Business
More for governments and less for companies with new oil licensing agreements in Africa
Analysts worry that Africa will become less attractive for exploration as states try to get more from the oil and gas sectors. Africa’s licensing regimes for oil and gas projects are steadily becoming more onerous and less predictable, ac- cording to Babette van Gessel, chief executive of Global Pacific & Partners (GP&P).
Van Gessel was addressing a select gathering of top oil and gas executives and senior politicians at the 2013 Africa Oil Week organized by GP&P in Cape Town late last year. In Libya, the government has proposed an oil-licensing round for 2014, but protesters continue to block oil exports, making the exercise uncertain.
Exploration and production have slowed dramatically in Egypt since late 2012, and Van Gessel said operators also reported the duplication of functions among the various licensing authorities. In Algeria, the government abandoned a mooted 2013 oil and gas licensing round for lack of investor interest: apparently due to tighter conditions. A presidential election scheduled for April is likely to delay matters further.
Moving to West Africa, Liberia is due to launch a licensing round in the third quarter of 2014. A new petroleum bill is on its way in Ghana, with higher local-content requirements and an increased state stake. In Nigeria, the long-awaited legislation has still not materialized and prospects for its appearance before the 2015 elections are receding.
In the meantime, ambitious local operators are snapping up the assets of international companies. The government allocated new oil blocks in Cameroon in 2013, but GP&P said uncertainties remained about the state’s stake and local-content requirements. In the Republic of Congo, 10 oil blocks are due to be offered during 2014, and there is a planned licensing round in Angola this year too. The Angolan government had already increased the state’s stake and implemented preferential treatment for local companies.
Dry wells
Results from exploration in Namibia are proving disappointing. Companies have hit a series of dry wells and are still waiting for big discoveries. In South Africa, Van Gessel noted with approval the lifting of a moratorium on shale gas prospecting in the pristine Karoo but said the government’s proposed 20 percent free carry was “troubling” investors.
Sudan is due to allocate three offshore and two onshore oil blocks by the end of 2014, and South Sudanese officials have talked about some new licenses, though heightened political uncertainty there is likely to deter the fainthearted. In Kenya, a licensing round was delayed in 2013 and no new date has been set.
Oil companies have resigned themselves to a new petroleum act imposing tougher terms and a higher free state carry. Tanzania launched a licensing round in late 2013, again with tougher terms, and with a state stake of up to 75 percent. Van Gessel said she expected liquid natural gas production in Tanzania by 2018.
In Uganda, she said the development of the oil and gas industry had “come to a standstill” due to increasingly tougher requirements from the state, which had resulted in the apparently indefinite delay of a proposed 2013 licensing round. Mozambique, by contrast, is expected to offer new contracts this year, which should attract significant investor interest.
Overall, the trend is towards tougher fiscal terms for international oil and gas investors, higher free state carries and more local content. To those who share her analysis but not her concern , arguing that these are welcome trends indicating that African governments are finally beginning to secure sufficient returns for their irreplaceable natural endowments, Van Gessel replied that Africa was becoming less and less competitive internationally. She concluded, “Africa’s share of international oil and gas exploration is already too low. Who does it help it if drops lower?”