Can African Oil Producers Help the World End its Reliance on Russian Oil and Gas?

By Soko Directory Team / Published March 29, 2022 | 10:35 am




KEY POINTS

Countries with significant LNG resources, such as Nigeria, Angola, Libya, and Algeria, suffer from limited and underdeveloped pipeline networks, refineries, jetties, terminals, and ports


fuel Saudi Arabia

Unlocking Africa’s oil and gas potential is now imperative against the backdrop of the war in Ukraine and the resulting crude, diesel, and gas supply crunch.

This has rendered European dependence on Russian energy untenable, creating a significant opportunity for Africa to position itself as a crucial option to increase the supply to the global energy markets.

The continent has oil reserves in plenty. By 2017, Africa had 148.6 trillion cubic meters of proven gas reserves — over 7 percent of the global reserves.

In 2019, the UK imported 108 billion cubic meters of LNG from Africa. Over 12 billion of the capacity came from Nigeria.

It is often thought that the top African oil producers have more reserves than needed for the African market and are therefore predestined for export.

For instance, in 2019, Nigeria was the leader in oil exports, with more than 2 million barrels sold per day on the international market. The continent’s overall oil and gas production reached 327.3 million metric tons during the same year.

 As of 2020, Africa’s contribution to global oil exports had reached nearly 9 percent. But is this enough to help the world end its reliance on Russian oil?

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Some experts argue that for it to help, Africa must have a spare capacity of at least 7.5 million barrels per day. This is still a challenge to the continent’s manufacturers.

Significant challenges remain for the continent’s hydrocarbon producers to suddenly ramp up their production due to infrastructure, finance, and technology deficits.

Countries with significant LNG resources, such as Nigeria, Angola, Libya, and Algeria, suffer from limited and underdeveloped pipeline networks, refineries, jetties, terminals, and ports.

Lack of infrastructure is one of the biggest challenges that hamper Africa’s global oil expansion. It doesn’t have sufficient pipeline infrastructure to transport energy to other international markets.

According to PwC, such challenges have significantly reduced oil production in Africa. In 2019, this production dropped by 19 percent from the levels recorded in 2020. This accounts for 7.8 percent of the global output. Gas production also dropped by 5 percent during the period under review.

There is, therefore, a need for significant investments in the sector to increase natural gas and LNG exports. Although there are currently four pipelines transporting gas from Africa to Europe, others need to be constructed as the continent gears up production.

The problem, however, is building a new infrastructure in sub-Saharan Africa to connect with the existing network in North Africa.

For Africa to achieve a short-term solution, fiscal regimes that allow oil companies to make more money from their investments should be amended.

There is also a need to ramp out other issues such as corruption, political instability, local insecurity, and financial institutions shifting investments from fossil fuels to renewables – all of which hamper sound investments.

Finally, securing the latest technology to facilitate local content development has proven cost-prohibitive given the reliance on foreign intellectual property and the continual brain drain of critical local human capital.




About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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