By Clifford Akumu
Africa’s oil and gas industry outlook is steadily showing signs of hope, even as oil prices are rising towards a pre-collapse level, says a new report.
The report, Africa Oil and Gas Review, released by Pricewater House Coopers during the 25th Africa Oil Week held in Cape Town, noted tough economic and external conditions have placed pressure on oil and gas companies to be more cost-effective and efficient.
According to the report, most companies have adopted to a low-cost environment, which promises to be even more beneficial given the current recovering oil prices.
Chris Bredenhann, PwC’s Africa Oil and Gas advisory leader said most operators in the sector had capitalized on the upswings by reducing costs and utilizing new technologies.
“Africa’s oil & gas companies have weathered the downturns and capitalized on the upswings focusing their efforts on new ways of working, reducing costs and utilizing new technology,” said Bredenhann.
PwC’s Africa Oil & Gas Review, 2018 analyzed what has happened in the last 12 months in the oil and gas industry within the major and emerging markets.
This year’s edition focused on the expert opinions of a panel of industry players from across the value chain who shared their views of oil & gas in Africa.
Bredenhann noted that outlook for the industry is hopeful, amid rising oil prices.
The report adds that most companies have taken to restructuring their portfolios with a focus on established regions, less exploration, higher value plays with low break-even-cost, and projects with shorter lead times and lower risk.
The industry has also renewed its focus on delivering projects on-time and on-budget, adds the report.
“It is, however, important for companies to avoid falling into the cost inflation trap that could eat into the profitability gains that should follow from the rising oil price. Keeping up capital discipline and further improving productivity will yield sustained results for the industry,” Bredenhann added.
Despite positive developments, the oil & gas industry still faces numerous and persistent challenges around talent shortages, regulatory uncertainty, political instability, corruption and fraud, and a lack of infrastructure. Notwithstanding the challenges, Africa does offer plenty of opportunities in the form of unexplored hydrocarbon demand fueled by population growth, urbanization and the emergence of a growing middle class.
Regulatory uncertainty continues to be a major barrier to the development of the oil & gas industry in Africa.
But overall, there are some positive developments that demonstrate that governments are reacting to the new environment. Despite some notable improvements around regulation, there is still a high level of uncertainty in a number of jurisdictions.
Digital disruption is here to stay, and African companies must embrace this to reap the rewards, notes the report.
“It is critical that the sector retains its capital discipline and adopts digital technologies if the hard-earned wins in cost savings are to be retained,” said Bredenhann.
