Source-Vanguard
Nigeria, Libya, Algeria, and Egypt, account for 90 percent of Africa’s annual natural gas production, PricewaterhouseCoopers, PwC 2015 report on Africa’s oil and gas said.
The just released report also said that as at the end of 2014, Africa has proven natural gas reserves of about 500 trillion cubic feet, Tcf. This is a slight drop compared to 2013, while production also decreased slightly over the period.
Nonetheless, Africa still has nearly 70 years of natural gas production available given current production rates, the report noted. According to the report, Nigeria has plans to quintuple natural gas production by 2020, so the gas economy in Africa could be well-poised for an uptick in activity.
Growth and development and overall industry activity on the continent has slowed given the oil price falls, adding that exploration activity has been the hardest hit, though Kenya has seen marginal onshore success over the past year.
The focus still seems to be on East Africa and developing its significant gas projects, while some players are turning to South Africa, as hopes for favourable legislation are renewed. “Despite a slack off in activity, Africa continues to grow as governments and players alike plan their next moves. It is clear through our interactions that many companies are taking a different perspective on the challenges they face.
They are being looked at as realities that can and must be dealt with if they wish to enter African markets. Strategies are therefore being implemented to handle the new African reality,” the report said. It further said that natural gas continues to be high on the African agenda for both producers and consumers. In Angola, LNG came online, but production was forced to stop due to feedstock not meeting the engineering requirement. Production is expected to be back on line at full capacity by early 2016.
For Mozambique, legislation has made progress for large-scale LNG projects. Both Anadarko and Eni are positive that they will be able to reach final investment decision, FID, soon, which will enable them to meet their target for first gas in 2020. Tanzania also continues on the LNG path with hopes of achieving first production shortly after Mozambique.
Continued electricity shortages around the continent have led policymakers to gas as a viable power feedstock. Many of these programmes have progressed, and various studies have been commissioned or completed, especially in South Africa. However, oil and gas skills shortages continue to pose a challenge in Africa, but this is one area that companies feel they have a good grasp of at this stage.
The PwC report also said that many of the companies are no longer investing heavily in skills development, as they have already established programmes and are now simply operating them. Retention of skilled resources will soon become the main theme dominating the operating environment in many countries.
Donor funding continues to flow into the continent, while skills and knowledge transfer continue to flavour initiatives from entities such as the World Bank. In addition to donor funding, governments are establishing training programmes, and many of the private players are also working to educate in the sector.
Forging ahead in a bearish market
The report further said that the lull in activity is giving the industry a moment to make plans for the execution of large scale projects, while also formulating a strategy that will make them more competitive for the future in the new African market. In this time of reduced exploration spend; many companies have decided to focus their effort on seismic surveys and seismic interpretation. To do so, some have had to negotiate extensions to existing licences, but governments seem to be willing to do so in most cases given current circumstances.
Development of infrastructure
Another focus area that seems to be gaining momentum is the development of infrastructure. The report noted that with activity reduced; this is a good time for companies to address challenges related to doing business in Africa. Strategic planning is necessary for continued, profitable presence on the continent.
While the industry is in a fragile state, PwC envisions that the players who survive the downturn in prices at the best will emerge as agile machines with well thought-out plans to execute in the dynamic and exciting market. Getting costs under control is the first step to take. Once costs are under control, the strongest players will be looking at acquisition opportunities if their balance sheets can accommodate them. While mergers and acquisitions, M&A activity has not been as high as expected, activity could still ramp up.