Three Questions with Igor Hulak
Igor Hulak, Partner, leads A.T. Kearney’s Utilities and Oil & Gas Practices in West Africa. We talk to him about his expectations for the energy industry.
The next big thing: Where do you see the greatest opportunities for the oil and power sectors in Africa?
Given the current situation in which low oil prices are expected to make a slow recovery, there are a number of significant shifts that could disrupt the oil industry. To name a few of these:
OPEC: Will OPEC disband and allow for free markets to exist? Or on the contrary, will OPEC strive to balance domestic budgets through increased production (thereby driving prices lower)?
Economic recovery: Will Asia and the European Union recover more slowly than generally expected or will a worst case scenario of a global economic crash materialize and drive fuel demand down?
Technology: Will technology accelerate the development of shale oil in Asia, South America and Mexico? Will technology accelerate the move towards a “hydrogen economy” and consequently reduce the demand for transport fuels by ~20%?
Regulations: Will some standards and regulations be made less stringent in coming years? If CO2 emissions standards were lowered, for example, it would be easier to process heavier, sour crudes.
All of these shifts could have massive impacts on the future of the global energy industry. However, the shift that I think is most interesting to look at is technological breakthroughs in power storage. As lithium costs fall and super-capacitors become more of a reality, greater power storage capacity could lead to the accelerated development of distributed power generation models and as a result the potential redrawing of the traditional energy sector value chain. This could present a significant opportunity for Africa, which often doesn’t carry a legacy of traditional utility assets, to accelerate the development of new distributed generation models that alleviate power shortages in many African countries and support future economic growth.
Making Africa more attractive for investment: What does it take and what do you want to see?
In the 15th edition of A.T. Kearney’s Foreign Direct Investment (FDI) Confidence Index, we highlighted that fundamentally investors require regulatory certainty and a conducive investment environment. From our work across the continent, we’ve noticed that both of these factors tend to vary quite significantly from country to country. I would like to see more African countries achieve similar significant increases in FDI inflows due to improvements to their regulatory business structures, as experienced by Rwanda over the last five years.
Your year in oil and power: what do you expect in 2016?
For sure it is going to be another exciting year of closely working with our clients and advising them on key strategic and operational issues during these times of high, and in many cases, unprecedented uncertainty and volatility. I believe that one of the main themes that Africa should continue to champion, especially countries that are blessed with significant natural resources, is the further widening and deepening of the diversification of their national economies. Developing smart strategies of leveraging significant natural resources to achieve diversification targets and the role of state and private sector collaboration are areas that I feel very passionate about.