Africa is likely to experience continued oil and gas investment over the next three to five years as the stabilisation of crude prices above US$ 60 a barrel, coupled with the continent’s rapidly expanding population, lure both major and independent oil producers to one of the world’s last remaining energy investment frontiers.
A string of exploration projects over the last decade has seen the number of African countries with proven oil and gas reserves rise to 28 thanks to new discoveries in Ghana, Niger, Mozambique, Uganda, Kenya, Senegal, Mauritania and South Africa.
The investment required to bring these countries on stream will add further impetus to Africa’s oil consumption, which at 4 million barrels a day already significantly exceeds the continent’s 2.1 million barrels of daily refinery output, according to Standard Bank.
“An expanding population, rapid urbanisation and accelerating economic growth are causing the gap between Africa’s demand for gas and petroleum products, and its ability to supply them, to incrementally widen over time,” says Dele Kuti, Standard Bank Group Head of Oil and Gas.
“This will serve to attract further investment from both major and independent oil producers, which in itself will exert further pressure on the demand side of the equation as the resulting infrastructure investment in refineries, roads, pipelines and housing drives energy consumption.”
Africa’s oil and gas sector is once again attracting investment from exploration companies and refiners following a prolonged break sparked by a slump in oil prices which saw crude drop to below US$ 30 a barrel in early 2016.
An improvement in oil prices, which Kuti says are expected to average between US$ 60 and US$70 a barrel over the next three to five years, are attracting greater interest in the continent, which is seeing a population boom that will likely see the number of people double to 2.5 billion by 2050 according to UN projections. The BP 2019 Energy Outlook says Africa is 6% of global energy demand by 2040.
In 2018, the International Energy Agency (IEA) projected global energy demand would grow by more than 24% to 2040, requiring more than US$ 2 trillion a year in investment to bring new energy supply on stream. Given Africa’s burgeoning population and economic growth, it is likely that a portion of this investment will be directed towards the continent’s relatively untapped energy market.
“All of this investment activity will in turn spur demand for lending, deal structuring and transacting capabilities across the continent,” says Kuti.
“Institutions with deep knowledge of the continent stand to benefit from those initiatives.”
“We have a wealth of knowledge across our team and have acted as mandated lead arranger, bookrunner, facility and security agent, and onshore bank for a number of international players in the industry,” says Kuti.
“Our understanding of the continent is unrivalled, which coupled with our deep institutional knowledge base and industry expertise, means we are able to provide the necessary bespoke services required to successfully navigate the complexities of doing business in Africa’s frontier markets.”
Standard Bank is one of the largest oil and gas lenders in Sub-Saharan Africa given its on-the-ground presence in 20 countries across the continent.