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New discoveries, tech, governance driving African oil & gas fortunes— PwC

Whereas Nigeria, Senegal, Mozambique, Cameroon, Sudan, South Sudan, Ghana, Gabon, Congo DR and other economies of Africa that have either discovered new oil wells or gas reserves have elicited upbeats, highlights from PwC’s annual Africa oil & gas review 2019 released on Monday, said fortunes of the economies are bright when merits of new technologies the report said breakthrough technologies are unlocking significant new reserves, processing, transportation and downstream uses that were previously unviable, unknown or inaccessible. PwC’s Africa oil & gas review, 2019 analyses what has happened in the last 12 months in the oil & gas industry within the major and emerging African markets.

Decarbonisation driven by the environmental sustainability agenda is shifting the energy mix at an accelerating pace, which is particularly evident across North America, Asia and Europe. This seems likely to position gas ahead of coal by 2030 to become the world’s number two fuel.

Africa’s oil & gas industry holds the potential for further growth mainly driven by an increase in investor appetite and a rebound in prices. New oil & gas finds off the coast of Africa have led to an increase in investment in infrastructure, technological advances, updates in regulation and improved governance, as well as the development of new skills. These are some of the key highlights from PwC’s annual Africa oil & gas review 2019 released by PwC Africa today.

In his remarks, Andries Rossouw, PwC Africa Energy Utilities & Resources Leader, said “Renewed optimism has returned to Africa’s oil & gas industry on the back of a rebound in prices and increased investor interest. The African oil & gas industry has been through some difficult and challenging years in the wake of the oil price crash. However, the industry has restructured itself and is more competitively placed in terms of efficiency and operational performance. The outlook for the industry continues to improve with oil & gas companies targeting cautious growth in areas less vulnerable to external volatility while maintaining their cost and operational margins.”

PwC noted that globally, 2018 was a successful year in oil & gas exploration with discoveries almost doubling those made in 2017. Notwithstanding Africa’s endowment in vast natural resources, including substantial oil and gas reserves, West Africa was the only African discovery to make it onto the 2017 and 2018 top 10 lists for new discoveries.

“One of the most dramatic finds in Africa over the past decade is Mozambique’s natural gas estimated at over 180 tcf, which has already unlocked the first three large-scale LNG projects. These projects, together with project expansion phases and additional exploration have the potential to position Mozambique as the third largest LNG producer in the world after Qatar and Australia by 2030.

“Hydrocarbon resources also provide growth opportunities in countries that can capitalise on the potential. Maximising the benefits from these endowments provides direct income to governments, employees, suppliers and shareholders of megaprojects.

“Although Africa’s oil production increased slightly in 2018, the continent was unable to keep up with global output, resulting in a 0.1% drop in share. Africa’s share of global oil reserves has declined by 1% from the prior year standing at 125.3 billion bbl, amounting to 7.2% of the world’s proven reserves.

At the end of 2018, Africa is reported to have 509.6 tcf of proven gas reserves, up 4.5% from the prior year, which amounts to 7.3% of global proven reserves. Nearly 91% of African gas production continues to come from Algeria, Angola, Egypt, Libya and Nigeria, and saw an overall increase of 4.8% from last year.

An interest in Africa’s gas reserves has also led to a series of successful LNG projects resulting in a liquefaction capacity of 18% of the total global capacity, the report added.

On Nigeria, the PwC Africa described the economy as one of the oldest oil-producing countries in Africa. Oil was first discovered in Nigeria in 1956 and production began in 1958. The oil price boom of the 1970s spelled good fortune for the country transforming it from an agrarian economy to an oil-dependent economy. Since then, the Nigerian petroleum industry has evolved and this evolution provides useful lessons for other countries with oil & gas to learn including: mid and downstream segments development, regulatory complexity and uncertainty and contractual frameworks.