Nigeria and other African oil-producing countries will lose an estimated N1tn in oil export revenues over the next 20 years as prices are forecast to remain low, a new report by PricewaterhouseCoopers has said.
PwC, in its Africa Oil and Gas Review 2020, said oil production in Africa saw a decline of 10 per cent in 2020 from 8.3 million barrels per day, driven by the COVID-19 demand slowdown for exports.
It said the continent’s proven oil reserves remained static at 125.7 billion barrels from the end of 2019 to 2020.
Oil exports saw a decline of more than 10 per cent in 2020, with the top five African crude oil-exporting countries experiencing a total decline of 11 per cent from 5.3 million barrels in 2019 to 4.2 million barrels in 2020, according to the report.
“Nigeria, Algeria, Angola, Libya and Egypt could each be facing $20bn or more in lost export revenue in 2020,” the PwC said.
It said Africa’s proven gas reserves remained at 527 trillion cubic feet between 2019 and 2020, with production declining by nine per cent in 2020 due to COVID-19 from 238 billion cubic feet in 2019.
The report said gas exports by African producers fell by more than six per cent to 37.3 million tonnes per annum in 2020 from 39.7 mtpa in 2019.
It said, “Gas demand is expected to quickly recover from 2021 in mature markets and show steady growth in emerging markets.
“Much of Africa’s supply growth will come from Nigeria, but Tanzania, Mauritania and Senegal are also aiming to contribute to rising supply. The post-2021 demand growth will take place in China and India where gas benefits from strong policy support.”
PwC said the onset of the COVID-19 pandemic had dealt Africa’s oil and gas industry a significant blow, eroding most recent gains and short-term upside.
“Many of the major international oil companies in Africa have written off/impaired some of their assets this year based on anticipated oil prices and assets they believe to be stranded,” it added.
According to the report, forecast 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 view of long-term pricing ranging between $60 and $70 per barrel).
“It is estimated that this lower price forecast will cost Africa a potential $1tn in export revenues from oil over the next 20 years,” it said.
PwC noted that the continent confirmed itself as a global exploration hotspot in 2019 with key projects primarily from West and East Africa advancing to exploration and development.
According to the report, the megaprojects include Shell’s Bonga South West offshore field in Nigeria, which was expected to reach final investment decision in 2019, but has still not been sanctioned.
It said, “The 2020 COVID-19 disruption has, however, reversed many of the sector gains and seen project delays and cancellations.
“Many oil and gas majors in Africa have announced that start-up date of their major projects are expected to be delayed by one to three years and smaller projects may be cancelled.
“Nigeria, Mozambique, Senegal, Kenya, Mauritania and Uganda are faced with project and FID deferrals, while two of Total’s projects in Angola are facing outright cancellation.”
PwC said African oil-producing countries must act quickly to consider their long-term market positions and potentially move to diversify their economies or risk even greater financial and economic stress.
“This is particularly important for oil exporters with a high degree of sector concentration. Even countries that are seen as highly resilient should still consider how to benefit from the economy shift and the significant investment stimulus being mobilised by the developed world,” it added.