Thursday, 7 April 2016

AOP White Paper: Dare to Invest

AOP White Paper: Dare to InvestABSTRACT
There is no time for gloom, even as African oil exporters are suffering across the board from low prices   Asset maturity and political challenges raise onshore operational costs while the offshore sector is deprived of capital expenditure   But with increasingly proven plays and proximity to a market with long-term demand drivers, Africa’s demographic fundamentals should sustain investor interest   A less optimistic public perception of the continent’s oil industry as a long-term source of economic uplift may come at some risk to socio-political stability   As a consequence, international oil companies are encouraged to safeguard local content initiatives, despite the need for OPEX cuts.  

The outlook, for governments and corporations in the private sector, will continue to be shaped by downturn strategies that can provide flexibility and negotiate market uncertainty The downturn in the global oil industry over the last eighteen months has been one of the worst in recent history: More than 200,000 workers have lost their jobs and industry giants have suffered multi-billion dollar losses.

While the fall-out of low oil prices across the breadth of Africa’s oil economies is hardly uniform, impairments to government revenues have threatened economic stability in exporting countries.   In the North, Algeria’s 2016 budget is expected to include spending cuts and consumption tax increases to help stem a widening trade deficit of more than $20 billion. To the West, Equatorial Guinea, at $40 per barrel, will suffer oil revenue losses of 35 percent relative to a theoretical prevailing price of $100.  

And as Nigeria’s public finances threaten to carry a forecasted deficit of $11 billion, as well as face up to a 50 percent increase in unemployment, the public perception of the continent’s oil industry as a long-term source of economic uplift is beginning to wane. This white paper finds that, on aggregate, low oil prices have negatively impacted oil-dependent African exporters across the broad base of their stability indicators, the most concerning of which is unemployment.

However, with a twofold rise in the demand for oil products (to 4 million barrels per day) predicted for 2020, and a fourfold increase in electricity demand by 2040, some operators have identified sub-Saharan Africa’s economic capacity to stimulate a revival in the regional oil and gas industry. The long-term opportunities for firms working across the industry and the prospects for investment in a nascent deep-offshore industry also necessitate downturn strategies that can provide flexibility and negotiate the uncertainty that will characterise the industry in the medium term. read more....

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