JOHANNESBURG - Recent discoveries of oil in SA’s neighbours
Mozambique and Namibia may revolutionise economies in the region, and
provide substantial opportunity for SA, provided they are managed right.
An estimated 11bn barrels worth of oil were recently discovered in
fields around Namibia’s southern coast while American Oil Company
Anadarko has discovered oil reserves off the coast of Mozambique.
Although these discoveries are not massive in global terms they are,
especially the Namibian discovery, significant, and are likely to spark
an intensification of exploration activity in the region which may
result in yet more findings.
And SA, according to Deloitte’s global head for oil and gas, Adi
Karev and his South African counterpart, Anton Botha, may stand to
benefit significantly.
“There’s a saying in the oil and gas business that you can do two
things when you explore (you can) explore next to the well that you have
already found and your probability of finding more is higher, or
explore further away in places you’ve never explored before and that
probability is lower.
“The more we find in Africa, the higher the probability that we will find more,” said Karev.
In light of these discoveries, asked whether Africa could be the next oil growth story, Karev responded by saying “it is, without any doubt.”
Africa “represents a higher potential than it
has in the past”, he said indicating that it has now become one of
“multiple” regions with significant potential to benefit from an oil
boom.
But “Africa is not the USA,” he commented as he graciously recognised that Africa
is a continent, not a country and “there are countries that posses,
within that context of higher promise (even) higher promise”.
That level of promise is related not only to the size and number of
reserves, said Karev, but to the available levels of technological
expertise and regional infrastructural capacity needed to exploit those
reserves.
This is where SA stands to benefit.
“When you find oil in most developed economies where the environment
for services is ripe and acceptable (and) in environments where you find
oil in proximity to economies that are well developed, and SA is a well
developed economy, there are a number of ‘circles’ (of benefit and
growth) that come out of that,” said Karev.
The immediate benefit comes from the extraction of that oil and the
engineering activities associated with that extraction and SA stands to
benefit by leveraging its existing capacity to help in these efforts.
But it is in the down-stream support services required for oil (and gas) extraction that offers the primary opportunity for SA.
“The closer oil finds and gas finds come to the borders the greater
the opportunity for us in SA to leverage the expertise that we have and
the capabilities that we have,” says Botha.
“Oil services will boom in this part of the world … with SA having
the ports, engineers, services and logistics … to support this industry
that’s absolutely booming in Africa, I believe … that oil services (in
SA) will boom,” he said.
The responsible exploitation of oil could be a game changer for
Sub-Saharan Africa but for it to be a success there will need to bet a
significant and “mature” buy-in from the region’s governing elite, say
Karev and Botha.
Political instability and, dare we say greed, may pose the greatest risk to a potentially great opportunity.
“There are a number of ways that politics tends to impact the
‘appropriate exploitation of reserves’,” says Karev, “not the least of
which is the recognition that you cannot run the exploration and
production activities that are long term, very engineering oriented and
need to be intensively managed (and) operationally controlled in cycles
that mimic the cycles that are associated with political changes (in
Africa and elsewhere).
“When you do you end up under-exploiting, you end up under-leveraging and creating inefficiencies”.
Ultimately, says Karev, the investment/extraction cycles associated
with oil last upwards of four decades, political cycles fluctuate in a
matter of years, creating a stable environment across these cycles is
the challenge.
“What we have not seen in Africa is the
ability of creating this arm-length relationship,” where politicians
allow oil projects to run without too much interference while creating
an environment of sustained support.
Source: Moneyweb
