African Oil and Gas Industry set for Rebound

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Africa’s offshore oil and gas industry after seeing tough times in recent years, it is becoming more dynamic again.

With the oil price back at levels last seen in late 2014, and oil company coffers swelling, Africa’s leading hydrocarbons producers are hopeful that they can draw investment back to the continent’s upstream oil and gas sector after some lean years. Both Nigeria and Angola, Africa’s largest oil producers were already finding it tough to launch large offshore oil developments before the oil price nose-dived from over $110 a barrel in mid-2014 to below $30/b in early in the following year.

In August 2018, Nigerian crude production averaged around 1.85m barrels a day (b/d), while Angola’s averaged 1.38m b/d, according to Opec data. Both countries are producing less than past peaks – over 2m b/d for Nigeria and around 1.8m b/d for Angola. Nigeria’s failure to nail down new legislative and financial frameworks for exploration and production agreements, along with the ever-uncertain security situation in the oil-rich Niger Delta, had already prompted some of the majors to scale down operations in the country.

Meanwhile, Angola’s state energy firm Sonangol was finding it hard to stimulate sufficient fresh exploration to replace fast-depleting reserves of existing developments, not least because of the high cost of operating there. Both countries’ oil sectors were also tainted by a lack of transparency and the impact of oil sector-related corruption scandals. In the last few months, both nations have been trying to heal their relationships with foreign investors by pushing ahead with plans for industry restructuring, though it remains to be seen how successful they will be in implementing meaningful change.

Nigeria’s legislative overhaul

In Nigeria, the Petroleum Industry Governance Bill (PIGB), a key piece of legislation affecting future investment – and the first of four related bills – had been passed by both houses of Nigeria’s parliament by early 2018. After a decade of fruitless negotiations, this potential breakthrough offered the prospect of a more clearly defined investment framework for major oil and gas projects. “I don’t think the PIGB was ever the silver bullet that some people thought it was going to be. But there was a body of opinion that said it would at least be a bit better than the current status quo,” says Gail Anderson, Research Director at consultancy Wood Mackenzie.

However, the reform process hit a snag in late August, when news broke that President Muhammadu Buhari decided to withhold his assent for the PIGB, apparently, in part, because it trimmed the amount of oil revenues available for government spending. Ita Enang, a senator and presidential aide, refuted local media reports that the president, who also acts as oil minister, was concerned that the PIGB would reduce his power over the industry by giving more control to independent regulators. Whatever the reason, a further delay – which could be months or even years, given the proximity of next February’s presidential elections – won’t do much for investor confidence in the sector.

There has also been mixed news from the Niger Delta. Militant attacks on oil and gas facilities in the region that have regularly disrupted onshore production and pipeline supply to oil and gas export facilities have eased off over the last year or two. This has enabled export volumes to recover, after Delta disruption caused Nigerian crude production to fall well below 1.3m b/d at some points in 2016. However, a coalition of local militant groups seeking a greater share of the spoils from the oil industry said in September that It would resume attacks if international oil companies did not move their headquarters to the Delta region by the end of 2018 – a demand that is unlikely to be met.

End of an era in Angola

Meanwhile, Angola’s President João Lourenço has announced measures that if implemented would loosen Sonangol’s tight grip over the oil industry there. Under recently unveiled plans, Sonangol, the state-owned company that oversees oil and natural gas production in the country would hand over responsibility for petroleum agreements, oil block sales and their management to an independent National Oil and Gas Agency (ANPG) by the end of 2020.

Lourenço was elected in September 2017, succeeding José Eduardo dos Santos, who stood down as president after 38 years at the top. Since then, his daughter, Isabel dos Santos, has been removed as head of Sonangol and an investigation into possible corruption at Sonangol under her leadership has been launched. She denies any wrongdoing. Both Angola and Nigeria are members of Opec, but their output has been little affected by the cartel’s recent production quotas. In Angola’s case, falling output meant it was producing well below the cap imposed on it. Nigeria was initially excluded from quotas to enable output to recover from the impact of Niger Delta unrest.

Projects advance

Despite the continued uncertainty, the uptick in interest in costly deepwater investments, which look more attractive with today’s higher oil price, has moved some big projects forward in both countries. In Nigeria, Total is considering expanding the scope of its new Egina deepwater project, whose floating production storage and offloading facility (FPSO) is due to start operations in late 2018. The FPSO is set to produce 200,000 b/d of oil from the Egina Main field, whose reserves are estimated at  570m barrels. The French company has said it is now considering connecting its nearby Preowei discovery to the Egina FPSO, after a third appraisal well was successfully drilled there in late 2017.

Prospects also seem brighter for Shell’s delayed expansion of the Bonga deepwater oil field, which had been mired in legal wrangles between Shell and the state-controlled Nigerian National Petroleum Corporation (NNPC) over the terms of the field’s Production Sharing Contract. In early September, Shell Nigeria’s managing director Bayo Ojulari said in a statement that a timetable for a final investment decision would be announced after commercial discussions with the government were concluded. He said those talks could be concluded “soon”. The $10bn Bonga Southwest project could add as much as 175,000 b/d to the field’s output.

In Angola, on the Total-operated Kaombo development on Block 32, the Kaombo Norte FPSO started producing in July, while the Kaombo Sul FPSO is due to start up in 2019. Overall production from the development is expected to peak at some 230,000 b/d. But Angola still needs a lot more exploration than is currently on the cards to make the discoveries it needs to compensate for falling output from now-maturing assets that have been the mainstay of production over the last two decades. Without more investment, production could fall to 1m b/d by 2023, as output from older fields runs down, according to Angola’s Ministry of Mineral Resources and Oil.

Spotlight on gas

Of course, it’s not just about oil anymore. With the era of peak oil fast approaching, many international oil companies (IOCs) are ploughing more money into gas export projects, whose shelf life could be longer. Nigeria remains the kingpin of Africa liquefied natural gas (LNG) exports, but is facing stiff competition not only globally, but also from within the continent, as up to three LNG projects in Mozambique move closer to fruition.

Talk of expanding export capacity from the current 22m tonnes a year (t/y) – all of it from the Nigeria LNG (NLNG) facility on Bonny Island – has been around for years, without progress. But, with the current the global LNG supply glut due to turn into a shortfall in the early 2020s, NLNG’s IOC owners have embarked on efforts to raise finance to build a new production train at the site to add to the existing six. NLNG is owned by Shell (25.6%), Total (15%) and Eni (10.4%), with NNPC holding the other 49%. 

They are seeking some $7bn to cover the cost of building Train 7 and another $5bn for upstream investment in gas supply. The expansion would add 8m t/y to Nigerian export capacity, bringing it to around 30m t/y. That would make the country the world’s third largest exporter, behind Australia and Qatar, based on current production data. Angola also exports LNG from the 5.2m t/y Angola LNG plant, operated by Chevron. The plant, which opened in 2013 has had a chequered history, and had to be shut down for months at a time due to technical problems in the following two years. Its operating record has improved more recently.

The country’s gas production has largely been based on associated gas from oil projects. But the new government has improved terms for gas-focused developments, raising the prospect of possible expansion of Angola LNG, as well as greater supply to the domestic market.    

Ian Lewis

KAOMBO: AN INNOVATIVE ULTRA-DEEP-WATER OFFSHORE PROJECT IN ANGOLA

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Angola and Total inaugurated a new deep-sea oil field worth $ 16 billion on Saturday.

This is expected to boost the production of the African nation since the fall in crude prices that plunged its economy into crisis in 2014.

Located 250 km off the capital Luanda, the Kaombo project is the largest offshore operation ever launched in Angola.

For the first time in the world, a network of more than 300 kilometers of tubes was laid up to 2,000 meters under the sea to raise hydrocarbons on the surface.

The first of the two ships, Kaombo Norte, produced its first oil last July.  The other, Kaombo Sul is expected by mid 2019.

Eventually, they must produce 230,000 barrels a day, or 15% of the country’s current production for total reserves estimated at 660 million barrels.

‘‘Kaombo opens a new chapter in Total’s commitment to Angola. It will produce 230,000 barrels of oil per day on a plateau basis and will enable Total to maintain world production of 600,000 barrels per day by 2023, or 40% more or less of the country’s production. So let me be clear, Minister of State ( Manuel Nunes Júnior), the future of our company is deeply linked to the future of your country’‘, said CEO of Total, Patrick Pouyanne.

The project is led by the French group, Total in partnership with the Angolan national company Sonangol, Sinopec from China, Esso, the United States and Portugal’s Galp.

Total produces 40% of the crude oil extracted from Angola, the second largest supplier of sub-Saharan Africa behind Nigeria.

In the early 2000s, Angola experienced a period of very strong double-digit growth fueled by oil. But in 2014, the sharp drop in crude prices, which sold 90% of its exports and 70% of its revenue, pushed the country into recession and brought down the national currency.

The price of the barrel reached its highest in four years last month but has recently fallen.

Angolan President Joao Lourenço, elected in 2017 after thirty-eight years of Jose Eduardo dos Santos’s reign, has promised the country an “economic miracle” that has been triggered by the revival of its oil production.

Angola’s Minister of Mineral Resources and Petroleum, Diamantino Azevedo said “our goal is to maintain production, the government has pledged that this figure will not decline during its term”.

AFP

FinTech to contribute $150 billion to Africa’s GDP by 2022

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The contribution of the financial-technology industry to sub-Saharan Africa’s economic output will increase by at least $40 billion to $150 billion by 2022, according to Financial Sector Deepening Africa, a development-finance organization.

The industry currently employs about 3 million people directly and indirectly in the region, FSD Africa Financial Markets Director Evans Osano said in an interview last month.

Sub-Saharan Africa’s gross domestic product is about $1.6 trillion, according to data compiled by the International Monetary Fund.

“If you look at the value chain, most of that money is coming out of mobile-phone companies,” Osano said. “So from the other support services the contribution is not much, but is expected to increase as fintech develops to address the financial needs of people or making services more accessible.”

Safaricom Plc, East Africa’s biggest mobile-network operator, developed one of the world’s first mobile phone-based money transfer services, and says 88 percent of its almost 30 million customers now use it. About 21 percent of adults in sub-Saharan Africa have a mobile-money account, nearly twice the share in 2014 and the highest of any region in the world, according to the World Bank’s Global Findex Data.

Ethiopia announces $7 billion road and power projects

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Ethiopia announced $7 billion worth of new road and power supply projects, according to the state-affiliated Fana news agency.

The government’s Public-Private Partnerships Office said the three road and 13 power projects would be launched this fiscal year after the tendering processes were completed, Fana reported.

It did not say how they would be financed or give any other details on the projects.

Ethiopia – which has recorded the highest economic growth rate in sub-Saharan Africa for years – has invested heavily in state-led infrastructure projects, drawing on foreign borrowing and its own foreign exchange reserves.

But there have been signs that China, a major creditor, is slowing financing to Addis Ababa as doubts grow over the profitability of some infrastructure projects there.

The power projects are a-469MW Genale Daw 5, 100MW Genale 6, 280MW Chemoga 1&2, 424MW Halele Werabe, 798MW Dabus, 125MW Gad, 125MW Dichato, 100MW Mekelle, 100MW Humera, 150MW Wolenchiti, 150MW Weranso, 125MW Metema, and 125MW Hurso.

Similarly, the three road projects are a 125km Adama-Awash, a 72km Awash-Mieso, and a160km Mieso-Dire Dawa highways.

Dr. Teshome Tafese, director general of the office noted that the projects will be launched this fiscal year after necessary tendering procedures are completed.

source: REUTERS

100 African Companies Signed Up to Participate to the Shanghai International Import Expo (CIIE)

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Deputy Director General of the China International Import Expo (CIIE) Bureau, Ms. Zhong Xiaomin, has informed journalists that over 100 African companies have already signed up for the event that is to be held in Shanghai this November.

Speaking Thursday, 19th July, at the National Exhibition and Convention Centre in Shanghai, she said the 100 companies are coming from 38 African countries.

She noted that China wants to share the experience of her progress with countries around the world, adding that CIIE is a bold step taken by the Chinese government to open up its market to the world.

“This is also a platform where countries will show what they can produce to the rest of the world. It is China’s wiliness and determination to expand export. The participatory countries are those from developing and least developing economies. The President of Kenya, among other presidents, will be attendance,” she disclosed.

Ms. Zhong revealed that at the initial stage of the preparation for CIIE, they apportioned space of 210,000 square metres for the exhibition, but as more participating countries continued to show interest and they didn’t want to leave anyone out, thus has increased the space to 270,000 square metres.

“African banks should embrace fintech” says Sunil Kaushal at Standard Chartered

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Sunil Kaushal, CEO of Africa & Middle East at Standard Chartered Bank outlines how the rules of the game are changing in Africa’s banking sector.

Halfway through 2018, total funding for start-ups in Africa has increased by nearly four-fold compared to the first half of last year. Digital entrepreneurs are changing the Sub-Saharan continent, and we have an opportunity be part of this monumental transformation. However, it requires all of us to embrace both exponential thinking and the latest technology to the fullest. African start-ups have raised a record breaking $560m in 2017, an increase of 53% from the previous year. African governments have welcomed technology into the continent, hoping to inspire a revolution across all industries and sectors.

Some of the brightest minds are determined to rewrite the rules of the game by harnessing technology to tackle some of the continents greatest challenges – with one of them being the distinct lack of access to banking services for large parts of the population. Only 4 years ago, an astounding 66% of Sub-Saharan Africans did not have a bank account. Now, Africa has been described as a “leapfrogger” with the application of a technology driven economic model to reach the unbanked.

FinTech remains to be the most appealing industry for investors as African start-ups look to bridge the financial gap. Several of the largest deals in 2018 involved African FinTech companies: Kenyan-based Cellulant raised close to $50m from investors this year, while microfinance company Branch received another $20m investment to continue funding their mission to bring digital financial services to the Sub-Saharan continent.

Think exponentially, not incrementally

It is a reality that the financial industry is experiencing disruptions on all fronts. As banks, we have a choice as to how we approach and address this change. One of the most important principles to master this evolution is to move from managing people and processes to managing purposes and principles with an entrepreneurial mindset.

During a recent trip to San Francisco, I had the opportunity to meet Patrick Collision, co-founder of Stripe (think PayPal). Started only seven years ago, Stripe displaces the need to have a merchant capability and enables sellers and buyers in e-commerce to invoice and collect payments. He believes it can be a large company, but it would have to have the mindset where people prioritise the greater good over personal goals. I thought this insight was fascinating, as for this kind of culture to grow, there must be unhindered obsession about doing better every single day.

US-based Singularity University, one of the world’s leading incubators and think-tanks in the field of technology, stresses that the greatest challenge for established institutions is to reinvent themselves using a digital mindset by thinking exponentially and not incrementally. This doesn’t mean the core of what companies do today has to be discarded, rather it is about innovating to foster sustainable growth.

Driven by unhindered obsession

An impressively large number of companies as well as individuals are investing in research, innovation and ideas for execution to keep up with the ever-changing demands of African consumers. Just in the first half of 2018, nearly 120 deals between investors and start-ups were signed. The time when start-ups were considered small, insignificant companies is long over: in fact, with their entrepreneurial spirit and unconventional approaches, they have the power and ability to shape the future of the continent. It can even be said that the people leading these small enterprises hold the key to growth by prioritising the greater good over personal goals. This is perfectly aligned with our bank’s mantra ‘Good enough will never change the world’.

We must do everything we can to harness technology and champion the next generation of entrepreneurs in Africa. We must put our faith in people who are on a mission to accelerate the continent’s development. In the words of renowned African entrepreneur and philanthropist Tony Elumelu, we have a responsibility to ‘collectively invest in our young people, and if they succeed, we all succeed’.

Sunil Kaushal, CEO of Africa & Middle East at Standard Chartered Bank

See: Africa Business Magazine

Making African agriculture more attractive for investors

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While global population growth slows, Africa’s population is set to double over the next three decades, reaching around 2.2bn people by 2050.

This surge in numbers will have significant ramifications for the continent’s food security, which is already under pressure mainly due to climate change. The good news is that Africa’s agriculture sector has been growing at a steady pace and the continent boasts at least 65% of the world’s uncultivated arable land. If this is fully utilised, then African farmers could meet the food needs of the entire world.

As things stand, however, the continent will continue to be dependent on the rest of the world for food, with imports amounting to $35bn annually entering the African market. This includes imports of staples such as wheat ($9.3bn), rice ($5.3bn) and maize ($4.1bn). The rate is projected to rocket up to $110bn by 2025. The current system is geared towards cheap imports of commodities such as sugar, rice and palm oil which are all also produced in Africa, making it very difficult for domestic farmers and food processors to compete.

The conundrum is clear: Africa must find a way of scaling agricultural output. In response to this challenge, the African Union adopted the Comprehensive Africa Agriculture Development Programme (CAADP) in Maputo, Mozambique in 2003. One of the key policies called for member states to increase public agricultural investment to 10% of national budgets per year and for a 6% increase in agricultural productivity per year.

Obstacles to investment

Despite most member states signing up to the ambitious strategy, very few nations have met the minimum requirements of the programme. While the African Union attempts to accelerate CAADP, agribusinesses have to rely on the private sector to help meet its funding needs in some countries. However, investors tend to be reluctant to offer affordable finance to agribusinesses because they consider the sector to be too risky, according to Dagmawi Habte-Selassie, programme officer at the UN-backed financial institution the International Fund for Agricultural Development (IFAD).

“The challenges facing the agribusinesses in Africa is that there is a shortfall in access to finance because many financial institutions view the sector as too risky,” Habte-Selassie says. “Some of the main obstacles cited by these institutions include an absence of data such as information on land titling, weak infrastructure in some areas, insufficient regulations and a lack of collateral to access significant amounts of funds, to name a few. “Investors would rather throw their backing to something which will guarantee returns such as real estate or ICT-related investments, but if you show them the model that is viable then they will definitely be willing to step in and seize the opportunity.”

Only 3% of total bank lending in Africa is allocated to agribusiness, this despite the fact that it contributes 40% of sub-Saharan Africa’s GDP and employs 70% of the population. The available domestic funding is expensive, with agricultural lending interest rates reaching as high as 50% in some countries. De-risking agricultural investment is achievable through the right kind of collaborations between government, private sector and agribusiness stakeholders.

De-risking agribusiness

Private investments in the agriculture sector are mainly targeted towards high-value crops and export products such as flowers. There is also an increase in countries such as China purchasing land in some African countries to secure their long-term food and biofuel supply. There are also a number of private agribusiness investment funds targeting African agriculture. These funds use various instruments such as quasi-debt investments and public-private partnerships (PPPs). 

More investors are embracing the opportunities on offer in agribusiness, but the lack of consistent government policy and poor regulations in some countries continue to constrain investment, according to Hans Bogaard, director at the Dutch development bank FMO. “It helps if governments and policymakers don’t interfere in agriculture in a way that creates uncertainties and unpredictabilities in the market,” Bogaard says. “The governments need to really understand that they have to facilitate a strong agricultural sector, which means investing in the rural infrastructure and creating predictable regulations.”

Government intervention, however, is required to improve poor infrastructure in every stage of the supply chain. Improving rural roads or implementing cold storage facilities could boost the volume of quality products making their way into the market. More countries need to ramp up their implementation of CAADP and embrace pro-private sector policies such as offering tax incentives to new agri­businesses. While these measures will go some way to making agribusiness an attractive investment prospect, systemic issues, especially the fragmented nature of Africa’s agribusiness will continue to hamper the sector.

by Taku Dzimwasha (African Business Magazine)

Ethiopia PM opens industrial park in Oromia region

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Ethiopia’s latest industrial park is located in the Oromia region – the largest and most populous, and home region of Prime Minister Abiy Ahmed.

Abiy was back home to inaugurate the Adama Industrial Park. The parks are central to the country’s economic plans and were started years back. Also in attendance was President of the Oromia region, Lemma Megerssa and other regional officials.

 

The PM’s chief of staff wrote on Twitter that the park is “an important addition to a network of world-class, sustainable eco-industrial parks in Ethiopia ready for plug and play investment. Productive investments strengthen the base of our economy and generate sustainable jobs.”

According to the Ethiopian Investment Commission, EIC, these parks are set up for specific sectors such as textile and apparel, leather and leather products, pharmaceutical, agro-processing and more.

The Adama Park joins others like the flagship Hawassa Industrial Park and the Bole Lemi I Industrial Park. Its scope will be the textile, apparel, vehicle assembly and food processing cluster. It is expected to open up a million job vacancies.

Adama, also known as Nazreth, is a city in central Ethiopia and the previous capital of the Oromia. Adama forms a Special Zone of Oromia.

Other upcoming industrial parks include Dire Dawa, Mekelle, Kombolcha, Kilinto, Arerti, Bole Lemi II and Debre Berhan Industrial Parks.

Ethiopian government has often taken high-profile visitors to tour these parks. The International Monetary Fund chief, Christine Lagarde; Rwandan president Paul Kagame and President Isaias Afwerki of Eritrea have all visited these parks whiles in the country.

by Abdur Rahman Alfa Shaban

 

African leaders in Beijing for 2018 FOCAC Summit

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Presidents and heads of government across Africa are in the Chinese city of Beijing for a high-level summit hosted by the Chinese government.

The Forum for Africa-China Cooperation, FOCAC, is a meeting between the two partners and is largely premised on ways to increase diplomatic, economic and bilateral ties.

The Summit has officially started today on September 3 lasting till tomorrow, September 4. This year’s edition is themed “China and Africa: Toward an Even Stronger Community with a Shared Future through Win-Win Cooperation.”

The summit is seen largely as a key diplomatic event hosted by China this year and attended by the largest number of foreign leaders to date. African leaders already in Beijing have held different levels of talks with their Chinese counterparts signing deals and also meeting investors.

This year is the third time the summit has convened, following the inaugural 2006 summit in Beijing and the 2015 summit in Johannesburg, said Chinese State Councilor and Foreign Minister Wang Yi.

African leaders and the chairman of the African Union (AU) will be in attendance, and the United Nations (UN) Secretary-General will be the esteemed guest, joined by 27 international and African groups as observers.

The interest in the forum is a result of China’s growing influence on the African continent and proves the FOCAC has been pragmatic and efficient, analysts said.

“Established 18 years ago, FOCAC has led international cooperation with Africa and has become a significant marker of South-South cooperation,” said Li Dan, director of Africa Studies Center of China Foreign Affairs University.

“AFRICAN SCHOLARS: MADE IN CHINA” – Brandy’s Research Experience at AFCHAM

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This summer, I had a great opportunity to intern at the African Chamber of Commerce in China.

Even though I have been to Shanghai before, being able to work in the environment was very interesting. One thing that caught me by surprise was the dress code. While I came to China with my most professional clothes for work, most people were actually very casual and laidback.

My overdressing helped, though, when it came to conducting interviews for people to take me seriously so I saw it as a reward. There were very vibrant people in the office and I was even able to participate in out-of-office events that made living in Shanghai much more fun. Living in Shanghai alongside doing the internship was also a rewarding experience. It was very hot every day, but after the boiling sun went down, it was fun to go and see the lights of the city and meet new people in social settings.

My research that I conducted with AfCham also opened doors for me to meet new people and understand new ideas that led me to cities like Jinhua where I was able to attend the Cameroonian Students Association election dinner. Thank you to everyone that has made this experience worthwhile. If you participated in my research or you are interested in seeing the results, you can find attached to this article.

Written by Brandy Darling

Click on the following link for Brandy Darling research ” AFRICAN SCHOLARS: MADE IN CHINA”

AFCHAM Brandy’s Research