In this new oil market supercycle, African operators turn to local content for help
Economic recovery, geopolitics and the overall global energy demand and supply have impacted the price of both crude oil and natural gas in the last couple of months. A reality that has gotten genuine industry players working, especially within Africa. On the continent, oil players are ramping up activity first for their domestic markets, and of course to supply international markets that are in dire need of some respite in the face of the uncertainty and chaos caused by the Russian invasion of Ukraine.
In this context, agitation and worry will not solve the problems, only strategic business decisions will. It is no news that several oil and gas asset owners in Africa are eager to get their fields to production after three to four years of stagnating performances. But while there is hydrocarbon to be produced and current prices are certainly attractive, the equation will be incomplete without the deployment of the right assets in the hands of the right team.
Every day and possibly every hour, a meeting is being held across African energy capitals. In Lagos, Luanda, or Brazzaville, the focus is on investments, project execution, and asset purchase/lease. But how many of these negotiations will transition into profitable and executable ventures? This is not the time to take a chance on new market entrants, but the time to move forward with experienced and verified stakeholders who know what’s at stake and can act quickly.
In Nigeria, credible intel has it that the management of West Africa Exploration & Production (WAEP) and General Hydrocarbon Limited (GHL) have formally engaged the Century Group for the development and production of their assets, all in the same week. The former has a substantial interest in OML 71/72 where lies the Kalaekule field, while the latter is the lead stakeholder in OML 120 where it is planning the redevelopment of the Oyo field.
In selecting Century Group, both companies have concretely chosen to use the in-country assets of arguably the only Nigerian wholly-owned company providing FPSO solutions at the moment. The company has indeed a proven track record of safe operational framework and of over 30 percent cost savings even in the heart of the COVID 19 lockdown. When historic times call for urgent solutions, it turns out that local content is the most strategic, prudent, and cost-efficient decision for new hydrocarbons producers like WAEP and GHL.
Over the past decade, several Nigerian energy companies have undoubtedly proven that they are energy infrastructure experts and have boosted indigenous capacity and participation. But none has really compared to the Century Group who is now well-positioned to support upcoming projects in the country.
And this is just the beginning. More African names like UTM Offshore Limited or PFL Engineering Limited can now be trusted as capable partners to shape the future of the Nigerian energy industry post exit of IOCs. In the same vein, the sale of crucial energy infrastructure should be based first on the criteria of capacity to operate sustainably rather than solely on finance.
Nigeria has a huge budget deficit (NGN 6.25tn, or approximately 3.39 percent of its GDP) and is heavily reliant on foreign debt financing. For an economy that heavily relies on oil, the current reality is a great opportunity to support recovery and help the country meet its fiscal and infrastructural obligations to the citizenry through direct earnings.
Let the fields come alive and most of all, let the country’s most competent ones lead the charge.
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