Expenditure In Oil, Gas In Africa To Hit $30bn in 2022-AEC

African Chamber Chamber of Energy (AEC) has projected capital expenditure in Africa’s oil and gas sector in 2022 to $30 billion after a $60 billion decline in 2014 to $22.5 billion in 2020.

The organization, in its first quarter 2022 report, the State of African Energy, stated that trhe development provides an opportunity for mature companies and emerging hydrocarbon producers to establish investor-friendly regimes to attract capital and accelerate project development across the continent.

The report said that at current project sanction levels expected, upstream spending by 2025 is expected to see an increase.

According to the Chamber’s report “the deferred projects and the projects originally scheduled for investment starting in 2022 together will have the potential to contribute significant growth potential. If the projects come to fruition, potential spending may rise to nearly $49 billion by 2024. Investments related to onshore projects represent the largest category with investments exceeding $68 billion over the 2022-2025 periods. Large investments are also expected in Uganda and Kenya related to greenfield development of the Lokichar Basin.

This greenfield development may be one of, if not the last, major conventional land project in the world. Subsea links will be second in cumulative spending from 2022 to 2025 and are likely to become more common as it makes good business sense to build on smaller hydrocarbon accumulations in existing infrastructure.

This category also includes the offshore-related portion of liquefied natural gas (LNG) developments, further boosting this category in light of the mega projects expected in Mozambique.

The years 2020 and 2021 showed that the African oil and gas industry was one of the hardest hit by the fallout from the COVID-19 outbreak. The initial fallout from the demand void and falling prices caused by the pandemic led to production sanctions being imposed on African OPEC member nations. Operators’ initial reaction included project delays with high breakeven prices, capital expenditure and operating expense reductions, and cash flow neutral forecasting at lower oil price curves.

However, as the region saw some project penalties, the 2022-2025 forecasts now shows relatively higher spending. It should be noted that the comparison of the capital expenditure of the fourth quarter of 2020 versus the fourth quarter of 2021 showed a contraction of approximately $33.5 billion during the same period.

“Africa’s oil and gas industry will see an influx of investment in 2022. Despite the COVID-19 pandemic and financial constraints related to the energy transition in 2020 and 2021, the sector will see a rebound in 2022, and capital spending is expected to increase to $30 billion this year. This marks a critical opportunity for African producers to increase production, stimulate exploration and launch important projects,” said Sergio Pugliese, president of Angola at the African Chamber of Energy. Meanwhile, a number of major upcoming projects in Africa are driving most of the short-term new facility spending.“Most volumes should be sanctioned and natural gas is being developed 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 AT project (Isarene) led by Sonatrach in Angola; the Cameia-Golfinho project led by TotalEnergies in Angola; and the Quiluma/Maboqueiro project led by Eni in Angola.”