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Gas and oil discoveries could transform Africa’s energy sector

17 May 2013 – In 2012, sub-Saharan Africa’s major oil producers accounted for about 5% of known global reserves, 7% of production and a slightly higher share of exports. Production is dominated by the oil superpowers, Nigeria and Angola, but other countries are emerging as major suppliers. This is according to a report on the continent’s extractive industries released by the Africa Progress Panel at the World Economic Forum in Cape Town on May 10th 2013.   

In the energy sector, rising world prices have spurred a new wave of exploration. Drilling has increased threefold since 2000. The ratio of proven oil reserves to production has increased from 30% to over 40% since 2000. Among the more significant finds, Ghana’s Jubilee field will add another 120,000 barrels of oil a day to Africa’s production, while the Lake Albert Rift Basin, which straddles Uganda and the Democratic Republic of the Congo, has known reserves in excess of one billion barrels and could add a further 150,000 barrels of day in production by 2015.

A major oil strike in the Turkana region of northern Kenya in 2012 prompted a new wave of drilling and the prospect of new finds across northern Kenya and Ethiopia.

Traditional oil suppliers have also increased reserves. Angola’s known reserves doubled between 2001 and 2010, while Nigeria’s increased by 20%. Exploration is prompting upward revisions of production estimates across several countries. In Equatorial Guinea, production in the largest oil field has been in decline since 2004, but new discoveries by US-based Noble Energy and Marathon Oil led to two major new fields coming on stream in 2011.

In Chad, a Taiwanese company, the Overseas Petroleum and Investment Corporation, discovered a major new reservoir in 2011, estimated at 100 million barrels.

Discoveries of natural gas off the coasts of Mozambique and Tanzania could transform Africa’s place in the global energy economy. The US Geological Survey estimates that the coastal areas of the Indian Ocean could hold more than 250 trillion cubic feet (tcf) of gas in addition to 14.5 billion barrels of oil. To put this figure in context, it exceeds the known reserves of the United Arab Emirates and Venezuela. Proven reserves in the United States are only slightly larger. Moreover, east Africa is far less explored than other regions. The success rate of companies exploring for gas offshore is phenomenal; of the 27 wells drilled in the last two years off the coasts of Tanzania and Mozambique, 24 have yielded discoveries, according to a report by Control Risks

In 2012, operators in Mozambique announced as much as 100 tcf of natural gas discoveries – double the level of Libya’s reserves – positioning the country as a major player in the sector over the coming decades. In addition, Mozambique is primed to become a major exporter of coal to India and China. Production could reach 100 million tonnes over the next decade, establishing the country as a major regional exporter alongside South Africa.

West Africa is also emerging as a major natural gas producer. With energy production traditionally dominated by oil, most gas output has been flared – a source of global ecological damage and regional economic waste. This is starting to change, with gas capture emerging as a strategic focus in Angola and Nigeria, as well as Cameroon, Equatorial Guinea and Gabon. The World Bank’s global gas flaring reduction initiative and other gas monetisation programmes have created incentives for gas capture and commercial sale.