NJ Ayuk argues that oil- and gas-producing African countries should be fine-tuning their local-content policies and exploring technologies that can contribute to a leaner, more profitable petroleum sector when the current Covid-19-induced demand slump ends.Stunning declines in crude oil prices as a result of Covid-19-related slumps in demand and an oil price war between Saudi Arabia and Russia have been taking their toll around the globe. For Africa’s oil-producing countries, the situation is especially dire.

In Nigeria, for example, Finance Minister Zainab Ahmed recently warned of an imminent recession and requested billions of dollars in international emergency funding. As of the second week of April, oil production in Angola was expected to fall from 1.8-million to 1.36 million barrels a day as the Angolan government prepared to freeze 30% of the country’s goods and services budget. Meanwhile, Ghana stands to see a 53% shortfall this year in revenue from crude oil sales. Many countries across the continent are in a similar situation.

There has been a ray of hope: a landmark production-cut agreement among OPEC, OPEC+ and G20 stakeholders on April 12 put an end to the oil price war. Shortly thereafter, the African Petroleum Producers Organisation committed to significant crude production cuts of its own, effective May 1. While demand remains a concern, the production cuts will help lower oil inventories and should bring some stability to the oil market.

However, we cannot expect smooth sailing from this point on. There is no denying that the Covid-19 pandemic will continue to test African countries on multiple fronts – from the health and safety dangers it poses to economic devastation and low demand for crude. The situation is painful, but it is not permanent. And when this chapter is over, African countries will recover.

This is the time to lay the framework for that recovery. When demand for crude oil increases again, Africa will need exploration and production activities to resume. That means oil and gas Ministries should be working on regulations that foster a more enabling environment for investors and businesses. We should be fine-tuning our local content policies and exploring technologies that can contribute to a leaner, more profitable petroleum sector.

With demand for oil at an all-time low, it may seem odd to talk about exploration and prospecting activity. After we get through the current crisis, production will play a critical role in our economic recovery. We need indigenous companies to be involved so employees, business partners and suppliers can benefit from these activities. We also need foreign companies that are willing to share knowledge and technology – and to create economic opportunities in the communities where they operate. That is why it is vital that governments take steps now to remove obstacles to launching production, including red tape, lengthy delays and excessive taxes. Governments also need to support smaller, independent companies by breaking exploration maps into smaller sections. And we need better fiscal terms for companies, such as breaks on import duties.

African countries need to develop fair, balanced local content policies that create economic and educational opportunities for Africans without overly burdening foreign investors and discouraging them from operating on the continent. A shining example of this kind of balance can be found in Equatorial Guinea, which I wrote about in my book, Billions at Play: The Future of African Energy and Doing Deals: “The government enacted requirements for international companies to hire Equatoguineans, contribute to training programmes, and work with local subcontractors. They were careful to balance the need to boost local industry, however, with the limitations of the current local industry. They understood how unrealistic it was to require 100% local content until more training, education and local capacity in that field is created.”

More African countries should consider the example of Equatorial Guinea, along with successful local content policies in Nigeria and Angola. Effective local content is key to helping ordinary Africans realise the benefits of Africa’s oil and gas resources.

Covid-19 has forced companies around the globe to rely on technology to function, whether they are using it to hold virtual meetings or to monitor vital assets. I am confident that technological solutions will also play an important role in the comeback of Africa’s oil and gas industry. In my book, I described technology’s potential to help indigenous African oil and gas companies operate more efficiently and boost profits, which, in turn, benefits communities and promotes economic growth. Innovations such as new ways to drill wells and handle equipment, the design of new seismic data collection programs, the management of petroleum data systems, and the monitoring and protection of Internet-connected equipment have the potential to redefine how business is done in this sector.

I encourage African oil and gas companies to work with one another, and with local tech firms, to augment their technological capacities. African companies should also be pursuing partnerships with foreign investors that are open to technical knowledge and skills transfers. Billions at Play describes how Angola-based Friburge Oil & Gas has been partnering with international technology providers to drive efficiency and environment-friendly production methods. We need to see more companies doing the same. Governments can support these efforts through local content policies that call for knowledge sharing, along with the creation of educational initiatives and public–private partnerships.

Long before Covid-19 changed our world, I made a case for strategically harnessing Africa’s oil and gas resources to create stability and economic growth. Now, because of the pandemic, we find ourselves in a difficult place with extremely low oil prices and faltering economies. As a result, some of the strategies I have recommended may have to be put on hold. Nevertheless, the steps I have put forth to help us reap the full benefits of our petroleum resources will still have merit when we emerge from this ‘trial’.

Ayuk is executive chairperson of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group and the author of several books about the oil and gas industry in Africa, includingBillions at Play: The Future of African Energy and Doing Deals