Page 4 - AfrOil Week 21 2021

AfrOil COMMENTARY AfrOil

African E&P: out of adversity

comes opportunity

In exclusive interview with AfrOil, an Africa oil patch veteran

discusses his views on the short-term outlook for the continent’s

E&P industry as we navigate the energy transition. By Ian Simm

AFRICA THE oil and gas industry has rebounded some- crossroads, with a number of African economies
what since the start of 2021 with prices rising in contraction due to COVID-19, final invest-
relatively steadily and giving the appearance ment decisions (FIDs) and project start-ups at
WHAT: of stability. However, despite the best efforts of multi-decade lows, in part due [to] strategic
Drilling activity OPEC+, concerns about demand have persisted refocusing of IOC portfolios to meet transition
throughout Africa is down as new variants of coronavirus (COVID-19) and priorities.”
more than 40% year a patchy vaccine roll-out continue to cast clouds For its part, Eburon anticipates that underin-
on year and investment of doubt over the anticipated recovery. vestment in conventional exploration will con-
decisions have been held Meanwhile, the unprecedented shift among tribute to a material hydrocarbon supply gap in
up amid a struggle for consumers and investors towards lower-carbon the coming decade, presenting a challenge to an
capital allocation. energies that has sped up over the last 18 months orderly energy transition. Upstream is
poses a particularly significant challenge for The company is building a diversified explo-
WHY: the development of hydrocarbon resources in ration portfolio of non-operated, minority work- at a critical
Listed oil and gas Africa, where high risk/high reward extractive ing interests in drill-ready prospects through crossroads,
firms are faced with sectors have long appealed to listed European targeted and data-driven farm-ins.
the challenge of an companies that are now radically altering their with a number
increasingly ESG-savvy strategies. Impact
investor base that has This has seen some IOCs with large African According to Wood Mackenzie, total sub-Saha- of African
already brought about footprints, including BP and Kosmos Energy, ran African (SSA) M&A deal spend dropped to
strategic change at some shift their attention away from traditional explo- $1.1bn in 2020, down from $5.7bn in 2019. In economies in
of the world’s largest ration towards lower-carbon, short-cycle, value parallel, data from Baker Hughes shows that the contraction due
companies. led projects respectively. number of drilling rigs active in April was down
These factors have led to a widespread 41% year on year. to COVID-19, FIDs
WHAT NEXT: shake-up of African E&P, and as Eskil Jersing, Just 61 rigs were active onshore and offshore
As investors grow business development advisor at newly formed Africa last month, compared with 103 in April and project start-
ever more cautious Eburon Resources, told AfrOil this week, this is 2020. Of these, 39 were located in Libya and
about hydrocarbon creating a multitude of opportunities, as long Algeria, with five or less each in Angola, Cam- ups at multi-
investments, African as you have funding and “belief in the ability to eroon, Chad, Gabon, Ghana, Kenya, Mozam- decade lows.
E&P is experiencing an overcome control and pace issues that have often bique, Nigeria, Ethiopia and Djibouti.
existential crisis, but hampered activity and success this last decade”. Fiscal hesitancy also saw four projects, Eskil Jersing
this presents significant Jersing, who previously managed E&P assets accounting for 400mn barrels of oil equivalent BD Advisor
opportunities for those and led new business teams for Africa at Went- (boe) of reserve additions, moved to a 2021 Eburon Resources
less encumbered by the worth Resources, Sterling Energy, Marathon start-up – Nene Marine (Phase 2b) in Congo
green revolution. and Petrobras, said: “Upstream is at a critical (Brazzaville), CLOV (Phase 2) in Angola, Hassi

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