African Oil & Gas Sector and Global Dynamics- Key Shifts in 2023
The gap between Africa and the rest of the world persists concerning the continent’s efforts to establish closer ties to energy markets in Europe and beyond, as well as to advance the development of its own hydrocarbon resources.
The Russian invasion of Ukraine significantly disrupted global energy markets, leading to Western sanctions on Russian oil and fuel exports. This geopolitical conflict prompted a redirection of world oil trade flows, with Asian countries absorbing more Russian oil, and European nations seeking alternative suppliers to avoid sanctions.
Despite speculation that the rearrangement of oil and gas trade flows could benefit Africa, particularly in becoming a natural partner for Europe, this hasn’t materialized as expected. Instead, Asian countries have awarded more exploration acreage to investors compared to African states, following the 2022 UN Climate Change Conference. Asia accounted for the largest portion of post-conference exploration acreage awards, leaving Africa lagging behind.
Furthermore, discrepancies exist in recent oil and gas discoveries between Africa and other regions, such as South America. South America’s deepwater zones have yielded more significant commercial finds than Africa since 2019, with larger quantities of oil and a more favorable mix in South American fields.
The gap between Africa and the rest of the world in establishing closer energy ties and developing hydrocarbon resources remains, despite the potential role the Russia-Ukraine conflict could have played in narrowing it. Instead, other regions have garnered more attention and investment.
This is an All-Hands-on-Deck Moment
That said, I do not believe for one 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 act immediately to make exploration and production in Africa investor-friendly. Now is the time to offer tax incentives, fast-track projects, show more transparency in processes, and do everything possible to minimize investor risk.
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Operators have a role to play as well. They should be working cooperatively with government administrations and implementing measures to bring down unit costs, which would allow breakeven prices to be brought down.
Prompt action and cooperation will create a win-win that will allow African nations to reap the socio-economic benefits of their oil and gas resources and companies to capitalize on the significant opportunities our continent’s oil and gas offer.
