BIG INVESTMENT SEEN REQUIRED FOR SOUTHERN AFRICA

Africa needs massive financing to develop its oil and gas potential, says Tei Mante, director, Sub-Saharan Africa, International Finance Corp., Washington, D.C. And there will be stiff competition from the former Soviet Union and other regions around the world wing for foreign capital and technology The World Bank recently estimated that $50-100 billion will be needed between now and 2000 for oil and mineral exploration and development in Africa, Mante said.

Dec. 6, 1993

4 min read

Africa needs massive financing to develop its oil and gas potential, says Tei Mante, director, Sub-Saharan Africa, International Finance Corp., Washington, D.C.

And there will be stiff competition from the former Soviet Union and other regions around the world wing for foreign capital and technology The World Bank recently estimated that $50-100 billion will be needed between now and 2000 for oil and mineral exploration and development in Africa, Mante said.

He spoke at last week's Sub-Saharan Oil and Minerals Conference in Cape Town, where ministers and representatives of governments in southern Africa gathered to describe their petroleum investment rules and objectives to private oil and mining companies.

The conference attracted the largest gathering of African energy ministers in many years-maybe ever-said a spokesman for the conference organizer. Better than expected attendance reflected a high interest in African oil and mineral opportunities.

PETROCHEMICALS, NATURAL GAS

As in a growing list of regions elsewhere, African nations are welcoming investors in upstream and downstream operations. Special emphasis is being placed on developing downstream manufacturing capabilities in many countries of southern Africa.

"Petrochemical manufacturing holds the key to development," Chief Don Etiebet, Nigeria's minister for petroleum and mineral resources, told the conference.

Investors are welcome in petrochemical manufacturing, he said.

Nigeria plans to build three methyl tertiary butyl ether plants, for example, to produce product for export, said Etiebet. Private companies will be involved in this construction program. A key reason for diversifying downstream is to reduce crude oil market risk.

Another thrust of countries in the region is to recover and utilize much more of current natural gas production, the bulk of which is currently flared. One estimate is that 74% of the gas produced in southern Africa is flared.

In Nigeria, development of natural gas is just beginning, Etiebet told the conference. He pegged Nigeria's gas reserves at 100 tcf.

Chevron Corp. has two gas utilization proposals in Nigeria. In partnership with Nigerian National Petroleum Corp., it plans a $570 million project to recover 170 MMcfd of associated gas now being flared. The gas will be gathered from offshore platforms, liquids extracted, and dry gas sold for domestic use.

Another proposal to lay a gas pipeline to fuel power plants in Ghana is under discussion.

Worldwide demand for natural gas could grow twice as fast as oil demand, said William Edman, managing director of Chevron Nigeria Ltd., Lagos.

As in other regions, one reason for the emphasis on natural gas in Africa is its environmental benefit. But Albina Africano, Angola's minister of petroleum, told the Cape Town conference, "Oil is also seen as beneficial in Africa because it replaces wood."

Kerosine and gasoline are the best intermediate alternatives for wood, she said.

FINANCING DEVELOPMENT

Financing oil and gas development in southern Africa won't be easy, but governments in the region are reassessing their investment rules with an aim to ensure an environment that will attract foreign capital.

The potential from an oil standpoint is considerable, Robert Angel, chief executive of South Africa's Engen told the conference. Subequatorial Africa has the potential for significant growth in oil demand, and regionally there is a good upstream/downstream balance.

Angel estimated total petroleum investment in the region at $100 billion. Currently, 63% is held by multinational companies, 18% by governments, and 19% by private African companies. He expects a shift away from government ownership as private investment is encouraged.

Angel outlined a plan of action for developing southern Africa's petroleum potential:

Encourage private African companies to participate in development.
Continue privatization efforts to make organizations cost competitive.
Make company organization and performance transparent to public and potential investors.
Develop technical and business skills.
Develop a blueprint for regional cooperations that will optimize the use of limited capital.

In closing the conference, South African President F.W. de Klerk said the years of isolation are over, and international investors and explorers can now return to South Africa.

He cited plans by South Africa's oil company, Soekor, to offer exploration licenses on offshore blocks in second quarter 1994 as part of an effort to encourage foreign participation in South Africa's oil industry.