Continental Focus, International Reach

All Eyes on Africa O&G Investment

Tuesday, April 30, 2019

Africa is likely to experience continued oil and gas investment over the next three to five years as the stabilization of crude prices above $60 per barrel, coupled with the continent’s rapidly expanding population, lure both major and independent oil producers to one of the world’s last remaining energy investment frontiers, a recent release from Standard Bank says.

According to the release a string of successful exploration projects over the last decade has seen the number of African countries with proven oil and gas reserves rise to 28 thanks to new discoveries in Ghana, Niger, Mozambique, Uganda, Kenya, Senegal, Mauritania and South Africa. The investment required to bring these countries on stream will add further impetus to Africa’s oil consumption, which at 4 million bpd already significantly exceeds the continent’s 2.1 million barrels of daily refinery output, according to Standard Bank.

“An expanding population, rapid urbanization and accelerating economic growth are causing the gap between Africa’s demand for gas and petroleum products, and its ability to supply them, to incrementally widen over time,” says Dele Kuti, Head of Oil and Gas for Standard Bank Group. “This will serve to attract further investment from both major and independent oil producers, which in itself will exert further pressure on the demand side of the equation as the resulting infrastructure investment in refineries, roads, pipelines and housing drives energy consumption.”

The uptick in crude prices has led to the continent to once again attract investment. This improvement in oil prices is expected to average $60 and $70 per barrel over the next three to five years according to Kuti.

In 2018, the International Energy Agency (IEA) projected global energy demand would grow by more than 24% to 2040, requiring more than US$ 2 trillion a year in investment to bring new energy supply on stream. Given Africa’s burgeoning population and economic growth, it is likely that a portion of this investment will be directed towards the continent’s relatively untapped energy market.

“All of this investment activity will in turn spur demand for lending, deal structuring and transacting capabilities across the continent,” says Kuti. “Institutions with deep knowledge of the continent stand to benefit from those initiatives.”