Africa Oil News – Why Independent Oil Companies Are Playing a Crucial Role in Africa’s Energy Future
Activists want to stop Namibia’s government from allowing Canadian firm ReconAfrica to drill for oil in the country’s Okavango Delta. They say the exploration will damage the ecosystem and exacerbate climate change.
Keith Hill, CEO of Africa Oil Corp, said the company will concentrate on acquiring oil assets that no longer make sense for majors, including Block OML 130 offshore Nigeria and projects in Equatorial Guinea, South Africa and Namibia.
Africa’s oil boom
A tarmacked road brings in the equipment needed to drill at Africa’s most exciting oil project. Nearby, an environmental officer checks that the cap on a well head is airtight and free of leaks.
The return of oil prices has triggered an African energy boom. Rigs are back in action after years of hiatus and wildcatters are snapping up exploration rights.
But this moment offers both opportunity and peril for countries still struggling with poverty. Catholic Relief Services (CRS) conservatively estimates that sub-Saharan African governments will receive $200 billion in oil revenues over the next decade. Past experience from around the world warns that petrodollars rarely lead to broad-based poverty reduction; they often make matters worse. CRS advocates that African governments manage oil revenues in transparent, fair and accountable ways. They should strengthen democratic institutions and develop strategies that focus on poverty reduction. This requires building strong, diversified economies with a post-oil future. It also calls for ensuring that indigenous people are fully consulted and involved.
The future of Africa’s oil
Africa’s proven oil reserves will play a vital role for years to come. Responsible development, alongside renewable energy, can increase energy access in ways that lift communities economically and socially – while adhering to the principle of common but differentiated responsibilities outlined in global climate agreements.
As the world shifts toward lower-carbon energy, African oil exporters will need to build buffers. In addition to allowing countries to manage price volatility, buffers can support investments in lower-carbon business opportunities.
With the big oil companies divesting their assets, newcomers and independents are taking a greater share of the business. But they need to make sure they’re able to unlock Africa’s full potential by prioritizing sustainability and accountability. A good place to start is with a comprehensive transparency agenda. This is information that Africa Oil Corp is obliged to make public pursuant to the EU Market Abuse Regulation and Swedish Financial Instruments Trading Act. The company’s disclosure policy can be found here.
Africa’s energy future
As the world shifts to greener forms of energy, oil and gas companies in Africa face a choice: either invest in lower-carbon projects or risk missing out. The former could see a bigger return on their investments, but the latter must also consider how to build resilience into the future.
The continent’s biggest producers are moving fast, with Eni dusting off plans for liquified natural gas (lng) projects in Mozambique and Tanzania, while nimbler traders like Trafigura sponsoring new oil projects in exchange for some of the future production. With Western banks cautious about financing African oil products, the nimblers are enjoying a sweet spot in the market.
The challenge is not yet over, though. Security remains a big issue in some places. And if governments continue to shake down oil and gas companies, or arbitrarily change the rules, investors will stay away. That could be a big blow for a region that is already behind on the path to greener energies.
Africa’s oil companies
Africa’s oil companies are playing a crucial role in the continent’s energy future. As the big oil and gas majors pull out of some projects, nimble independents are stepping in with new exploration and development plays. They are providing short-term supplies, medium-term production and greenfield investment to drive African energy security.
They are also helping to rebalance Africa’s energy mix away from coal, which is currently responsible for around 80% of the continent’s power generation. But they need to do more, especially as the world tries to accelerate its clean energy transition, because reliance on fossil fuels risks dwindling export revenues. Fortunately, many are planning to do just that. Kenya is working to double its refinery capacity, and Nigeria’s richest man, Aliko Dangote, is constructing a private facility that will almost double the country’s refining capacity and help cut fuel imports. Ultimately, the biggest success of Africa’s oil companies will be in meeting Africa’s domestic demand.