Bulls n Bears Entrepreneurship Zone :: NJ Ayuk: 10 developments that will shape Africa’s energy sector in 2019

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After a year of rebound and recovery, Africa’s old and new hydrocarbons
markets have an opportunity to further entrench the continent’s position as
the world’s hottest oil and gas frontier in 2019.

However, the new year also brings a new set of dynamics and challenges set
to influence the future of the industry, from presidential elections to
megaprojects developments, amidst intensifying international competition.


New African frontiers opening up


Independents are leading the way in exploring and opening up new frontiers
across Africa. This year will be key for the advancement of new exploration
and production development projects from West to East Africa. Developments
to watch notably include Senegal’s SNE field development, where FEED works
are ongoing and a final investment decision (FID) is expected by Woodside
Energy and Cairn Energy this year; Niger’s Amdigh oilfield development,
where Savannah Petroleum’s US$5m early production scheme is set to start
anytime soon; and the opening up of Kenya’s South Lokichar Basin by Tullow
Oil, where FID is also expected before year end amidst rising tensions with
the Turkana local community.


A year to confirm Africa as a global exploration hotspot


Ongoing bidding rounds in key existing and new African hydrocarbons markets
will tell if Africa further confirms its position as the world’s new
exploration hotspot and manages to attract necessary investment in its oil
and gas acreages.

Amongst well-established African producers, OPEC members Gabon and
Congo-Brazzaville each have ongoing bidding rounds. Gabon’s 12thshallow and
deep-water licensing round is set to close in April 2019 and
Congo-Brazzaville’s license round phase II in June 2019. With both countries
struggling to implement their new hydrocarbons codes, the success of these
rounds will tell if investors have been convinced by policy reforms
developed over the past two years.

Two bigger African producers and also OPEC members, Nigeria and Angola, are
set to launch landmark and out-of-the-ordinary bidding rounds this year.
Nigeria will auction its gas flare sites under the Nigerian Gas Flare
Commercialisation Programme, likely to happen after the February general
election, and Angola will hold its Marginal Fields Bidding Round, result of
a new May 2018 policy enacted by President Lourenço, and to be launched at
the Africa Oil & Power conference in Luanda in June 2019. With the Nigerian
Petroleum Industry Bill yet to be signed and the ink still fresh on Angola’s
new policy regime, both rounds will also be key in assessing investors’
interest for both countries’ business environments.

Also attracting interest is the newest and arguably one of the upcoming
entrants – Ghana – holding its first formal licensing round set to close in
May 2019 which has reportedly got the attention of 16 oil companies,
including majors ExxonMobil, BP, Total and ENI. As a hopeful new East
African offshore frontier, Madagascar is also putting 44 concessions on
offer until May 2019, none of which has ever been tendered or explored
before. For a country without any major oil discovery to date, the ongoing
license round is a wager test.


Africa’s struggling FLNG industry


After the start of commercial operations at Golar LNG’s Hilli Episeyo FLNG
vessel in Cameroon in June 2018, hopes were high that Equatorial Guinea
would soon move forward with its own Fortuna FLNG project, set to be
Africa’s first deep-water FLNG development. While Fortuna was to be game
changing for the gas industry of Equatorial Guinea and the rest of the
continent, the development of the $2bn project has stalled due to a lack of
financing. And the clock has been ticking since. The lack of progress on
this plan has been so slow that operator Ophir Energy has been denied the
extension of its license to operate block R (as of January this year), which
contains the giant Fortuna gas discovery. While Equatorial Guinea’s FLNG
aspirations look more uncertain than ever, 2019 will tell if the country can
find the right partners to put the project back on Africa’s FLNG map.

Meanwhile, new entrants in Africa’s hydrocarbons stage are making
remarkable advances towards the development of their own FLNG industry. On
21 December last year, BP finally announced its FID for phase one of the
cross-border Greater Tortue Ahmeyim development between Senegal and
Mauritania, which involves the installation of a 2.5 MTPA FLNG facility. It
became the third African FLNG project to reach FID after Cameroon’s 2.4 MTPA
Hilli Episeyo and Mozambique’s 3.4 MTPA Coral South FLNG.


Mega projects on the move


Africa’s come back on the global oil and gas map is not only due to the
vast natural resources found in its soil and waters, but also to the
continent being home to mega
<https://www.howwemadeitinafrica.com/category/sectors/energy/> energy
projects set to transform the future of the industry.

On the upstream side, the recent inter-governmental cooperation agreement
between Senegal and Mauritania, and BP’s FID on its cross-border Greater
Tortue Ahmeyim development, bodes well for the future of West Africa’s
hydrocarbons industry. The project aims at extracting the 15 Tcf of gas
estimated to be held in the Tortue gas field, located at a depth of 2,850
metres. However, the ability of both Senegal and Mauritania to work out
their differences to ensure a more sustainable development of their offshore
reserves and facilities around the MSGBC Basin is a factor to watch out for.

African mega gas projects are not the sole property of the continent’s West
coast, with Mozambique moving forward with two landmark projects putting the
Southern African nation on the global LNG map. Following the launch of the
Coral South FLNG project by ENI in June 2017, a FID is now expected in the
coming months for the Anardarko-led Mozambique LNG project, an onshore LNG
development initially consisting of two LNG trains totaling 12.88 MTPA to
export the gas extracted from the offshore Area 1, estimated to contain a
whooping 75 Tcf.

Sub-Saharan Africa’s biggest petroleum producers, Nigeria, is also moving
forward with massive oil development projects in 2019. Last year already saw
the launch of Total’s $3.3bn Egina FPSO in Nigeria, where production
officially started in the first days of 2019 and is set to peak at 200,000
bopd. FID is now expected on Shell’s Bonga Southwest offshore field in
Nigeria early this year, a multi billion-dollars development whose
production is expected to reach 180,000 bopd.


International contenders and pretenders


As Africa strengthens its position at the centre of global transformations,
it is increasingly becoming the playground for international actors willing
to benefit from the continent’s vast resources.

While China has asserted its position of a contender in the continent, will
new continental dynamics lead the Asian giant to change its investment
strategy or portfolio? With Russia’s intentions on the continent becoming
clearer and clearer, will the first Russia-Africa Summit this year translate
into more concrete Russian deals across the continent? At the same time,
will the US’ “Prosper Africa” initiative launched in December 2018 be able
to counter both rising international competition and declining US influence
on the continent?


A complex energy diplomacy dilemma for OPEC in Africa


With a majority of its members made up of African nations since the joining
of the Republic of Congo in June 2018, OPEC’s evolving relationship with the
continent as it strives to manage the global supply glut will be requiring
skillful diplomatic ingenuity.

On one side, Africa’s biggest producers and OPEC members Algeria, Libya,
Nigeria, Angola and Congo-Brazzaville, are striving to boost their domestic
output, which makes it harder and harder for the organisation to negotiate
its production cuts.

On the other side, the continent is also home to a flurry of upcoming
petroleum producers like Senegal, Kenya or Uganda, or old players making a
comeback like South Sudan, some of them part of OPEC’s Declaration of
Cooperation, whose upcoming or increasing output adds another layer of
complexity to the formulation of OPEC’s global oil prices management
strategy.

An increasing African output from OPEC and non-OPEC member countries only
complicates OPEC’s maneuver capabilities and increases its dilemma of both
providing a stable pricing environment conducive to investments, while
avoiding a worsening of the supply glut that would push prices further down.


Africa’s biggest petroleum producers casts their ballots


Amongst the series of elections happening in the continent this year, from
Senegal to Mozambique, none will be more important for the African oil
sector than that of Nigeria this February. The Nigerian presidential
election is set to shape the future of the industry, not only because
Nigeria is Africa’s biggest oil & gas producer, but because what happens in
Nigeria impacts the rest of the subcontinent one way or the other. While
both Muhammadu Buhari, seeking re-election, and his ally turned rival Atiku
Abubakar have committed to the signing of the Nigerian Petroleum Industry
Bill, the ability of the future president to get his office in order and get
the bill passed quickly will heavily influence investments within Nigeria’s
hydrocarbons sector for years to come.

North, Algeria and Libya are also entering an election year, with the 2019
Libyan general election set for the first half of the year, and Algeria’s
for April. Both countries are on a transformation path. Libyan authorities
plan to more than double the country’s output to 2.1 million bopd by 2021,
providing politics doesn’t tamper hydrocarbons governance and the work of
the National Oil Company. With Muammar Gaddafi’s son Saif al-Islam Gaddafi
set to stand for election and the country still divided between West and
East, maintaining the stability required by investors will prove
challenging.

In Algeria, where a wave of reform is shaking the entire hydrocarbons
sector, elections are expected to maintain a relative status-quo, at least
politically speaking. The country’s national oil company, Sonatrach, has
launched an ambitious transformation strategy that will see it investing
$56bn over the next four years and internationalising its operations across
major global energy markets. 2019 could even see the state-owned giant and
Africa’s biggest company further expand south of the Sahara.


Angola’s steady road to reforms


Since taking office in the summer of 2017, Angolan President João Lourenço
has been implementing a bullish reformist agenda which is drastically
transforming the governance of the country’s oil & gas sector. Angola is
reforming fast, but will market forces allow changes to happen at that pace
and yield the results that the government is looking for?

While international investors seem to think so, with Total and BP signing
major agreements to boost their Angolan operations over the past few months,
2019 will tell if the international oil industry is being convinced of
Angola’s return as a competitive African frontier or not.

To showcase the work being done by Sonangol and the Angolan government to
generate more investment in the country’s oil & gas industry, Angola is
backing up an international conference being organised by Africa Oil & Power
in Luanda on 4-6 June 2019, where it will be launching the Angolan Marginal
Field Bidding Round. This will be the first official investment roadshow
organised in Angola under the current administration, and one that is set to
unveil a new set of reforms and investment commitments.


South Sudan’s march to peace


The major progression in South Sudan, and one on which the entire economy
relies, is that of the peace accords. The Sudanese and South Sudanese
authorities have time and again demonstrated their commitment to the peace
process, which has remained peaceful for the most part. However, will peace
deals translate into investment promises and money being invested into the
South Sudanese economy this year? Some signals point to that direction, with
South Africa’s Central Energy Fund committing $1bn to South Sudan late last
year, but markets are still skeptics and observers will remain pragmatics
and wait to see how the peaceful transition is managed and how oil
production resumes before making any concrete moves.


A year to improve market access for East African producers


With Uganda set to join the club of African petroleum producers by the
early 2020s, efforts are on the way to develop adequate infrastructure for
the evacuation of oil that will be produced from the Lake Albert Basin. The
project seemed to be positively moving forward when Uganda and Tanzania
exchanged the inter-governmental agreement for the 1,443 km East African
Crude Oil Pipeline in May 2017. However, the partners in the pipeline’s
construction, French major Total, China’s CNOOC and Tullow Oil, are yet to
make a final investment decision on the project. Meanwhile, the Host
Government Agreements are to be signed this January, but delays in
concluding the pipeline’s financial deal have already pushed back Uganda’s
oil production ambitions from 2020 to 2021.  The pipeline is crucial for the
further integration of the East African community and to set a positive
record of joint planning, financing and implementation of landmark energy
projects in the region.

NJ Ayuk is the founder and CEO of Centurion Law Group and the executive
chair of the Africa Energy Chamber of Commerce.--Howwwemadeitinafrica



NJ Ayuk

 

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