Africa’s oil and gas sector is expected to witness strong investment flows in the coming years, speakers said during a webinar organized by energy analytics company Welligence. While global energy majors are expected to reduce their funding – prioritizing high-return projects and strategic assets – independent and national oil companies are rapidly expanding their portfolios, breathing new life into mature fields.
These investment trends are attributed to a variety of factors, including reduced global spending for oil and gas projects, restructured portfolios and improved operating climates across the continent. According to Temitope Malomo, Senior Analyst, sub-Saharan Africa, Welligence Energy Analytics, the continent is also witnessing a shift by the majors from onshore and shallow water acreage to deepwater and ultra-deepwater basins, with independents stepping in to sustain – and sometimes increase – production.
“The majors have been very active divesting their mature assets. Independents have been responsible for picking up these reserves. However, even with this momentum in M&A activity driven by independents, it’s important to note that long-term investments will continue to be driven by the majors. Examples include the Eni-operated Baleine project in Ivory Coast and TotalEnergies-operated Venus project in Namibia,” he stated.
Titled Upstream Investment – The new wave of capital heading to sub-Saharan Africa, the webinar drew attention to the driving factors behind Africa’s anticipated surge in upstream financing. NJ Ayuk, Executive Chairman of the African Energy Chamber (AEC), engaged in a conversation with Ross Lubetkin, CEO of Welligence Energy Analytics, on this topic, highlighting the role regulatory reform has played in attracting foreign capital.
“There is a change when you look at global investments coming into Africa and part of that has been the change in the U.S. administration. But African governments have also done a lot. They have realized that they are not competing among themselves; they are competing with Guyana, America and other international countries. They have improved approval timelines, fiscals and even the licensing process has been streamlined in many countries. But there is still a lot of work to be done,” Ayuk said.
Ayuk shared insight into the regulatory advancements seen across the continent. These include Nigeria, which implemented its Petroleum Industry Act to entice investment; Angola, which has significantly improved its fiscals and licensing procedures; and the Republic of Congo, which is working towards a Gas Master Plan and new Gas Code. By strengthening their respective business environments, countries across the continent are making a strong case for foreign investment.
“When you open up the market, investors gain confidence. They move in and you see a lot of activity. If you reform, change and do it right, money will flow. This nationalization approach doesn’t work. It keeps us behind. International companies invest, they create jobs, they bring taxes. Whose benefit is that? It’s ours,” Ayuk added.
Looking ahead, the continent is expected to witness a series of final investment decisions (FID) in the coming years, as companies work to unlock new hydrocarbon plays in both established and emerging markets.
“We have seen upward budget revisions for some independents, but for the majors, budgets are down about 5% year-on-year. This does not mean that companies will not progress new projects; but only the best projects will advance. Companies will be looking closely at their respective pre-FID portfolios. We see deepwater and LNG projects dominating that picture. There is a decent pipeline of projects in sub-Saharan Africa that we expect to progress in the coming months,” stated Obo Odornigie, SVP: Energy Trends&Analytics, Welligence Energy Analytics.
Distributed by APO Group on behalf of African Energy Chamber.