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Standard Bank projects continued Oil & Gas investment for Africa

…As Nigeria, Saudi Aramco discuss investment options

Motolani Oseni

Amidst stable crude prices above US$ 60 a barrel, Standard Bank Group, the parent company of Stanbic IBTC Holdings Plc, has projected a continued oil and gas investment for Africa over the next three to five years.

The institution in its latest report explained that the continent’s rapidly expanding population, lure both major and independent oil producers to one of the world’s last remaining energy investment frontiers.

According to the bank, a string of successful exploration projects over the last decade has seen the number of African countries with proven oil and gas reserves rise to 28 thanks to new discoveries in Ghana, Niger, Mozambique, Uganda, Kenya, Senegal, Mauritania and South Africa.

The investment required to bring these countries on stream will add further impetus to Africa’s oil consumption, which at 4 million barrels a day already significantly exceeds the continent’s 2.1 million barrels of daily refinery output, according to Standard Bank.

“An expanding population, rapid urbanisation and accelerating economic growth are causing the gap between Africa’s demand for gas and petroleum products, and its ability to supply them, to incrementally widen over time,” the report stated.

Commenting on this development, Head of Oil and Gas for Standard Bank Group, Dele Kuti, said: “This will serve to attract further investment from both major and independent oil producers, which in itself will exert further pressure on the demand side of the equation as the resulting infrastructure investment in refineries, roads, pipelines and housing drives energy consumption.”

He explained that Africa’s oil and gas sector is once again attracting investment from exploration companies and refiners following a prolonged break sparked by a slump in oil prices which saw a crude drop to below US$ 30 a barrel in early 2016.

Kuti noted that an improvement in oil prices is expected to average between US$60 and US$70 a barrel over the next three to five years, which are attracting greater interest in the continent, and is seeing a population boom that will likely see the number of people double to 2.5 billion by 2050 according to UN projections.

The BP 2019 Energy Outlook says Africa is 6per cent of global energy demand by 2040.

In 2018, the International Energy Agency (IEA) projected global energy demand would grow by more than 24 per cent to 2040, requiring more than US$2 trillion a year in investment to bring new energy supply on stream.

Given Africa’s burgeoning population and economic growth, it is likely that a portion of this investment will be directed towards the continent’s relatively untapped energy market.

“All of this investment activity will in turn spur demand for lending, deal structuring and transacting capabilities across the continent,” said Kuti, adding “Institutions with deep knowledge of the continent stand to benefit from those initiatives.”

Standard Bank is one of the largest oil and gas lenders in Sub-Saharan Africa given its on-the-ground presence in 20 countries across the continent.

It’s Corporate and Investment Banking (CIB) division has deep specialisation in Africa’s natural resources the sector, where it has built up an enviable track record across the full spectrum of the mining, oil and gas value chain.

Meanwhile, Nigerian Oil Minister, Ibe Kachikwu and the president of Saudi Aramco have discussed investment options in the mid and downstream sector.

Aramco is expanding downstream operations such as refining and petrochemicals production as part of its drive to become the world’s largest integrated energy firm.

Nigeria imports the bulk of its petrol, despite being Africa’s biggest crude oil producer, due to its dilapidated refineries.

Last month, Nigeria’s state oil company, the Nigerian National Petroleum Corporation (NNPC), said it was in talks with different consortiums to revamp its refineries and save billions of dollars on fuel imports.

The petroleum ministry, on its Twitter feed, said Kachikwu, who is on an official visit to Saudi Arabia, stated that Aramco officials including its president discussed “areas of shared investment interests and existing viable investment options in the midstream and downstream sector.”