Catalysts: Diversification and Power Generation are Key

The theme of Africa Oil & Power, Catalysts for Change, encompasses the major changes that African governments and firms are undergoing in 2017, and the significant developments in the oil, gas, power and finance industries in response to the oil and gas price down-cycle. We asked the leading voices in the African oil, gas and power business to give us their views on the drivers for change in the energy industry.

Dr. Benedict Okey Oramah
President and Chairman of the Board of Directors
African Export-Import Bank (Afreximbank)

The main catalyst is the current commodity-induced shocks to many economies in Africa. We are seeing economic recessions in many commodity-dependent countries, but what that has done is demonstrate the need to diversify.

Of course, we have seen this drive for diversification before. Whenever there is a crash in commodities, countries talk about diversification, but then when the prices recover, they would go back to commodities. I think this will be different, though. What we are seeing and what we have been doing at Afreximbank is the promotion of inter-regional trade, regional investments and the promotion of exports, especially in light manufacturing and the creation of a new industrialized sector that will increase export performance. This will be the biggest catalyst for change. Every country I have been to is doing something about this. Banks like ours and the African Development Bank are pushing for this transition. So you have the political will, and you also have the people in the country beginning to push for this and you have the banking sector supporting the transition.

Another reason this particular commodity crash is driving change is that in the past 15 years, Africa has seen a significant investment in infrastructure. It is not where it should be, but the continent has made tremendous progress, and this infrastructure is key to boosting industrialization and intra-African trade. Secondly, the middle class has expanded, and as the access to infrastructure globally has also expanded, people no longer need to be poor and politically oppressed. Governments are more accountable.

Even after the commodities recover, I don’t think we will go back to an over-dependence on natural resources.

Thabo S. Thobejane
Senior Associate of Oil & Gas Finance in Corporate and Investment Banking
Nedbank CIB

At Nedbank CIB, we see change happening in key countries where the upstream and power sectors are moving to development, and with projects that are reporting FID either this year or early 2018.

A route for a 1,400 kilometer pipeline to export Ugandan oil has been agreed. The pipeline will go through Tanzania, and Tullow Oil & Total are expected to reach FID on the Uganda project in 2017/2018. In Kenya, both companies are planning to make FID in 2018/2019.

Africa-focused exploration and production company Kosmos Energy spent a substantial amount of funds on exploration in 2015/2016 and they seem to be moving towards development of their discoveries in Senegal and Mauritania.

Focusing on East Africa, especially Mozambique and Tanzania, the gas-to-power theme will continue – which has really kicked off – such as Sasol’s 400 MW gas-to-power plant planned for Maputo. Appraisal activities in the PSA have ensured there is enough supply of gas.

Countries like Botswana have been dependent on coal-to-power solutions, and power imports from South Africa. The country is, however, also seeking gas-to-power solutions with AIM/ASX listed company Tlou Energy, which is tendering to develop an up to 100MW of gas-to-power capacity in the country using CBM.

In Ghana, gas-to-power is also advancing. The country has been producing oil since 2010, and has made strides from a gas-to-power perspective.

Turning to Ivory Coast, there is talk of an LNG re-gasification terminal and FSRU for gas-to-power projects.

Another catalyst for change is LNG exports from Mozambique and Tanzania. There have been delays on FID, but Mozambique is expected to reach FID on the Coral FLNG project this year. ExxonMobil has just completed talks with Eni and the Mozambique Government about farming into Area 4.

Moving back to the West, after a number of delays, the Angola LNG project has come to fruition and is said to be ramping up.

Militancy in the Niger Delta region has put production largely on hold in Nigeria, but formal negotiations between the Government and the militants are continuing and, as a result, Nigeria is likely to reclaim its spot as Africa’s number one oil producer soon.

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