Ministers of petroleum discuss upstream in Africa
Africa’s upstream competitiveness was called to task Tuesday during a session at CERAWeek, with key African ministers of petroleum and government officials arguing that Africa is emerging from the downturn ready to play ball — offering licensing rounds, opening up regulations, addressing security issues and focusing on transparency.
The central question of the panel – Are governments positioned to compete for a more limited pool of upstream capital? The resounding reply from a wide range of countries, including stable, mature oil producers like Equatorial Guinea, rising stars like Ghana and Kenya and those emerging from civil unrest and instability to seek investment in the oil and gas sector like Sierra Leone and South Sudan, was yes.
“2019 we have named as the Year of Energy because for two years we and the companies have had a major impact because of the drop in the price of the commodities. And we believe that 2019 has to be the year of investment,” said H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons of Equatorial Guinea.
Lima outlined a strategy to bring new investment into the sector, including the controversial decision not to renew Ophir Energy’s lease on Block R. “Instead, Block R will be offered during the country’s 2019 Licensing Round being launched at the African Petroleum Producers Organization Cape VII Conference in Malabo from April 2-5, one of two blocks,” Lima said on offer that had already been explored.
“An additional 25 blocks are being offered for exploration, with potentially two more to come available to investors as the contract expires in just two months,” Lima said.
The country’s gas mega hub is also a strong attraction for investors, as Equatorial Guinea builds its downstream capacity.
Ghana, which is currently in the middle of a licensing round, has already had 60 applications on just five blocks on offer, said Ghana’s Deputy Minister of Energy, Dr. Mohammed Amin Adam.
“There are some countries that have trouble managing their oil and gas resources, and Ghana will not have that said problem,” Adam said on the panel.
“Across the gulf, Sierra Leone is also offering a bidding round sometime this year,” said Timothy Kabba, Director General to the Petroleum Directorate of Sierra Leone.
Kabba touched on Sierra Leone infamous civil war and the impact of the deadly Ebola outbreak on the country’s oil and gas exploration. Both crisis, he said, halted exploration and development in their tracks, but the country has drilled eight wells in its history, six of which show the presence of hydrocarbons. After peaceful elections last year, Kabba said the country is ready to move forward in oil and gas.
“Today, we have a reformed petroleum sector and I believe we have an unfinished job in our aspiration to explore for oil and gas,” he said. “Sierra Leone has an advantage over its neighbors in that we already have proven hydrocarbons in the country. What we need is an investment to tap on that discovery and to change the economic landscape of our country and bring prosperity to our people.”
“In Kenya, where Tullow Oil has commenced trucking oil out of the country in an early production plan, is a top priority is developing infrastructure,” said Andrew N. Kamau, Principal Secretary for the State Department of Petroleum of Kenya.
Another top concern for Kenya and Ghana is that the petroleum sector doesn’t aid in the further development of the economy.
“Having a diversified economy, we have to be careful hat oil does not distort our other things in horticulture, the tourism industry, and tea and coffee,” said Kamau. “But it becomes an incentive for those enterprises.”
In South Sudan, the country has signed a peace deal with internal rebel groups and is coordinating with Sudan to boost production. “The country is also offering a licensing round this year,” said Mohamed Lino Benjamin, Technical Adviser, Ministry of Petroleum.
“Peace was signed last year and the government and opposition are now working hard to make sure peace is sustained,” Benjamin said. “I believe this so far is not the biggest issue in the country. The challenges that may still remain are that we are operating most of our blocks in swamps and so access roads and managing operations in the swamps are the most difficult. And as I said, the production water, these are bigger challenges on the production.”