The African oil and gas industry is shaking off years of stagnation and is now entering an exciting growth phase, according to auditing firm PwC.
PwC’s annual Africa oil & gas review for 2019, which was released on Monday, looks at developments and trends in the sector and spans the continent.
Africa, which is endowed with mineral wealth, has acutely felt the effects of the oil price crash of 2014, which has seen oil and gas companies cut spending on the continent, the report said.
The oil price plummeted from more than $110 (about R1,600) a barrel in mid-2014 to about $50 in January 2015. It has failed to breach $80 since, and on Monday it was trading at about $56 a barrel.
Investment has dwindled in recent years.
The continent holds an estimated 7.2% of the world’s proven oil reserves and 7.3% of global proven gas reserves. But expenditure on oil and gas production in Africa declined 43% from 2014 to 2018. The drop in exploration spend was even worse and declined 86% during this period.
However, from this year onward, PwC said capital expenditure on production is expected to increase at an annual compound growth rate of 5% to reach more than $70bn in 2030. Projections for exploration spend in Africa are looking up, with an average 17% year-on-year growth rate projected over the next decade.
This is in part thanks to improved forecasts for oil prices which experienced notable increases throughout much of 2018, banishing the idea of “lower for longer” oil prices.
There is now also a greater impetus around developing gas resources, which will assist countries as they seek to transition away from fossil fuel to cleaner energy sources.
“The increasing regulatory drive to decarbonise will reduce the share of coal in the global energy mix and drive demand for natural gas for energy generation and other uses,” PwC’s report said. “While not carbon neutral, natural gas is ‘cleaner’ than coal and acts as a ‘bridge fuel’. This enables countries to reduce coal dependence cost effectively and with less disruption, while other sources of renewable energy are being developed.”
Gas has been discovered in abundance around Africa. Recently there have been significant finds in Mozambique’s Rovuma basin as well in Senegal. Even in SA a notable discovery has been made off the coast of Mossel Bay. For now, nearly 91% of African gas production continues to come from Algeria, Angola, Egypt, Libya and Nigeria.
New oil and gas finds off the coast of Africa bode well for the sector’s future and, as the review found, 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.
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