N
E
W
S
OIL & GAS
The Outlook for Africa’s Oil & Gas Sector Prices are just one part of the puzzle in Africa’s energy industry, according to Peter Roberts, Head of the Global Oil & Gas Practice at Orrick, Herrington & Sutcliffe LLP Africa is home to some of the world’s largest petroleum discoveries in recent years. A relative lack of exploration throughout the continent offers huge potential for the further exploitation of untapped resources. But there are also plenty of difficulties ahead for much of the continent. Mozambique and Tanzania continue to vie for the title of principal exporter of LNG from East Africa. Continuing offshore gas
6
discoveries indicate huge reserves but regulatory and commercial progress continues to be slow and the present global glut of LNG offers a reduced incentive to race to the market. Still on the eastern seaboard, significant reserves promise is held by Kenya and Madagascar, although in Madagascar’s case the economic profile of commercialising heavy oil deposits will always be challenging in a low price environment. In Uganda, there are continuing difficulties relating to agreeing an export pipeline
route across Kenya and/or Tanzania so that Uganda’s significant but landlocked oil discoveries can be commercialised. On the other side of the continent, each of Mauritania, Senegal and Benin indicate attractive reserves bases ripe for further exploration, albeit with the attendant cost consequences of deep-water exploration and production. The nascent oil industry in South Sudan has suffered badly due to the civil war that broke out in early 2014, with reduced production from the Unity region. A working group established between the governments of South Sudan and Sudan earlier this year has recognised the severity of the situation, and is working to recast the current tariff arrangements to create something that benefits both countries. It is obvious that now is the time for private sector participants to invest (whether through licensing rounds, farm-ins or acquisitions) to secure relatively low priced reserves. But for potential investors, much will depend on them being comfortable with the various non-economic project risks. For all of the promise, a lot of Africa’s petroleum estate is stricken with major political, constitutional and regulatory problems that make any investment case a hard sell. This can only be hidden behind the more obvious problems of the current low oil price environment for so long. There is a ray of hope however: these problems have frequently been faced elsewhere in history and geography in the maturation of petroleum–producing provinces. Lessons learned from other jurisdictions could be applied for the benefit of Africa, if there is a willingness to do so.
GO TO WWW.AFRICAOUTLOOKMAG.COM/NEWS FOR ALL OF THE LATEST NEWS FROM AFRICA