Catalysts: Low Oil Prices Drive Change

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.

 

Tracey Henderson
Vice President Exploration, Business Execution/Geophysics
Kosmos Energy LLC

I believe the current economic downturn in itself may ultimately be a catalyst for change. E&P companies and service providers have reacted swiftly to the lower price, but significant changes from host governments and National Oil Companies have been slower to come.  However, as acreage positions have been relinquished and companies have exited countries, we are beginning to see some shifts, and those shifts are focused on changes to ensure that host governments can continue to attract investment into their countries.

The sobering effect of the price crash has impacted historically high signature bonuses and capital intensive work programs that prevailed in the competitive environment of $100 oil.  We have been encouraged recently that there appears to be more focus on attracting companies who will properly explore basins and progress work programs that can ultimately deliver discoveries that will benefit countries.  Access costs, license and fiscal terms are gradually beginning to reflect the current oil price.  If this sentiment continues, the net effect will be capital discipline coupled with work programs and fiscal terms that work in a $50 world, and this would be a positive impact.

 

Lizel Oberholzer
Director
Norton Rose Fulbright South Africa Inc.

Lower oil prices, combined with diminishing returns from established mature fields forced International Oil Companies to cut costs. Consequently, drilling activities reduced and IOC’s relinquished blocks. When making these decisions geological risks, the prospects of success, political and regulatory certainty, are considered

Lower drilling cost, adaption to the changing commercial circumstances and finalisation pending legislation, which created uncertainty, such is the Tanzanian Petroleum Act in could encourage IOC to re-engage in drilling activities and commercialisation of discoveries such as the oil discovery in Uganda.

 

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