Despite the fact that global capital expenditure fell between 2014 and 2020, owing largely to COVID-19 pandemic spending trends and energy transition-related divestment in Africa, the African Energy Chamber (AEC) forecasts an increase in capital expenditure in Africa’s oil and gas industry in 2022 and beyond.
Capital investment in Africa’s oil and gas sector would reach $30 billion in 2022, according to the organization’s Q1 2022 report, The State of African Energy, after falling from $60 billion in 2014 to $22.5 billion in 2020.
This presents an opportunity for both mature and emerging hydrocarbon producers to create investor-friendly regimes in order to attract money and speed up project development across the continent.
Upstream spending is likely to rise in the years ahead, based on current project sanctioning levels. Deferred projects, as well as those scheduled for investment from 2022 onwards, have the ability to contribute to significant growth potential. If the initiatives come to fruition, the total cost might reach over US$49 billion by 2024.
Onshore project investments are the single largest category, with investments totaling more over US$68 billion between 2022 and 2025. Large investments are also envisaged in Uganda and Kenya in the Lokichar basin’s new onshore development.
This greenfield venture could be one of the last large conventional onshore projects in the world, if not the last. Subsea tiebacks will come in second in total spending from 2022 to 2025, and they are projected to become more widespread as it becomes more commercially viable to piggyback smaller hydrocarbon accumulations on existing infrastructure.
In view of the mega-projects envisaged in Mozambique, this category also covers the offshore associated component of Liquefied Natural Gas (LNG) developments, which raises this category even further.
The African oil and gas industry was one of the hardest hit in the aftermath of the COVID-19 pandemic in the years 2020 and 2021. The initial effects of the pandemic’s demand vacuum and price drop led to production sanctions being imposed on African OPEC members.
The operators’ initial reaction was to postpone projects with high breakeven prices, reduce capital and operating spending, and estimate cashflow neutrality at lower oil price curves.
However, due to a few project sanctions in the region, the prediction for 2022–2025 now shows a considerably higher level of spending. It’s worth noting that the capital expenditure comparison between Q4-2020 and Q4-2021 revealed a decrease of around US$33.5 billion over the same time period.
“Africa’s oil and gas industry is set to see an influx in investment in 2022. Despite COVID-19 pandemic and energy-transition-related financial restrictions in 2020 and 2021, the sector will see an uplift in 2022, with capital expenditure expected to increase to $30 billion this year. This marks a critical opportunity for African producers to ramp up production, spur exploration and get sizeable projects off the ground,” stated Sergio Pugliese, President for Angola at the African Energy Chamber.
Meanwhile, a number of upcoming major projects in Africa are driving the majority of the greenfield expenditure in the short term. The majority of the volumes are to be sanctioned
and developed are natural gas with projects like the Area 1 LNG project in Mozambique and the Greater Tortue Ahemyim Floating LNG project offshore Senegal-Mauritania leading the list. Other projects include the TotalEnergies-led Tilenga project in Uganda; the Sonatrach-led AT (Isarene) project in Angola; the TotalEnergies-led Cameia-Golfinho project in Angola; and the Eni-led Quiluma/Maboqueiro project in Angola.
Despite the anticipated increase in capital expenditure within Africa’s oil and gas industry in 2022, the continent’s full energy potential is yet to be exploited. In this regard, and with an objective to ensure the continent is well-positioned to develop all of its resources, the AEC’s annual conference, African Energy Week (AEW) 2022 – taking place from 18 to 21 October in Cape Town – represents the most suitable platform for discussions on Africa’s energy future.
Through collaborative panel discussions and industry-advancing investor summits, AEW 2022 will host conversations on how African hydrocarbon-producing countries can boost investment to unlock the continent’s full oil and gas energy potential.