Business | Oil & Gas
Companies rush to strike gold in the Dark Continent
Publicly-listed oil companies have tripled spending in Africa.
- By Dino Mahtani, Financial Times
- Published: 01:39 February 2, 2008
In the past decade, Africa has seen an unprecedented boom in oil and gas investment.
With big companies shut out, or deterred from investing in the Middle East, Africa has by contrast offered multinationals relatively lenient terms and extensive access to its oilfields in the past 15 years. The continent has been able to attract money from the biggest supermajors, from ExxonMobil to Shell, looking to exploit its prolific and relatively untapped geology, particularly in the Gulf of Guinea and North Africa.
It also has the world's highest ratio of "light" and "sweet" crude oil, preferred by refiners in big consuming countries, and 83 per cent of its oil resources comes from fields yielding more than 100 million barrels.
In 2006, US President George W Bush laid out a strategy of reducing oil imports from the Middle East - a policy that is likely to result in greater strategic importance for Africa. "The rise of Africa as an energy region is not a short-term trend," says Robert Gillon of John S. Herold, the industry consultancy.
Libya's Sirte Basin is the largest site, holding more than 20 per cent of the continent's 300 billion barrels of reserves. The rest lies in 10 big basins, including those in Nigeria, Angola, Algeria and Egypt. Angola and Nigeria, with their large deepwater deposits, are expected to become important producers.
New frontiers
With oil prices so high, Africa has also seen a boom in the exploitation of its marginal fields and investment and interest in new frontiers, from Tullow Oil's significant finds in Ghana and Uganda to China's sudden interest in exploration rights in the failed state of Somalia. Asian companies, particularly state-owned ones from China, have also begun to pile in, challenging the hegemony of the traditional majors.
Research by John S Herold estimates that, between 2002 and 2006, publicly-listed oil companies tripled their spending in Africa, a rate that was 20 per cent more than their spending across the world during the same period.
Yet the effect of increased corporate interest has not always translated to economic well-being for African countries.
Soaring oil prices have threatened to wipe out recent economic gains on what is both the world's poorest continent and its fastest-growing oil and gas exploration zone of the past decade. According to the International Energy Agency, the increase in the cost of oil in 13 non-producing countries, including stable economies such as South Africa, Senegal and Ghana has since 2004 been equivalent to three per cent of their combined gross domestic product.
Even in some of Africa's biggest producers, where high oil prices have driven rapid growth, poor governance in the use of oil funds as well as high fuel prices brought about by a lack of refining capacity and heavy import bills have added to social woes.
The contrast between the multi-billion dollar international oil industry and the grinding realities of Africa is nowhere more apparent than in Nigeria's Niger Delta, the most prolific zone in the Atlantic basin,from where the US expects to source up to a quarter of its oil imports in the next decade. There, armed militants using an anti-poverty rhetoric have cut a quarter of Nigeria's production in pre-dawn raids on oil facilities and kidnapped scores of oil workers in the past two years, a potent symbol of the kind of disorder that can occur on the doorstep of huge investments.
Much of the capacity being added on the continent may be too far offshore to be affected by the kind of militancy seen in the delta. But US policymakers nevertheless remain deeply concerned about stability in oil-producing zones.
Africa's share of oil production is expected to grow to up to 30 per cent of the world total, from roughly 12 per cent in 2006. By 2012, energy consultant IHS expects liquids production to have reached a plateau of about 16 million barrels per day.
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