African Oil & Gas and the Rest of the World: What Changed in 2023? (By NJ Ayuk) | The Guardian Nigeria News – Nigeria and World News

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By NJ Ayuk, Executive Director of the African Energy Chamberwww.EnergyChamber.org).

There is no denying that Russia’s invasion of Ukraine has caused a major crisis in the global energy market. This geopolitical conflict has led the West to impose sanctions on Russia’s oil and gas exports and the G7 group to impose price restrictions on Russian crude.

It has changed the direction of world oil trade flow. For example, Asian countries such as China and India began to absorb more Russian oil and gas than before, and many European countries began to look for new suppliers or buy more from non-Russian suppliers.

Meanwhile, European buyers of Russian natural gas will start looking for alternative sources in 2022. They did so with somewhat less urgency, of course, as natural gas imports were never sanctioned. But they were still interested in finding other suppliers, especially after Russian gas supplies began to deteriorate a few months after the start of the war.

These issues have led, for example, Italy to send government representatives and representatives of Eni’s semi-state company to Africa to discuss expanding the scope of supply contracts with authorities in Egypt, Algeria and Angola. These talks were successful as they enabled Eni to secure commitments to deliver 7.0-7.5 billion cubic meters of gas by 2022, higher than originally planned.

New links with Europe?

The discussion was held against the assumption of how global oil and gas trade flows could benefit Africa.

The idea was that Africa could become Europe’s natural partner with a little help. The two continents benefited from relative geographic proximity (at least along the Mediterranean coast) and existing infrastructure links (for example, submarine pipelines linking Algerian and Libyan gas fields to Italy and Spain). Major European companies – such as Britain’s majors BP and Shell, France’s Total Energy and Norway’s Equinor as well as Eni – had large greenfield and brownfield portfolios in Africa.

So (advocates of this view argue) already on these pillars, why not turn Africa into Europe’s closest supplier of oil and energy?

But that’s not how it happened.

New gaps between Africa and Asia, South America

Instead, after the 2022 UN climate change summit in Egypt’s Sharm el-Sheikh, Asian countries gave investors a new field of exploration far greater than African countries.

As the African Energy Chamber (AEC) notes in its newly released 2024 Africa Energy Outlook, Asia accounts for one of the largest shares of COP 27 post-production sector awards, accounting for more than 52% of the onshore total and 45% of the onshore total. Africa lags far behind, accounting for only 28% of the total landmass and 5% of the landmass total.

There have also been significant differences between Africa and other regions of the world in recent oil and gas discoveries. According to the AEC Outlook, South America’s deepwater zones have provided nearly 13 billion barrels of oil in new commercial discoveries since 2019, with 3 billion boe discovered in 2019 and 2020, 1.5 billion boe in 2021, 2.6 billion boe in 2022 and 2.8 billion boe from early 2023.

On the other hand, the deep water zones of Africa As of 2019, approximately 7.65 billion new business acquisitions have been achieved, 2.9 billion boi in 2019, 425 million boi in 2020, 1.135 billion boi in 2021, 1.94 billion boi in 2022, 2.2 billion boi from the beginning of 2023.

Moreover, South American fields generally contain more oil than their African counterparts, with the mix favoring 80:20 oil in the former region, compared to 65:35 in the latter region. And since oil is generally more expensive than gas, this makes it easier for South American discoveries to generate more revenue than those in Africa.

Assuming the transition away from fossil fuels peaks, this gap may become somewhat less significant a decade from now. This change is expected to have a major impact on oil producers who rely on crude oil over natural gas, which many African countries see as the best bridge fuel. (Nigeria is one of Africa’s leading producers of both oil and gas, and its “Decades of Gas” policy is designed to promote and expand the use of domestic gas for electricity generation and industrial use.)

In other words, as more energy consumers switch from petroleum products to renewables, if world demand for crude oil declines, investment in South America’s relatively oil-rich South America will gradually decline. However, because gas is a cleaner-burning fuel than petroleum derivatives, and African countries such as Nigeria, relatively gas-rich Africa will remain at the peak of investment even after a few years. Close the last power station to use refined petroleum products.

In the meantime, however, there is still a gap between Africa and the rest of the world in terms of what the continent can do to better connect with energy markets in Europe and other countries, and to expand the development of its own hydrocarbon resources. Russia-Ukraine can help to close this gap to a great extent, but instead, other regions attract more attention.

This is all-hands-on-deck time.

That said, I don’t believe for a second that we should accept lagging energy industry investments as an inevitable reality for Africa. Instead, energy industry stakeholders should view our report’s findings as a call to action. It is not too late to reverse course.

African governments must take immediate action to make exploration and production in Africa more investor-friendly. Now is the time to do everything possible to show tax incentives, expedite projects, show more transparency in the process and reduce the risk of investors.

Operators also have a role to play. Working in cooperation with government administrations and implementing measures to reduce unit costs will allow to bring down the prices.

Quick action and cooperation will enable African countries to reap socio-economic benefits from their oil and gas resources and create a win-win situation for our company to take advantage of the oil and gas opportunities on our continent.

For more insight into these and other topics, download the 2024 Africa Energy Outlook at www.EnergyChamber.org.

Distributed by APO Group on behalf of the African Energy Chamber.





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