 With the world’s oil reserves diminishing, energy companies around the world will need to focus their attention on countries that can unlock hidden value, including those in Africa, says commodities investment company Beresford Investments CEO Luswazi Vokwana.
“The only sustainable avenue for the industry is to explore emerging oil- and gas-possessing African countries, such as Tanzania, the Demo- cratic Republic of Congo, Kenya and Madagas- car, and properly engage the traditional African oil-supply sources, such as Angola and Nigeria, to revitalise the industry.
“However, the major African suppliers have been roped into the Organisation of the Petro- leum Exporting Countries (Opec) and are bound by its covenants and rulings; however, this will provide the industry with a vast new potential of product supply for the future.”
Vokwana adds that, if the industry follows this avenue, then emphasis should be placed on oil and gas infrastructure development.
To ensure that this is a mutually beneficial relationship, he says, African countries must add value to their primary oil assets, which will create a wider revenue pool to aid sustainable public spending and the servicing of exter- nal debts. “This is Africa’s only choice, and Beresford is currently going through a process of sensitising the relevant policymakers to this reality. African decision-makers understand the situation – the problem is how to effect the required institutional changes and put in place the proper capacity building mechanisms within parastatals.”
In order to achieve this, oil companies have to develop the industry in Africa to deliver a promising midstream and downstream sector, where the value-added benefits to the primary resource can be attributable to African countries’ balance sheets. However, to ensure that these countries benefit materially, the onus is entirely on them to put together structures within energy parastatals to tackle these challenges and be equipped to deal with the private sector.
He notes that a few challenges lie ahead, and that the oil game is all about cash on hand and access to capital to unlock value. African countries have little of the former and are prime targets for multilateral institutions’ structural adjustment plans for the latter; and when they borrow they do not have adequate plans, skills capacity and institutional structures to take advantage of their resources, whether with the private sector or alone.
“The net effect is, merely, that they frequently pawn their greatest assets for low value. When Beresford engages with vari- ous Ministers and heads of States in Africa, the various countries’ abject inability to harness value for their countries out of the potential resources is a constant frustration for them,” says Vokwana.
He adds that Beresford is in the process of entering into a private–public partnership (PPP) with two African countries to increase their efficacy in these key areas. The company hopes that its approach will, in the short term, provide the countries with a clear operating framework and, in the medium to long term, with adequate skills capacity to structure deals to benefit and extract maximum sustainable value for them.
Vokwana agrees with the sentiment that there is a reluctance to fund greenfield projects over brownfield projects.
He reports that the commodity pricing cycle trend is well established, the markets will recover and demand for nonrenewable resources will be bolstered within the next three to five years.
“Beresford feels that the industry may experience a super boom, where the pricing level of commodities in the previous boom could be superseded considerably in the next session. Whether this pricing uplift will be maintained is another matter.
“The company’s rationale is centred on the number of projects that have been put on hold, the downscaling of mining and oil production operations, and the transportation and power infrastructure projects being cancelled or put on hold. When one marries these factors with the eventual recovery of the Chinese, Indian and US markets, a shortage of supply will exist and it will take time to create equilibrium in the market,” says Vokwana.
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