After a year of rebound and recovery, Africa\u2019s old and new hydrocarbons markets have an opportunity to further entrench the continent\u2019s position as the world\u2019s 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 mega projects developments, amidst intensifying international competition.\u00a0<\/p>\n\n\n\n
New African frontiers opening up<\/strong><\/p>\n\n\n\n Independents\nare leading the way in exploring and opening up new frontiers across Africa.\nThis year will be key for the advancement of new exploration and production\ndevelopment projects from West to East Africa. Developments to watch notably\ninclude Senegal\u2019s SNE field development, where FEED works are ongoing and a\nfinal investment decision (FID) is expected by Woodside Energy and Cairn Energy\nthis year; Niger\u2019s Amdigh oilfield development, where Savannah Petroleum\u2019s $5m\nearly production scheme is set to start anytime soon; and the opening up of\nKenya\u2019s South Lokichar Basin by Tullow Oil, where FID is also expected before\nyear end amidst rising tensions with the Turkana local community.<\/p>\n\n\n\n A year to confirm Africa as a\nglobal exploration hotspot<\/strong><\/p>\n\n\n\n Ongoing\nbidding rounds in key existing and new African hydrocarbons markets will tell\nif Africa further confirms its position as the world\u2019s new exploration hotspot\nand manages to attract necessary investment in its oil and gas acreages.<\/p>\n\n\n\n Amongst\nwell-established African producers, OPEC members Gabon and Congo-Brazzaville\neach have ongoing bidding rounds. Gabon\u2019s 12th<\/sup> shallow\nand deep-water licensing round is set to close in April 2019 and\nCongo-Brazzaville\u2019s License round phase II in June 2019. With both\ncountries struggling to implement their new Hydrocarbons Codes, the success of\nthese rounds will tell if investors have been convinced by policy reforms\ndeveloped over the past two years.<\/p>\n\n\n\n Two\nbigger African producers and also OPEC members, Nigeria and Angola, are set to\nlaunch landmark and out-of-the-ordinary bidding rounds this year. Nigeria will\nauction its gas flare sites under the Nigerian Gas Flare Commercialisation\nProgramme, likely to happen after the February general election, and Angola\nwill hold its Marginal Fields Bidding Round, result of a new May 2018 policy\nenacted by President Louren\u00e7o, and to be launched at the Africa Oil & Power\nconference in Luanda in June 2019. With the Nigerian Petroleum Industry Bill\nyet to be signed and the ink still fresh on Angola\u2019s new policy regime, both\nrounds will also be key in assessing investors\u2019 interest for both countries\u2019\nbusiness environments.<\/p>\n\n\n\n Also attracting interest is the\nnewest and arguably one of the upcoming entrants \u2013 Ghana \u2013 holding its 1st<\/sup>formal licensing round set to close in May 2019 which has\nreportedly got the attention of 16 oil companies, including majors ExxonMobil,\nBP, Total and ENI. As a hopeful new East African offshore frontier, Madagascar\nis also putting 44 concessions on offer until May 2019, none of which has ever\nbeen tendered or explored before. For a country without any major oil discovery\nto date, the ongoing license round is a wager test.<\/p>\n\n\n\n Africa\u2019s struggling FLNG industry<\/strong><\/p>\n\n\n\n After\nthe start of commercial operations at Golar LNG\u2019s Hilli Episeyo FLNG vessel in\nCameroon in June 2018, hopes were high that Equatorial Guinea would soon move\nforward with its own Fortuna FLNG project, set to be Africa\u2019s first deep-water\nFLNG development. While Fortuna was to be game changing for the gas industry of\nEquatorial Guinea and the rest of the continent, the development of the $2bn\nproject has stalled due to a lack of financing. And the clock has been ticking\nsince. The lack of progress on this plan has been so slow that operator Ophir\nEnergy has been denied the extension of its license to operate block R (as of\nJanuary this year), which contains the giant Fortuna gas discovery. While\nEquatorial Guinea\u2019s FLNG aspirations look more uncertain than ever, 2019 will\ntell if the country can find the right partners to put the project back on\nAfrica\u2019s FLNG map.<\/p>\n\n\n\n Meanwhile,\nnew entrants in Africa\u2019s hydrocarbons stage are making remarkable advances\ntowards the development of their own FLNG industry. On December 21st<\/sup> last year, BP finally announced its FID for phase 1 of the\ncross-border Greater Tortue Ahmeyim development between Senegal and Mauritania,\nwhich involves the installation of a 2.5MTPA FLNG facility. It became the third\nAfrican FLNG project to reach FID after Cameroon\u2019s 2.4MTPA Hilli Episeyo and\nMozambique\u2019s 3.4MTPA Coral South FLNG.<\/p>\n\n\n\n Mega projects on the move<\/strong><\/p>\n\n\n\n Africa\u2019s\ncome back on the global oil and gas map is not only due to the vast natural\nresources found in its soil and waters, but also to the continent being home to\nmega energy projects set to transform the future of the industry.<\/p>\n\n\n\n On\nthe upstream side, the recent inter-governmental cooperation agreement between\nSenegal and Mauritania, and BP\u2019s FID on its cross-border Greater Tortue Ahmeyim\ndevelopment, bodes well for the future of West Africa\u2019s hydrocarbons industry.\nThe project aims at extracting the 15Tcf of gas estimated to be held in the\nTortue gas field, located at a depth of 2,850 metres. However, the ability of\nboth Senegal and Mauritania to work out their differences to ensure a more\nsustainable development of their offshore reserves and facilities around the\nMSGBC Basin is a factor to watch out for.<\/p>\n\n\n\n African\nmega gas projects are not the sole property of the continent\u2019s West coast, with\nMozambique moving forward with two landmark projects putting the Southern\nAfrican nation on the global LNG map. Following the launch of the Coral South\nFLNG project by ENI in June 2017, a FID is now expected in the coming months\nfor the Anardarko-led Mozambique LNG project, an onshore LNG development\ninitially consisting of two LNG trains totaling 12.88MTPA to export the gas\nextracted from the offshore Area 1, estimated to contain a whooping 75Tcf.<\/p>\n\n\n\n Sub-Saharan\nAfrica\u2019s biggest petroleum producers, Nigeria, is also moving forward with\nmassive oil development projects in 2019. Last year already saw the launch of\nTotal\u2019s $3.3bn Egina FPSO in Nigeria, where production officially started in\nthe first days of 2019 and is set to peak at 200,000 bopd. FID is now expected\non Shell\u2019s Bonga Southwest offshore field in Nigeria early this year, a multi\nbillion-dollars development whose production is expected to reach 180,000 bopd.<\/p>\n\n\n\n International contenders and\npretenders<\/strong><\/p>\n\n\n\n As\nAfrica strengthens its position at the centre of global transformations, it is\nincreasingly becoming the playground for international actors willing to\nbenefit from the continent\u2019s vast resources.<\/p>\n\n\n\n While China has asserted its\nposition of a contender in the continent, will new continental dynamics lead the\nAsian giant to change its investment strategy or portfolio? With Russia\u2019s\nintentions on the continent becoming clearer and clearer, will the first\nRussia-Africa Summit this year translate into more concrete Russian deals\nacross the continent? At the same time, will the US\u2019 \u201cProsper Africa\u201d\ninitiative launched in December 2018 be able to counter both rising\ninternational competition and declining US influence on the continent?<\/p>\n\n\n\n A complex energy diplomacy\ndilemma for OPEC in Africa<\/strong><\/p>\n\n\n\n With\na majority of its members made up of African nations since the joining of the\nRepublic of Congo in June 2018, OPEC\u2019s evolving relationship with the continent\nas it strives to manage the global supply glut will be requiring skillful\ndiplomatic ingenuity.<\/p>\n\n\n\n On\none side, Africa\u2019s biggest producers and OPEC members Algeria, Libya, Nigeria,\nAngola and Congo-Brazzaville, are striving to boost their domestic output,\nwhich makes it harder and harder for the Organisation to negotiate its\nproduction cuts.<\/p>\n\n\n\n On\nthe other side, the continent is also home to a flurry of upcoming petroleum\nproducers like Senegal, Kenya or Uganda, or old players making a comeback like\nSouth Sudan, some of them part of OPEC\u2019s Declaration of Cooperation, whose\nupcoming or increasing output adds another layer of complexity to the\nformulation of OPEC\u2019s global oil prices management strategy.<\/p>\n\n\n\n An\nincreasing African output from OPEC and non-OPEC member countries only\ncomplicates OPEC\u2019s maneuver capabilities and increases its dilemma of both\nproviding a stable pricing environment conducive to investments, while avoiding\na worsening of the supply glut that would push prices further down.<\/p>\n\n\n\n Africa\u2019s biggest petroleum\nproducers casts their ballots<\/strong><\/p>\n\n\n\n Amongst\nthe series of elections happening in the continent this year, from Senegal to\nMozambique, none will be more important for the African oil sector than that of\nNigeria this February. The Nigerian presidential election is set to shape the\nfuture of the industry, not only because Nigeria is Africa\u2019s biggest oil &\ngas producer, but because what happens in Nigeria impacts the rest of the\nsubcontinent one way or the other. While both Muhammadu Buhari, seeking\nre-election, and his ally turned rival Atiku Abubakar have committed to the\nsigning of the Nigerian Petroleum Industry Bill, the ability of the future\nPresident to get his office in order and get the bill passed quickly will\nheavily influence investments within Nigeria\u2019s hydrocarbons sector for years to\ncome.<\/p>\n\n\n\n North,\nAlgeria and Libya are also entering an election year, with the 2019 Libyan\ngeneral election set for the first half of the year, and Algeria\u2019s for April.\nBoth countries are on a transformation path. Libyan authorities plan to more\nthan double the country\u2019s output to 2.1 million bopd by 2021, providing\npolitics doesn\u2019t tamper hydrocarbons governance and the work of the National\nOil Company. With Muammar Gaddafi\u2019s son Saif al-Islam Gaddafi set to stand for\nelection and the country still divided between West and East, maintaining the\nstability required by investors will prove challenging.<\/p>\n\n\n\n In\nAlgeria, where a wave of reform is shaking the entire hydrocarbons sector,\nelections are expected to maintain a relative status-quo, at least politically\nspeaking. The country\u2019s national oil company, Sonatrach, has launched an\nambitious transformation strategy that will see it investing $56bn over the\nnext four years and internationalizing its operations across major global\nenergy markets. 2019 could even see the state-owned giant and Africa\u2019s biggest\ncompany further expand south of the Sahara. <\/p>\n\n\n\n Angola\u2019s steady road to reforms<\/strong><\/p>\n\n\n\n Since\ntaking office in the summer of 2017, Angolan President Jo\u00e3o Louren\u00e7o has been\nimplementing a bullish reformist agenda which is drastically transforming the\ngovernance of the country\u2019s oil & gas sector. Angola is reforming fast, but\nwill market forces allow changes to happen at that pace and yield the results\nthat the government is looking for?<\/p>\n\n\n\n While\ninternational investors seem to think so, with Total and BP signing major\nagreements to boost their Angolan operations over the past few months, 2019\nwill tell if the international oil industry is being convinced of Angola\u2019s\nreturn as a competitive African frontier or not.<\/p>\n\n\n\n To\nshowcase the work being done by Sonangol and the Angolan government to generate\nmore investment in the country\u2019s oil & gas industry, Angola is backing up\nan international conference being organized by Africa Oil & Power in Luanda\non June 4-6, 2019, where it will be launching the Angolan Marginal Field\nBidding Round. This will be the first official investment roadshow organized in\nAngola under the current administration, and one that is set to unveil a new\nset of reforms and investment commitments.<\/p>\n\n\n\n South Sudan\u2019s march to peace<\/strong><\/p>\n\n\n\n The\nmajor progression in South Sudan, and one on which the entire economy relies,\nis that of the peace accords. The Sudanese and South Sudanese authorities have\ntime and again demonstrated their commitment to the peace process, which has\nremained peaceful for the most part. However, will peace deals translate into\ninvestment promises and money being invested into the South Sudanese economy\nthis year? Some signals point to that direction, with South Africa\u2019s Central\nEnergy Fund committing $1bn to South Sudan late last year, but markets are\nstill skeptics and observers will remain pragmatics and wait to see how the\npeaceful transition is managed and how oil production resumes before making any\nconcrete moves.<\/p>\n\n\n\n A year to improve market access\nfor East African producers<\/strong><\/p>\n\n\n\n With\nUganda set to join the club of African petroleum producers by the early 2020s,\nefforts are on the way to develop adequate infrastructure for the evacuation of\noil that will be produced from the Lake Albert Basin. The project seemed to be\npositively moving forward when Uganda and Tanzania exchanged the\ninter-governmental agreement for the 1,443km East African Crude Oil Pipeline in\nMay 2017. However, the partners in the pipeline\u2019s construction, French major\nTotal, China\u2019s CNOOC and Tullow Oil, are yet to make a final investment\ndecision on the project. Meanwhile, the Host Government Agreements are to be\nsigned this January, but delays in concluding the pipeline\u2019s financial deal\nhave already pushed back Uganda\u2019s oil production ambitions from 2020 to\n2021. The pipeline is crucial for the further integration of the East\nAfrican community and to set a positive record of joint planning, financing and\nimplementation of landmark energy projects in the region.<\/p>\n","protected":false},"excerpt":{"rendered":"