By Jeph Ajobjau, Chief Copy Editor
Nigeria and other African oil producers may suffer a combined estimated loss of $1 trillion export revenue in the next 20 years due to likely low oil prices and the shifting away from fossil fuel to green energy across the world.
The prediction comes from PriceWaterhouseCoopers (PwC) in its Africa Oil and Gas Review 2020, themed energising a new tomorrow.
Coronavirus hugely impacted the oil market in Africa, the review says, and many countries that depend oil and gas revenues on the continent have had to divert fiscal resources to support healthcare and welfare responses to the pandemic, leading to greater economic distress.
Highlights of the review
Highlights of the review itemised by Nairametrics include
· Oil production in Africa saw a slight increase of 0.5 per cent from 2019 amounting to 8.3 mmbbl/d. This accounts for 8.82 per cent of global production.
· In 2020, production saw a decline of 10 per cent relative to the previous year driven by the Covid-19 demand slowdown for exports.
· Africa’s proven oil reserves have remained static at 125.7 Bbo from the end of 2019 to 2020. Some 41 per cent of these reserves are located offshore, 59 per cent onshore.
· Exports remained static at 7.1 mmbbl/d between 2018 and 2019. However, due to Covid-19 in 2020, exports saw a decline of more than 10 per cent.
· Consumption at 4 mmbbl/d remained unchanged from 2018 to 2019. Consumption fell by less than 10 per cent in 2020. Africa’s domestic market consumes around 50 per cent of its total oil production.
· Africa has very limited refinery capacity and imports circa 48 per cent of its finished product fuel demand.
· Proven gas reserves on the continent have remained at 527 tcf between 2019 and 2020, with 34 per cent of these reserves situated offshore.
· Gas production saw a slight increase of 0.36 per cent from 2018 to 238 bcm in 2019. However, production declined by 9 per cent in 2020 due to COVID-19.
· Gas consumption slightly increased by 0.4 per cent from 2018 to 150 bcm in 2019 while it declined by more than 10 per cent in 2020 relative to the previous year.
· Africa consumes 63 per cent of its total gas production, predominantly for power generation.
· African gas exporting countries saw a total decline of more than 6 per cent in 2020 from 39.7 mtpa in 2019 to 37.3 mtpa in 2020.
According to PwC, oil demand globally shows a curbed recovery over the next few years following the Covid-19 induced demand slump, with prices predicted to reach a ceiling of around $54 per barrel, compared to a pre-Covid-19 estimate of long-term pricing ranging between $60 and $70 per barrel.
“It is estimated that this lower price forecast will cost Africa a potential $1 trillion in export revenues from oil over the next 20 years,” the review said.
Energy transition
Energy transition refers to the global shift from fossil-based systems of energy production and consumption – oil, natural gas, and coal – to renewable energy sources like wind and solar, as well as lithium-ion batteries.
Increasing penetration of renewable energy into the energy supply mix, electrification and improvements in energy storage are all key drivers of energy transition.
PwC advised the adoption of energy transition to provide a ‘lifeline’ in light of declining oil demand.
It suggested that energy transition does in fact create significant positive economic impact and opportunities, and Africa can benefit tremendously from the technology foundations and learning curves largely paid for by the developed world.
One can infer from the African energy policy environment whether countries are creating a dynamic or static policy environment in relation to capturing the benefits and economic growth that can be leveraged from the energy transition.
The review stressed that as export revenues and domestic demand change, energy transition readiness will be an important sustainability factor for many countries that have relied on oil and gas endowments.
