Look at the last full year 2013. The biggest oil and gas discoveries are all over the place, worldwide. Some in non-surprising areas, with others in new or frontier areas: (1) Lontra – Angola – 900m boe; (2) B14/B17 – Malaysia – 850m boe; (3) Ogo – Nigeria – 775m boe; (4) Nene – Congo Brazzaville – 700m boe; (5) Agutha – Mozambique – 700m boe; (6) Tangawizi – Tanzania – 575m boe; (7) Coronado – Gulf of Mexico – 550m boe; (8) Salamat – Egypt – 500m boe; (9) Maximino – Gulf of Mexico – 500m boe; (10) Bay du Nord – Canada – 450m boe.
Five of the above 10, totalling approximately 3.65b boe, are in sub-Saharan Africa. That is 2013 alone!
African oil and gas has seen very interesting times in the past five to 10 years. Some might even say “exciting times”, especially sub-Saharan Africa. Countries not usually referred to in oil and gas context have suddenly come into oil and gas reckoning. There is so much oil and gas yet to be discovered in sub-Saharan Africa.
Last year, Oil Review Africa, an oil and gas publication, said: “New energy-producing countries such as Uganda, Kenya, Ghana and Niger are set to redraw sub-Saharan Africa’s oil and gas map over the next five years, contributing to a significant increase in output and attracting top global companies.”
Wood MacKenzie said sub-Saharan Africa could be producing an extra 400,000 bpd by 2018, taking the region’s crude output to 7mbpd.
Mozambique and Tanzania are looking for and planning compression plants to liquefy gas. Mozambique’s gas reserves could be as much as 150tscf. Let’s look at Africa’s current production.
Nigeria and Angola are sub-Saharan Africa’s heavyweight producers. Between them, they produce just over 4mbpd. Currently, sub-Saharan crude oil production is just about 6.5mbpd, and natural gas is just about 200mn cubic metres per day. This could rise to 255mn cubic metres/day by 2018 and 360mn cubic metres/d by 2024.
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Presently, about two-thirds of sub-Saharan Africa’s gas is exported as liquefied natural gas (LNG) from Nigeria, Angola and Equatorial Guinea. Mozambique may soon join.
Companies such as Tullow Oil, Anadarko, ENI, Global, Fastnet, Ophir, Azonto, Far, Chariot, Africa Oil, WHL, Pan Continental, Chevron, Total, Shell, Petrobras, ExxonMobil, Kosmos, Cove, etc have either taken up acreages or are exploring in new oil and gas countries such as Liberia, Sierra Leone, Kenya, Tanzania and South Africa.
The search for new oil and gas is on, big time! The Western Africa region – Morocco, through Mauritania, Ivory Coast, Nigeria, Gabon to Angola and Namibia – is arguably the hottest oil play in the world today. If you add the inland basins of Chad, Niger, South Sudan, the Rift Valley and additionally venture round the Cape of Good Hope and add the East African play, then definitely and unarguably, the sub-Saharan African play is the hottest.
In all this, the Nigerian play is the diamond in the crown. So, I shall concentrate on Western Africa and specifically on Nigeria.
Nigeria has been producing and exporting oil since 1956. Just under 60 years now. Play in this specific area has matured, with Nigerian-owned independent producers ever more active. Dubri Oil Company was the first Nigerian and African independent crude oil and gas producer. Dubri started production of oil and gas in 1987 – 27 years ago.
Currently, Nigerian independent companies are active both inside and outside Nigeria – Ghana, Uganda, Equatorial Guinea and Angola.
With reserves of over 37bbls of crude oil and 260Tscf of gas, Nigeria will remain a significant player in oil and gas on the world scene for a few years to come. Thus, I see the Nigerian independents playing an increasing role both within and outside Nigeria. Currently, they are estimated to be holding about 10bbls out of Nigeria’s 37bbls of crude oil reserves, and 45Tcf of gas, according to the DPR.
Within the past 24 months, Oando, quoted on both Toronto and Lagos Exchanges, bought the Nigerian interests of ConocoPhillips. Seplat, quoted on both London and Lagos Exchanges, bought some of Shell’s interests in Nigeria. A few others are quoted in London, Johannesburg, Lagos and Toronto Stock Exchanges.
However, I see the paradigm changing. The paradigm is changing on more than one front at the same time. This conference, the essence of which is to take another look at existing and emerging oil and gas opportunities in sub-Saharan Africa, in light of today’s realities, could not have come at a more opportune time. I congratulate the organisers. Here are why the paradigm is changing:
• Africa is home to 54 countries, and 6 of the 10 fastest growing economies on the planet. Consumer spending in Africa will climb to $1trn by 2020. There is tremendous demand for US goods and services in sub-Saharan Africa.
• More than half of consumer expenditure in sub-Saharan Africa comes from Nigeria and South Africa. This year Porsche, the German Car maker, stated that their Lagos operations met their annual targets in the first three months of the year. Rolls Royce has just opened a new franchise in Lagos. New real estate development in Nigeria is astronomical.
• UNICEF predicts that by 2050, there may be 1 billion Africans under the age of 18; and that by 2100, one in four people on the planet will be African.
• The African youth bulge, especially in sub-Saharan Africa, can be a tremendous purchasing machine.
• This, in an atmosphere of high GDP growth rates and an emerging middle income group, is the real emerging opportunity in sub-Saharan Africa.
• How to tap into this is what the US and the rest of the world should be looking at.
• No country exemplifies the challenges and ambiguities of demographic and economic growth like Nigeria.
• The Carlyle Group CEO, David Rubenstein, says the private equity industry in Africa will “take off”; that opportunities there are far greater than people thought a few years ago. Africa-focused PE firms raised $3.3bn in 2013, a 130 percent increase from 2007. Dangote and the Blackstone Group have committed to invest $5bn over the next five years in power projects in sub-Saharan Africa.
• The US, long Nigeria’s largest export market for our crude oil, has been extremely successful in producing additional oil and gas, mainly from recent Shale oil and gas activity. Nigeria was a top-5 oil supplier to the US. However, as reported by the US Department of Energy, the US has not imported a single barrel of oil from Nigeria since July 2014. This was the first such occurrence since records started being kept in 1973. This trend is likely to continue. To put the situation in perspective, at its peak in 2006, the US was importing 1.3m bpd from Nigeria. Most of this oil is now being exported to Asian countries.
• Nigeria is now Africa’s largest and most diverse economy, even if not the most sophisticated; and 26th in the world. Nigeria’s economy overtook South Africa’s earlier this year, following a rebasing and updating of the parameters.
• Only 15 percent of the GDP is from Resources, with Oil and Gas contributing 14 percent; Retail and Services contributing 51 percent; Agriculture 22 percent; Telecoms 8.7 percent; Manufacturing 6.7 percent; Entertainment & Films 1.2 percent. Current growth rate is 6.3 percent for 2014 and 6.5 percent is estimated for 2015.
• Nigeria’s new economic figures have shown that Nigeria’s economy is much more diversified than previously thought. Given the country’s population of 170m people, of which about 70 percent are young people, Nigeria has a large labour force, the 11th in the world, and a large market for consumer goods and services.
• Nigeria accounts for 2.35 percent of the world’s population. This means that one in every 43 persons on the planet resides in Nigeria. That’s a large demographic market for labour, goods and services. This translates to a frontier market for Foreign Direct Investment.
• It’s not just a large population, but the character of the population is changing. The Nigerian middle class jumped six-fold in 14 years, riding on growth rates that have exceeded 7 percent annually over the past 10 years, driven by steady growth in the non-oil sector.
• The Nigerian middle class (daily consumption between $2.0 and $20 in 2005 PPP) is estimated at about 23 million people. McKinsey Global recently reported that there are almost 40m Nigerians in the consuming class household – households with incomes more than $7,500.00. Further, the rebased GDP has shown opportunities in other areas, such as Manufacturing, Telecommunications & IT, Construction, Wholesale & Retail and Agriculture.
• However, a few warning clouds: The commodities cycle is drawing to a close! Demand from China is waning, as the character of her economy changes. This will impact commodities pricing.
The US Federal Reserve’s review of its assets buying programme will affect emerging economies like Nigeria. Thus the prospect of a rise in US interest rate, in the near future, is high. Crude oil prices are plunging.
All these mean that frontier and emerging markets, such as Nigeria, must contend with a paradigm shift regarding their commodities and exports. It’s time Nigeria rethinks its economic and growth strategies.
When we think oil and gas, we must move away from the conventional production of Crude oil and gas only. When we think oil and gas, we now need to move into value-added aspects of oil and gas – refining, LPG, CNG, LNG, urea/ammonia, petrochemicals, plastics, etc, plus services, maintenance and fabrication facilities in oil and gas. Turn Nigeria to the petroleum hub of Western Africa. That must be the 2015-2025 vision for Nigeria and West Africa’s oil and gas. Nigeria’s economy is more than 60 percent of West Africa’s. There are ample investment opportunities to create a Western African investment hub in Nigeria. That is gradually happening, board the train now!
Let me end by quoting Thomas Donohue, the president and CEO of the US Chamber of Commerce: “The United States is wisely pursuing trade and investment opportunities round the world…given that 95 percent of the world’s customers and 80 percent of its purchasing power lie beyond US shores…. Our strategy would be even smarter if Africa was a bigger part of the mix.”
Donohue is a wise man. I believe China and India have both seen these opportunities and are aggressively pursuing trade and investment in sub-Saharan Africa. The US must not lose its previous advantage here – the train is about to leave the station; please get on it!
U. J. Itsueli
