African producers and quest for continental synergy in oil, gas sector
Nigeria and other oil producing countries under the umbrella of African Petroleum Producers Organisation (APPO), are making efforts to ensure that the sector offers desired benefits to Africans. KINGSLEY JEREMIAH writes on the prospects and challenges to the agenda.
Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who doubles as the President of APPO recently said the organisation would mobilise $2 billion fund to aid continental synergy that would ensue sustainable development of hydrocarbon in Africa.
The primary focus of the renewed continental collaboration announced on the floor of the just concluded Nigeria International Petroleum Summit in Abuja came on the backdrop of increasing volatility in the oil and gas sector, pressure from shale oil, pessimism from the U.S President, Donald Trump, environmental concerns and rapid technology development, which could drastically cripple Africa’s space in the oil and gas industry.
Nigeria reportedly spearheaded the founding of APPO to mitigate over-dependency on western technology and markets for oil export revenues, the promotion of cooperation in petrochemical research and technology. But the objectives are far from being adequately met.With membership hovering around 18 countries, the call for a reformed APPO is compelling because despite the huge hydrocarbon resources on the continent, Africa is home to least developed economies and poor people.
Indeed, oil and gas resources on the continents are not used to the benefit of Africans, while expatriates are primary beneficiaries of most of the lucrative jobs in the sector. Despite the growing hydrocarbon resources, about 645 million Africans still lack access to electricity while industries are shutting down due to gas related challenges.
Similarly, the many countries in the continent still import refined petroleum products, while the per capita usage of Liquefied Petroleum Gas (LPG) consumption rate remain very small. Kachikwu, who is currently at the forefront of APPO’s reform agenda, believes that without the right policies, right market place, collaborative mechanisms, infrastructure, Africa might miss out in the much coveted investment opportunities available to the sector.
To him, the level of local content and skills development being pursued in Nigeria remained a model that could be exported to help other African countries grow.“We are hoping that with the collaborative spirit we are beginning to build, we would be able to export some of these to Africa; sit down with some of those countries coming into oil production for the first time; get some of our local participants and investors to begin to get into those countries and begin to take opportunities of what their blocks offer.
“Africa, the time has come. Unless we protect our border posts; unless we begin to look more to the continent; unless we begin to look more to financing that we can find locally; unless we begin to look for African financial entities that would help us develop the key infrastructure that we need in this sector, we would have lost a huge opportunity,” he added.
For many analysts, APPO could only achieve its objectives if the continent is connected through infrastructure. The experts equally insisted that APPO must project its benefits to member countries, particularly the emerging oil and gas countries, while providing solutions to the critical barriers facing economies of member countries.
Nigeria’s Vice President, Professor Yemi Osinbajo, had told APPO ministers to embark on economic diversification as well as investing current earnings from the industry in infrastructure and human capital to enable, especially in a manner that prioritize the needs of the present and the future.
“We must keep in mind that oil and gas are only guaranteed as only today’s resources and not necessarily tomorrow’s. We cannot bet on the fact that even a few decades away from now, these natural resources would not be as central or as relevant to the global economy as they are today. “All serious economies around the world have realised this and are making determined plans for a world beyond oil or as they say a zero oil world. As African countries, we cannot afford to act differently,” Osinbajo said.
According him, by serving as a platform for increased collaboration and cooperation among member countries, APPO would go a long way towards helping overcome financial challenges.He noted that increased synergy would help mobilise investment needed to facilitate and to deliver the major infrastructure required by the continent, such as trans-border gas and oil pipeline, joint refineries, gas plants and so on.
Being consumers and producers, synergy across the continent could enable the APPO members to share experience and knowledge, create similar regulatory framework, address volatility and device means to make the resources beneficial to present and future generation, Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju noted.Adenikinju was not certain of any remarkable stride by the current move unless, the oil producers were convinced on their gains, stressing that the common interests of the members must be prioritised.
“There are a lot of benefits when producers and consumers come together. They will be able to fight challenges better. There are number of issues that are peculiar to Africa that this type of organisation could provide a forum to address the challenges. “It is good that the association finds a way to optimize the benefits of oil wells to the advantages of the present and future generation. There is inequality in the distribution of benefits of the wealth coming from oil thereby reflecting in the poverty line. They can adopt common legislations, particularly in terms of best practices in the value like the procurement of licenses, allocation of oilfield, revenue management, fiscal regime, governance structure and others,” he said.
Nigeria is currently positioning key continental projects such as the Nigeria and Morocco gas pipeline, the West African gas pipeline and a refinery located by the border of Nigeria and Niger Republic as a continental initiative that would address some of the barriers facing Africa’s synergy in the oil sector.
The concern for Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote was the long and short-term implications of slow development of the hydrocarbon, particularly in terms of migration and job creations.He maintained that operators in the sector must improve local content development on the continent to create jobs and address the growing migration of Africans to developed countries.