2015 Oil & Gas Report

Editor's Note

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I’m honoured to have been invited by Asia Africa Business to be the guest editor for this special report on Asia’s involvement in the oil and gas sector in Africa. My adventure in Africa’s oil and gas sector is fairly recent. It started in 2011, in Kuala Lumpur, when I heard several oil ministers speaking at the 2nd Africa Southeast Asia Business Forum. They had a good grasp of technical details and articulated well their vision for the sector in their respective countries. Companies from Malaysia, Indonesia and Singapore — national oil companies, offshore players, oil services suppli - ers, oil traders, energy economists — came away with a positive view of opportunities. It was fascinating to see the emergence of the Asia-Africa energy nexus, as I plunged into the world of bon - ny-light crude and immersed into “oil-speak”, the African way.

 

Fast forward to today where this nexus has turned into a concrete reality. China has pumped more than US$20 billion into the sector. Following closely are Southeast Asian countries, who increased their investments to US$15 billion, catalyzed by a se - ries of US$1 billion deals into offshore gas into Tanzania and Mo - zambique. Against the backdrop of an estimated US$50 billion of cumulative deals into the oil and gas sector in Africa, Africa has taken note. Organized by the energetic Singapore Business Fed - eration, Singapore was the proud host of Asia’s inaugural Af - rica Asia Oil and Gas Summit, attended by Ministers and CEOs from Ghana, Kenya, Equatorial Guinea, Gabon, and Nigeria.

 

African gas could very well be the new oil. LNG exports from Africa to Asia will grow, led by demand from Japan and Chi - na. Commodity traders have caught on, as we see African oil traded out of Singapore. It is now timely for African producers to begin developing their oil and gas trading and hedging capabilities, so as to reap greater margin efficiencies per barrel produced. Structured commodity financiers, lawyers, and project finance specialists will increasingly see demand for Africa deals from Asia buyside investors. Asian bankers and funds will need to grow their capacities for Africa. In this respect, it is perhaps not so far fetched a reality, to see the Asian Infrastructure Investment Bank take the lead in financing and structuring deals related to midstream deals such as energy transportation between Asia and Africa.

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However, with Brent crude hovering at half their prices compared to a year ago, will the enthusiasm in Africa’s oil and gas sector wane? The answer is probably yes, but to what extent? What are the sobering challenges, given that the opportunity cost of investing in oil in Africa is considerably higher than in other competing oil producing regions? Where does the Asia Africa partnership in energy stand today? Where are the opportunities and bright spots? Do African governments have a role to play? This report serves to provide its readers with answers to some of these questions. On this note, I find it apt to conclude with the words of great Nigerian author Chinua Achebe, who hails from Africa’s most significant oil and gas producing nation, “Proverbs are the palm oil with which words are eaten.” May you equally find this oil report appetizing and tempting enough to take alongside you, when you consider energy deals or partnerships on the continent.

 

Happy reading.

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