• 3 minutes Cyberattack Forces Shutdown Of Largest Gasoline Pipeline In United States - Zero Hedge
  • 6 minutes Renewable Energy Capacity Jumped 45% Worldwide In 2020; IEA Sees 'New Normal'
  • 11 minutes Forecasts for Natural Gas
  • 5 hours U.S. Presidential Elections Status - Electoral Votes
  • 6 hours Is the Republican Party going to perpetuate lies about the 2020 election and attempt to whitewash what happened on January 6th?
  • 8 hours Electric vehicle market growth is a blessing for some metals — and not a big worry for oil
  • 8 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 11 hours CRAPPIFORNIA DOES IT AGAIN! California proposes to steer new homes from gas appliances
  • 22 hours Сryptocurrency predictions
  • 1 day 1 in 5 electric vehicle owners in California switched back to gas because charging their cars is a hassle, new research shows
  • 1 day Joe Biden's Presidency
  • 8 hours .
Oil Moves Higher On Largest Crude Draw Since January

Oil Moves Higher On Largest Crude Draw Since January

Oil prices moved higher after…

When Will Oil Demand Fully Recover?

When Will Oil Demand Fully Recover?

Oil consumption patterns are still…

OPEC Continues To See Strong Oil Demand Recovery In 2021

OPEC Continues To See Strong Oil Demand Recovery In 2021

OPEC is optimistic that accelerating…

Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

More Info

Premium Content

Deep Oil Cuts Put Africa At Serious Risk

About two decades ago, The Economist [infamously] dubbed Africa as the “Hopeless Continent”, claiming that the new millennium had brought more disaster than hope to Africa with threats of famine in Ethiopia (again); floods in Mozambique; mass murder in Uganda and the implosion of Sierra Leone

A decade later, the magazine did a 180-degree and changed its tune to “Africa Rising” thanks to major improvements in labor productivity; dropping inflation and booming economies. 

But alas, the upbeat narrative was not to last for long, with the 2014 oil price crash devastating some of the continent’s most promising economies. And now, it’s happening all over again, with some of the continent’s leading oil producers in dire straits after the 2020 oil price crash.

To wit, Angola has gone from being Africa’s top crude producer just five years ago to barely pumping more than war-torn Libya while Nigeria--another key OPEC member--is in grave danger of suffering Angola’s fate as Big Oil makes yet another round of deep capex cuts.

Five of OPEC’s 13 member states are from Africa.

Deep spending cuts

Angola’s oil production has plummeted to a 15-year low of below 1.2 million barrels a day since November, effectively meaning that Libya, where a decade-long civil war has massively disrupted the country’s oil industry, is now pumping more crude than Angola.

But Angola’s problems have been long in the making, with the seeds of this sharp decline sown during the 2014 oil price crash, as the oil majors curtailed capex spending after oil prices crashed from $100 a barrel to less than $30 in the space of a few years.

Related Video: Top 5 Uses of Petroleum

Although the deep production cuts by OPEC eventually spurred a rebound in prices, offshore drilling activity by Angola and West Africa have recovered far more slowly. The coronavirus pandemic has triggered yet another round of deep spending cuts, with Baker Hughes reporting that just a single drillship was operating in the waters off Angola and Nigeria by the middle of 2020.

Some subsequent offshore projects by Total SE (NYSE:TOT) and Eni SpA (NYSE:E) have helped keep offshore oil flowing in Angola; however, the global pandemic and subsequent market downturn have ensured that just a trickle is flowing from Angola’s deepwater projects.

Angola has recorded a sharp 40% decline in production over the past decade, reflecting years of underinvestment in new projects despite the IMF estimating that it needs oil price of just $55/barrel for fiscal breakeven. Angola’s oil industry is largely dependent on deepwater fields where production typically declines faster than in onshore oilfields. The situation has been aggravated by a prolonged lack of constant investments to improve oil-recovery rates or tap additional reservoirs.

The situation is not much better at Africa’s top oil exporter and largest economy, Nigeria.

Nigeria only recently emerged from a major recession in 2017, and was contending with low growth of about 2% before the oil crisis struck. Oil sales contribute 90% of the country’s foreign exchange earnings; 60% of the revenue and 9% of GDP. With a high fiscal breakeven of $144 per barrel, Nigeria is feeling the heat more than many of its OPEC peers. The country had applied for $7 billion in emergency funds to the African Development Bank, World Bank, and the IMF but saw its credit rating downgraded by Fitch and S&P due to the oil slump.

Nigeria cut production sharply last year as part of the OPEC+ deal with crude shipments falling to 1.5 million barrels a day, the lowest level in four years. That’s less than half of the nation’s long-standing target for 2023, which might remain out of reach without quickly ramping up deepwater drilling.

Big Oil companies, including Total SE, Royal Dutch Shell Plc. (NYSE:RDS.A) and Exxon Mobil Corp.(NYSE:XOM) have expressed concern that Nigeria’s long-delayed Petroleum Industry Bill (PIB) could deter investment. Nigeria’s National Assembly is set to debate the proposed PIB in the first quarter of 2021––which could lead to a major change in the roadmap of the oil and gas industry after nearly two decades of attempted reform. 

Oil prices have mostly recovered from the historic slump, with Brent crude rising above $65 a barrel in London. Nigeria remains in a better position to recover from the investment slump than Angola, considering that about two-thirds of the country’s production comes from shallow-water and onshore fields.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News