Nigeria, other African petro states missing out on oil boom -Expert

Oil & Gas‚ Oil and Gas Industry | intent | September 9, 2024 | Comment off

Despite oil prices being high since 2021, most major African oil producers are not experiencing the trappings of an oil boom, Zainab Usman, a senior fellow and director of the Africa programme at the Carnegie Endowment for International Peace has said.

According to her, compared to their other OPEC+ counterparts in the Middle East, Asia, and Russia, the ten major African oil producers have lower trade surpluses than they did in 2010, and heavier debt burdens—on average about 85 percent of GDP.

Some climate activists might celebrate the contraction in African oil production. But it will have a negative effect on these countries’ ability to mobilise the finance needed for long-term energy transitions. Already, the African continent has an annual financing gap of $400bn per year until 2030 if it is going to be able to achieve the UN’s sustainable development goals, according to the African Development Bank.

An important source of Africa’s climate and development financing should be the recycling of petrodollars for investments in green sectors such as climate-smart agriculture and renewable energy. This is the playbook of Arab monarchies in the Gulf and of Norwegian politicians, both of whom are deploying oil revenues through hefty sovereign wealth funds into green industries of the future.
 
If wealthier African oil-producing countries are unable to finance their energy transition, poorer ones will struggle even more.Angola’s dramatic exit from the oil cartel Opec+ late last year was interpreted as a historic pivot to the west. The less understood but equally important factor in its departure was the diverging impact of oil production quotas between African countries and their counterparts in the Middle East, Asia and Russia.
 
Oil prices reached an average price of $82 per barrel in 2023, way above the $65-$70 benchmark set by most governments. Yet the 10 major African oil-rich countries which have been exporters since at least the year 2000 have lower trade surpluses than they did in 2010, when oil prices were $79 per barrel. They also have heavier debt burdens — on average about 85 percent of GDP. Meanwhile, many of their non-African Opec+ peers have larger trade surpluses and lower debt to GDP ratios.
 
On the supply side of this growing divergence, output among the major African oil-producing countries is in decline. Countries including Congo-Brazzaville, Angola and Equatorial Guinea have experienced significant contractions in oil output. Nigeria has experienced the most dramatic decline, dropping from about 2.5mn barrels of crude oil a day in 2010 to 1.5mn b/d in 2023.
 
By contrast, output among non-African Opec+ countries such as Saudi Arabia, Oman, Russia and Kazakhstan has increased. Even conflict-torn Iraq nearly doubled its oil production over the same period.
 
This decline in Africa can be attributed to years of under-investment. This is due to outdated legislation, tense relations with communities involved in onshore production and even the favourability of alternative jurisdictions within Africa and elsewhere, such as Guyana, now the world’s fastest growing economy.On the demand side of the equation, the destination for African crude has also changed.

 

The shale revolution propelled the US to the status of the world’s largest oil producer in 2018, dramatically reducing its imports of African crude oil. The value of Chinese oil imports from major African oil producers also declined by around 28 per cent between 2018 and 2023. This contraction is particularly acute for Algeria, Angola, South Sudan and Libya, which previously relied heavily on the Chinese market. Meanwhile, Chinese imports of oil from non-African Opec+ countries, including Russia, have jumped by 78 per cent.

Source:https://thenationonlineng.net