the region. Emerging new sources of capital, alternative and financing options from emerging market and investors have increased investments into the industry. Investors’ appetite is high and capital continues to flood SSA market and industry. This Foreign Direct Investment (FDIs) have boosted industry growth potential, regional economic outlook and commodity market. Nigeria, top oil producers in SSA become Africa’s largest economy in 2014, while Angola, second highest producer continue to leapfrog behind while attracting enormous FDIs as results of stable economic environment

10. Sustainability and Social Responsibility Sustainable development is critical for Africa’s long-term prosperity and stability. All companies including the oil and gas sector need to play a pivotal role in this effort by contributing to the broader improvement of their societies through Corporate Social Responsibility (CSR) initiatives that align with national development objectives and goals. This will depend on how NOCs and IOCs create jobs, improve local talent and professionalism and carefully manage environmental impacts. Government, civil society organisations, IOCs and NOCs are all involved in this effort and regulatory policies have been put in place to enhance compliance. Companies are required to get involved and contribute to the betterment of the societies in which they operate by increasing their CSR initiatives.




How SSCG can help you

At SSCG, We provide innovative and cutting-edge energy consultancy, advisory and executive training solutions to petroleum, E&P, mining and energy organisations in frontier and developing markets. Our strategy ensures that we create value in the energy industry, improve our clients distinctive capabilities and play to our strengths while working across the value chains. We are committed to growth in the activities of finding and managing minerals, energy, oil and gas resources in Africa.

We draw upon our global and local knowledge, market and industry insights to help our clients enhance their operation capabilities, manage risks, strengthen controls, grasp opportunities and achieve full potential particularly across multiple countries in Africa. We are highly integrated across Africa, which is very significant for our clients and to ensure that we retain consistent and quality standards everywhere. We believe that these benefits significantly enhance our quality of service and speed of response. Our network throughout the region helps us to demonstrate that we are responsive to the needs of our clients, stimulating trade and enhancing business relationships. Contact us T: + (44) 01865 600 580 E: [email protected] W: www.s-scg.com



top 10 factors changing the landscape of africa oil and gas industry

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