Publications
Partners
After a few difficult and tumultuous years the world’s oil production has started to pick up again.
This year’s Africa Oil and Gas Review, which PwC launched last week at the Africa Oil Week in Cape Town, says the global output of crude oil rose by 0.7% between 2016 and last year.
Africa was leading this trend with an average growth of 5% compared with 2016.
“Africa’s oil and gas companies have weathered the downturns and capitalised on the upswings, focusing their efforts on new ways of working, reducing costs and new technology,” said Chris Bredenhann, PwC’s Africa Oil & Gas advisory leader.
He noted Africa’s oil consumption (2.5%) had increased faster than the global average (1.8%), with west Africa and east Africa being key contributors.
To Sasol, these are good reasons to expand its west African oil footprint.
“West Africa is a well-established oil region and the place to explore opportunities to gradually build our portfolio of oil-buying assets which can generate immediate revenue and create off-side value to our business,” said Gilbert Yevi, senior vice-president exploration and production.
The world’s largest manufacturer of synthetic fuels will look mainly at joint ventures, joint exploration and production asset acquisitions, he said.
“Corporate acquisitions are not totally out of the question, but they are not on the top of our agenda at this stage. This is because we want to grow gradually in west Africa.
“Joint ventures allow us to do just that,” Yevi said, adding that the focus is deliberately on upstream oil activities – and not on gas.
This was despite Africa’s growing gas production (+8%) and consumption (+6.8%) and various substantial gas finds in the past years, including a 420 billion cubic metre discovery made by Kosmos Energy last year off the coast of Senegal and Mauritania.
“We are already heavily invested in gas in Mozambique. Oil provides a higher revenue value for us. We, therefore, want to increase our share in oil,” Yevi said, referring to Gabon’s offshore Etame Marin venture, in which Sasol has a 30% stake.
Started in 2002, the venture is operated by US oil company Vaalco Energy and has proved to be a lucrative business decision.
“We acquired a stake in Etame on the basis of a prognosis of production of 18 million barrels. So far, we have produced 100 million barrels since, and there is more to come,” Yevi said.
“How good is that, when you make an investment decision and you get six times more than you anticipated?”
Although investing in west Africa’s refining sector is not part of Sasol’s agenda, Yevi emphasised the opportunities in this sector.
“The benefits of refining crude oil and creating refined products for our own use, from fuels to agricultural products, affects the entire economy,” he said, his statements resonating in PwC’s report, which estimates Africa’s refining capacity at 2.1 million barrels a day while its production stands at 8.1 million barrels a day.
Given projected population growth rates and a rising demand for refined fuels and other petroleum products, Africa will need an estimated additional 3.4 million barrels a day of refined fuels by 2030 to meet its fuel needs.
The PwC report stated: “This is in addition to current refinery throughput with ageing equipment that is not running at full capacity.”
For Africa to boost its refining capacity, it needs more stable policies and an foreign direct investment-friendlier business environment, Yevi said.
“Business doesn’t thrive on uncertainty.”
This also applies to other resources, also in South Africa.
The ongoing uncertainty regarding the Minerals and Petroleum Resource Development Amendment Act is not helping, he said.
“This is not a big issue for us specifically, but for many other players, it is. That piece of legislation needs to come out to remove this uncertainty and needs to be brought to a close to enable businesses to make investment decisions.
"These decisions are made for decades to come. No one will make investment decisions when this type of uncertainty is hanging over one’s head.”
