The year 2014 is likely to see renewed interest in the African oil and gas sector from global multinationals across the continent. With significant new discoveries in both oil and gas across Africa, the continent’s collective contribution to the sector is expected to reach 13% of global oil production by 2015. According to a recent report by PwC, Africa holds 132 billion barrels of oil or 8% of the worlds’ supply and 513.2 Tcf, or 7%, of the worlds’ gas supply. This brings opportunities to invest in the sector and is giving rise to some of the continent’s own rising stars.
On a macro level, the US is expected to achieve energy self-sufficiency in the next two decades and become a net exporter of energy. However, the growth in Africa’s oil and gas sector is expected to continue given the growing energy needs of the Asian and European markets.
The West African region is changing and developing fast as the discovery of hydrocarbons in the traditionally under-explored western African nations such as Gambia, Ghana, Senegal and Liberia are set to fundamentally change the economy of this region over the next decade. Additionally, the oil and gas landscape in Africa has extended south and east from the once dominant West African region. African oil companies are expanding across the continent seeking new opportunities and markets, either partnering with one of the global multinationals or investing in their own operations.
One example is NYSE-listed Camac Energy. It operates as an independent oil and gas exploration and production company focused on energy resources in Africa. Its asset portfolio consists of eight licenses in three countries covering an area of 41,000 square kilometres, including production and other projects offshore Nigeria, as well as exploration licenses offshore and onshore Kenya, and offshore Gambia.
Kase Lawal, Chairman and CEO of Camac says, “Africa is full of opportunities. We see enormous potential in the African energy sector.” Across Africa there is a growing consumer middle class driving both industrialisation and urbanisation. To sustain the economic development of these countries, significant capital will need to be invested in upstream, midstream and downstream operations. While part of the capital will come from the region, the sheer scale of the investment requires large external capital inflows. Some of this however, will still come from the traditional sources of Europe and to a lesser degree the Americas. What is different today is that a significant part of this investment will come from new emerging market sources of capital include other markets such as Latin America, the Middle East and Asia, especially China as well as South Africa.
In late 2013, Camac announced its intention for a secondary listing on the JSE. This is the second by a Nigerian oil company to do so, the other being Oando several years ago. Camac’s JSE listing brings with it the South African Public Investment Corporation’s (PIC) US$270 million equity investment. The PIC will hold close to a 30% ownership in Camac and underpins its exploration, development and growth strategy by providing immediate funding for realizing the 2014 work program which will increase oil production to 14,000 barrels a day this year, which in turn improves the cash flow from increased production which enables further funding and further development in the Oyo oil field off the coast of Nigeria.
“Being dual-listed on both the Johannesburg and New York Stock Exchanges will provide increased liquidity and transparency for shareholders.” Another key issue in the sector is who will own and fund the gas infrastructure and what will be the desired balance in responsibilities between the public and private sectors. Huge capital investment is required and private investors need to be assured of returns on investment.