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By and large, 2021 has been a missed opportunity for African oil producers. While the continent’s hydrocarbons sector yielded several discoveries and Nigeria finally signed its landmark Petroleum Industry Bill into law, decreasing output across the board means that African producers have not maximised benefits from the strong rebound in commodity prices. This is particularly the case with sub-Saharan Africa’s three biggest oil producers Nigeria, Angola and the Republic of Congo. Despite OPEC quotas increasing, and leaving room to ramp domestic production back up, the three countries have been unable to pump more barrels. In fact, the difference between their allocated OPEC production quotas and their actual production reached as much as 548,000 barrels per day in August this year. From January to October 2021, the three countries have missed on over $29bn worth of oil production according to Hawilti’s research and estimates. Volumes differentials between OPEC quotas and actual production increased to 30,000 bopd for Congo in August. They are even more significant for Nigeria and Angola, especially at a time when their oil prices reference is high: Nigerian and Angolan oil prices stood constantly above $70/bbl between July and September 2021. Both the Girassol Blend and Bonny Light were selling at an average of over $80/bbl in August. Source: OPEC Nigeria’s oil sector has been massively underperforming this year so far. Its oil GDP was down -12.65% in Q2 2021, its fifth consecutive negative quarter. Despite setting an oil price benchmark of $40/barrel in its 2021 budget, the country is also failing to meet its oil revenue target. Between January and May 2021, gross oil revenue stood at NGN 1,490.76 bn against a pro-rata target of over NGN 2,000 bn. Because of its inability to increase production, Nigeria is very likely to miss its yearly gross oil & gas revenue target of NGN 5,185.57 bn. Reasons abound, but chief amongst them is the lack of investment, especially from international oil companies (IOCs) in the Niger Delta, where the focus for the past decade has primarily been on divesting. Meanwhile, new local operators who have taken over critical onshore assets have been left cash strapped by the double oil price crash of 2014-2016 and 2020. Coupled with aging infrastructure, continued insecurity and repeated vandalism on pipelines, Nigeria’s oil production is simply unable to meet the needs of the hour. The declaration of Force Majeure by Shell at the Forcados oil terminal in August only aggravated the situation, with the country loosing 2.6m barrels of production between July and August 2021. Production and export figures from the country’s five IOCs-operated onshore oil terminals are the most representative of Nigeria’s current situation. While the Bonny, Brass, Qua Iboe, Forcados and Escravos terminals pumped about 165.5m barrels in H1 2020, volumes were down below 130m barrels in H1 this year according to data from the Department of Petroleum Resources (DPR). Source: Department of Petroleum Resources Hopes are that the newly signed Petroleum Industry Act will both lead to the development of undeveloped deep-water discoveries by IOCs while unlocking fresh capital into brownfield opportunities with local operators onshore and in shallow water. Hawilti’s research on M&A deals in the country’s hydrocarbons sector suggests investors are increasingly looking at brownfield investments in the region, at a time when several key local operators are looking at farm-in, technical and capital partners. Meanwhile, Angola also continues to suffer from under-investment in the past decade even though the outlook for its oil & gas sector is positive. Recent fields put into production such as Zinia 2 in May and Cuica in July have done very little to reverse production decline and the country had to revise its yearly production target down to 1,193,420 bpd this year. However, Angola had already met its oil revenue target for the year by the end of Q3, with Kz 4,200 bn already collected in the first nine months of the year against a yearly target of Kz 4,059.4 bn. The country’s short and medium-term outlook is also positive because IOCs have been extremely responsive to the bold policy moves of the Lourenço administration. Most majors operating in the country have already approved new projects, especially subsea tie-backs, infill drilling and marginal fields developments ventures. Those will be supporting production in the short-term, while three new FPSO-based production hubs are in the making by TotalEnergies, Eni and BP.
Djibouti has no natural resources, a land area of only 23,200 km2 and a population of 1m. Yet, the country has attracted billions of dollars of investments over the past decade, making some of Africa’s biggest economies look up to it with envy. Foreign investors from China, the Middle East and the United States are injecting billions into the country’s ports, oil & gas terminals, free trade zones and a 750km rail line that serves Ethiopia’s population of over 110m. That railway line alone can carry 2,600 tonnes of wheat and fertilisers and 110 containers per trip. At a time when African countries continue to decry the lack of investment into the continent’s infrastructure, Djibouti is forging ahead and using its geographical location to build the trade and services infrastructure of tomorrow. Geography is the country’s biggest asset: Djibouti is located on the strait of Bab-el-Mandeb on the north-east edge of Africa, where 30% of the world’s shipping passes on its way to the Suez Canal. Coupled with political and economic stability, Djibouti offers investors a safe haven to tap into the world’s most dynamic globalization routes while serving Africa’s growing population. It also helps that its neighbours Eritrea and Somalia continue to be plagued with insecurity and instability. Djibouti’s ports and container terminals remain amongst the most productive in the world. According to a new global container port performance index compiled by the World Bank and IHS Markit, its port is even the most efficient in Africa measured by minutes per container move. With such efficiency, Djibouti’s goal of emulating Singapore as a leading maritime trading hub is within reach. To cement its position as the world’s future big trading hub, Djibouti recently set up a sovereign wealth fund with a view to finance about $1.5bn of domestic business activity over the next decade. In parallel, the country has embarked on significant infrastructure expansion with the Djibouti Damerjog Industrial Development Free Zone, echoing Singapore’s own Jurong petroleum and petrochemicals hub. The industrial park represents a 15-year undertaking and is expected to house integrated energy and petrochemicals facilities and further position the country as a strategic energy and industrial hub meeting the needs of the East African sub-region. While the complex was initially conceptualised to export South Sudanese oil, it eventually developed into a mega industrial and petrochemicals scheme. The ultimate oil complex will cover 80ha, starting with the development of 32ha comprising of 300 000 m3 storage tanks, an oil jetty and railway infrastructure connected to the Nagad Station, and from there to the Djibouti-Addis Abebe railway line. It will also include the construction of a 6 million tonnes refinery by the China Marine Bunker Co. Ltd (CHIMBUSCO) that will refine Saudi and Sudanese crude into marine fuels with a sulphur content of no more than 0.50%S, along with diesel, naphtha and LPG. The facility would primarily meet demand for Djibouti and Ethiopia and be followed by the construction of an onshore refinery. The industrial park will also benefit from a 150MW gas-to-power plant, starting with a 20MW hybrid power station expected to be commissioned in 2022. Such power supply will be key for all upcoming manufacturing units in the park built by Chinese investors and including steel, metal mesh, PVC pipes and glass. The anchor project for the whole complex is the Damerjog Liquid Bulk Port, Djibouti’s seventh port, built by Moroccon contractor SOMAGEC. President of Djibouti Ismaïl Omar Guelleh laid the foundation stone there in September 2020. Details on the Damerjog industrial park and liquid bulk terminal can be found in the “Projects” section within your Hawilti+ research terminal.
