Oil& Gas in Africa: Governance Key In Making Resources Curse or Blessing-NJ Ayuk
Governance is the only deciding factor when it comes to a country’s natural resources becoming a curse or a blessing says N.J Ayuk CEO of Centurion Law Group and Executive Chairman of the African Energy Chamber. N.J Ayuk ,who is today the leading voice on oil, gas, and energy in Africa, says natural resources become a curse only when poorly managed, and when their extraction is done without proper supervision. In an exclusive interview with PAV, NJ Ayuk says Africa’s potential in oil & gas is considerable because most of its reserves are yet to be discovered. While the recovery in oil prices last year helped a number of African countries to restructure their economies last year, NJ Ayuk shares a number of key developments which could make Africa more competitive.
NJ Ayuk, thanks for finally creating time for this interview, you are a guru on everything oil, gas, and energy related in Africa, how did Africa do last year, and what are projections for 2019?
2018 was a time of recovery for Africa thanks to rebounding oil prices. Decreasing global commodity prices since 2014 had left most African oil nations in recession and to severe economic crises due to the lack of foreign exchange liquidity in the market. As operators and economies started to stabilize in 2018, the recovery in oil prices allowed African nations to breathe while restructuring their economies.
For 2019 several key developments will be affecting Africa’s energy sector. This includes new African frontiers opening up, especially Niger whose production should be increasing and Senegal and Kenya, who are getting closer to production. Exploration is also picking up steam in Africa with several bidding rounds closing this year that are expected to boost investments. Africa’s FLNG industry is also moving forward, especially in Mozambique and Senegal, while mega oil & gas projects are bringing a new impetus to the sector, particularly in markets such as Nigeria or Angola where international oil companies are developing multi-billion-dollar projects. Africa is also becoming more competitive. Existing players such as the US or China are set to remain in the continent and keep seeking opportunities, while new players such as Russia or Turkey are also becoming more aggressive across African energy markets. Elections are also a development to watch, and while we expect most governments to be re-elected into power, one cannot overlook the fact that the continent’s biggest producers, Nigeria, Algeria and Libya, are all undergoing political transformations this year. In terms of overall oil & gas growth, two markets in particular will be worth watching: Angola and South Sudan. The former is in the middle of a profound overhaul of its oil & gas governance under the new administration of President Lourenço, while the latter’s ability to manage a complex peace will tell if it can get back to pre-civil war production levels or not.
What is the potential for Africa when it comes to oil and gas compared to the rest of the world?
Africa’s potential in oil & gas is considerable because most of our reserves are yet to be discovered. The most recent and biggest discoveries have been made in Africa, notably Senegal and Mozambique. This speaks to the need to further boost exploration, as we are confident several world-class oil and gas discoveries are yet to be made in Africa. South Africa for instance recently announced a large offshore gas discovery made by Total, which is likely to open up a brand-new African hydrocarbons province.
The continent’s shortage of power will also have to be met with massive investment in gas and renewables to provide electricity to all Africans, which will make Africa the fastest growing energy market in the world for decades to come. Africa is in great need of electrification so any investor or contractor involved in power should be looking at making business on the continent. The potential for power investments is massive.
As a leading expert, what opportunities do you see and what are the challenges?
We see great opportunities in gas. Gas is a clean and relatively cheap source of energy and can easily integrate with renewable energy sources like wind and solar. African nations have understood this well and are increasingly switching to gas-to-power by setting up new power facilities or converting existing diesel or coal plants into gas-fed ones. This will notably be the case of Senegal or South Africa until 2030. The challenges with gas are on the supply and infrastructure fronts. While African nations are open to the idea of using gas to power their economies, securing a stable supply and setting up the infrastructure to receive and process the gas is capital intensive. Nigeria is a great example: while it is the biggest gas-to-power market in Africa, shortage of gas due to limited supply and lack of infrastructure means that most of the country’s power capacity is stranded. More initiatives like the Equatorial Guinea-led LNG2Africa that seek to encourage the use of African gas within Africa need to be encouraged in this regard. Similarly, massive investments need to be made into gas infrastructure, from upstream to downstream, and into gas monetization projects such as fertilizers, petrochemicals or cement.
Can you shed light on the famed Centurion Law Firm that you run and how it is helping Africa to navigate the challenges?
Centurion Law is a truly pan-African law firm that specializes on cross-border energy transactions. We pride ourselves in training the next generation of African lawyers able to lead the continent into the 21st century. As an African firm rooted in Africa, we have at heart to build sustainable energy industries that benefit African companies, entrepreneurs and citizens first. We are strong advocates of local content and have helped several governments develop local content frameworks that are conducive to foreign investments while providing the right mechanisms to ensure local industries are developed and local jobs are created. Whether we work with the public or the private sector, we have the future of the continent at heart.
NJ are these resources a curse or blessing for Africa, we see that some of the most conflict-prone and poorly managed countries are some of the most resource rich, how do explain this paradox?
Natural resources become a curse only when poorly managed and when their extraction is done without proper supervision. Governance is the only deciding factor when it comes to a country’s natural resources becoming a curse or a blessing. The newest countries to have discovered oil or gas, like Ghana or Senegal, have understood it well. The early involvement of the Ghanaian and Senegalese civil societies in political and legislative debates on oil & gas is translating into an overall public awareness and inclusion that is very beneficial for the sustainability of these countries’ hydrocarbons industries. At the end of the day, it is all about domestic capacity building. African nations and investors in Africa must invest in local capacities and the development of local talent. Avoiding the curse has one simple recipe: invest locally.
How is Africa doing in terms of corporate ownership of actors in the sector, most of the familiar names use to be foreign-owned, are we seeing more Africans owning companies or playing a leading role in the sector?
Nigeria is by far the country that has succeeded the most in developing strong Nigerian companies across the value-chain. Atlas Oranto in upstream, DeltaTek Offshore in services or Sahara Energy in power are perfect example of Nigerian companies born in Nigeria that have expanded across Africa. As a matter of fact, we are seeing an increasing number of Nigerian services and supply companies seeking to expand across West and Central Africa, which is very encouraging for the future of our African content.
Moving forward, international oil companies and foreign services and engineering companies will of course remain prominent because they have the technology and the capital Africa needs. They are welcomed in Africa and encouraging them to invest in our markets and set up joint-ventures with local companies is what will contribute to drive the growth of the local industry moving forward.
There is so much talk about new energy, solar, and others, how is Africa doing when it comes to this, what potential do you see?
Africa has entered the renewable energy scene later than other regions such as Europe, North America or Asia. But the momentum is building up. As the most energy-hungry continent in the world, Africa has a lot to benefit from renewable energy, be it large-scale facilities or off-grid solar which can bring much needed light and energy to our rural communities and villages. Within Africa itself, Southern and Eastern Africa have taken the lead in solar and wind, and the achievements of countries such as South Africa or Rwanda are now inspiring the rest of the continent to follow suit and develop their own renewable energy agenda.
In terms of general recommendations or some vital reforms that African countries need to reap maximum dividends from the sector, what would you have in mind?
We need stronger local content frameworks within our oil & gas markets, and clear industry development master plans, especially for gas. The development of distinct regulatory frameworks dedicated to gas could also go a long way in supporting the development of Africa’s gas value chains. Angola and Congo-Brazzaville for instance have taken this avenue and we certainly would like to see similar developments in other markets as well.
You are author of the book Big Barrels: African Oil and Gas and the Quest for Prosperity, what is the book about?
Big Barrels takes aim at the perception that in Africa oil and gas can do no good. Through eight detailed case studies such as employment and enterprise in Nigeria, good governance in Ghana, economic development in Tanzania or environmental stewardship in Gabon, Big Barrels recaptures the African oil & gas narrative to give it a more balanced perspective that breaks with the traditional negative outlook given to our industry by foreign commentators. With Big Barrels, we demonstrate that the reality of Africa’s oil & gas industry is far more complex and encouraging than associating Sub-Saharan Africa with corruption and dysfunction.
NJ Ayuk is also President of the Africa Energy Chamber, what is the Chamber about?
The African Energy Chamber was created to give a united voice to Africa on the global energy stage. African energy cooperation has been steadily rising over the past few years, mostly on an institutional and political level. We are now federating the industry within one body that can propel the continent into a more advanced stage of cooperation, encouraging public-private partnerships, enhancing communication with foreign investors and operators, and advocating together for the reforms that will enable investments and job creation.
Any special events that the Chamber will be hosting or participating in for 2019?
The Chamber is a strategic partner of Africa Oil & Power so we will be heavily involved in the success of the APPO Cape VII Congress & Exhibition in Malabo in April, the Angola Oil & Gas Conference in Luanda in June, or the Africa Oil & Power Conference in Cape Town in October. We have also multiplied partnerships with international bodies such as the International Association of Geophysical Contractors, the German-African Energy Forum and set up the Africa-China Energy Chamber in Beijing last year. We are also currently working on sending a strong delegation to the Russia-Africa Initiative in Sochi next October. There is a very strong demand for more engagement from African companies and entrepreneurs on the global energy scene and we are working to make that dialogue happen.
on April 25, 2019
By Ajong Mbapndah L