Deloitte, one of the “Big Four” accounting organizations and the largest professional servicing firm has named Ghana, Mozambique, Tanzania and Uganda as new countries that will be competing with Nigeria’s oil and gas sector for Foreign Direct Investment (FDI) in 2019 and beyond.
According to Deloitte, while established oil and gas countries like Nigeria look to reinvigorate FDI, the spotlight is also shining on Africa’s new contenders as the region’s newest oil producer; Ghana has seen the highest growth in oil production among its peers thanks to launching of its first offshore licensing round with six blocks in late 2018 which will contribute to a rise in exploration activity.
“A long-debated Petroleum Bill, passed in August 2016, is set to improve the broader regulatory environment and remove major barriers to exploration,” Deloitte said in its “The new frontier: Winning in the African oil and gas industry” report.
Another country on the spotlight to compete for FDI with Nigeria is Mozambique who also holds the largest gas resources in the continent, which implies it has the largest untapped potential in the region.
Despite domestic and governance challenges aside, Mozambique has recorded the largest flow of FDI over the past eight years among its peers as recent discoveries multiplied proven reserves which will underpin the country’s projected economic recovery.
“Plans for the coral floating liquefied natural gas development in the Rovuma Basin, as well as the Anadarko Petroleum project in the north are two prominent developments that will soon gather momentum,” Deloitte said.
For Deloitte, another country to observe is Tanzania. The country boasts of one of the fastest-growing economy among its oil and gas-producing peers in the region and the second-largest natural gas resources.
“While production is low, the discovery of new offshore fields has the potential to transform the economy. It’s closer location to Asian markets gives Tanzania a geographical edge over peers, although exports of liquefied natural gas based on a planned onshore export facility have been delayed for at least five years,” Deloitte said.
Next on the list is Uganda; Discoveries in 2006 proved the country has the fifth-largest oil resources in the region and new exploration licenses are being awarded. Production is expected to start in 2021 and the construction of a pipeline from Hoima (Uganda) to Tanga (Tanzania) began in 2018.
Deloitte also raised consideration about Cote d Ivoire were a favorable ruling in September 2017 on the long-running maritime border dispute have brightens the country’s prospects however “refining capacity is constrained, and limited oil pipeline infrastructure may affect consumption.”
For established oil country like Nigeria with substantial foreign direct investment (FDI), Deloitte noted that delays in reforming the sector have deterred further investments as governance challenges, corruption, as well as economic, security and high cost concerns still hinder investment inflow.
“Improving economic conditions and transport sector growth could see domestic consumption increase by 31 per cent between 2017 and 2023 while investment in gas infrastructure, such as new pipelines, will boost production,” Deloitte said concerning Nigeria.
Deloitte noted that opportunities exist for players with the Nigerian government intending to privatize ten power stations as part of efforts to guarantee an effective and sustainable power supply in the country.
Despite, Angola having the second-largest oil resources and is the second-largest oil producer in sub-Saharan Africa, Deloitte believes Angola is less attractive from a regulatory perspective as Africa’s second largest oil producing county still grapples with corruption, high business costs, low growth and a lack of business diversification.
Generally, Deloitte admitted that there is no universal recipe for winning in the sub-Saharan Africa oil and gas sector. However, soft and hard skills, paired with the right timing, and an understanding of market-specific conditions will bring success.
According to Deloitte, factors considered by multinationals looking to invest and operate in Africa ranges from investing in local partnerships, capitalizing on local market knowledge, understanding local customs and business culture to developing local content and localization strategies, creating value beyond compliance, portfolio management and diversification, embracing digitalization, identifying risks and planning for uncertainty.