Despite global capital expenditure having been on a downward spiral between 2014 and 2020- owing largely to COVID-19 pandemic spending trends and energy transition-related divestment in Africa – the African Energy Chamber (AEC) projects capital expenditure within Africa's oil and gas industry to increase in 2022 and beyond.
According to the organization's Q1 2022 report, The State of African Energy, capital expenditure within Africa's oil and gas sector will reach $30 billion in 2022 after a decline from $60 billion in 2014 to $22.5 billion in 2020. This provides an opportunity for both mature and emerging hydrocarbon producers to establish investor-friendly regimes to attract capital and accelerate project development continent-wide.
At the current expected project sanctioning levels, upstream spending towards 2025 is expected to see an increase. Deferred projects and the projects originally slated for investments from 2022 onwards will together have the potential to contribute to a significant growth potential. Should the projects materialize, the potential expenditure may increase to almost US$49 billion by 2024. Investments related to onshore projects represent the single greatest category with investments reaching over US$68 billion during the 2022 – 2025 period. Big investments are also expected in Uganda and Kenya related to the greenfield onshore development of Lokichar basin. This greenfield development may be one of, if not the last, big conventional onshore project in the world. Subsea tiebacks will take the second spot in 2022 – 2025 cumulative spending and are likely to be more and more common as it makes commercial sense to piggyback smaller hydrocarbon accumulations on existing infrastructure. This category also includes the offshore related part of Liquefied Natural Gas (LNG) developments which further boosts this category in light of the mega-projects expected in Mozambique.
Years 2020 and 2021 showed that the African oil and gas industry was one of the hardest hit in the aftermath spurred by the COVID-19 outbreak. The initial after-effects of the demand vacuum and price crash caused by the pandemic led to production sanctions imposed on the African OPEC member nations. The initial reaction from the operators included delays to the projects with high breakeven prices, reduction of capital and operating expenditure, and cashflow neutral forecast at lower oil price curves. However, as the region saw a few project sanctions, 2022 – 2025 forecast now shows a relatively increased spending. To be noted, Q4-2020 versus Q4-2021 capital expenditure comparison showed a contraction of about US$33.5 billion during the same 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.
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