OIL AND gas

Af­ter a few years of low crude prices, oil com­pa­nies are hold­ing out for a sus­tained rise in prices in 2017

The Africa Report - - CONTENTS - Ni­cholas Nor­brook

Drilling down­ers

As ever, the oil price is the magic ball through which much of Africa’s eco­nomic for­tunes are read. Pro­duc­ers en­dured pain as the price dropped from more than $100 per bar­rel in 2014 to less than $40 in early 2016. But now a deal be­tween mem­bers of the Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries ap­pears to be hold­ing. Saudi Ara­bia is cut­ting pro­duc­tion again. Oil bulls are con­fi­dent that a bar­rel will nudge $60, while the United States En­ergy In­for­ma­tion Ad­min­is­tra­tion sug­gests $53 is more likely for the time be­ing. The price crash has hit newer play­ers in Africa hard. Nige­ria had a late bloom of in­dige­nous en­ter­prises that pur­chased oil blocks from in­ter­na­tional oil com­pa­nies at the top of the mar­ket, with se­vere con­se­quences. Oando (#154), for ex­am­ple, has fallen out of our top 100. There may yet be a round of con­sol­i­da­tion that could cre­ate a heavy- weight pri­vate Nige­rian oil com­pany. Un­til then, most of them will be lick­ing their wounds and wait­ing for bet­ter times. State-run com­pa­nies have also been suf­fer­ing. An­gola’s So­nan­gol (#2) saw turnover al­most halved from $34bn in 2014 to $17bn in 2015. Per­haps that was the mo­ti­va­tion for putting in place a new boss for the com­pany – pres­i­den­tial daugh­ter Is­abel dos San­tos. Her ini­tial re­marks sug­gest she will start to tighten the screws on fuel im­porters such as Glen­core by forc­ing them to go to ten­der, and will split So­nan­gol into three units to im­prove trans­parency.

SONA­TRACH STRIDES ON

Those gov­er­nance con­cerns may be felt at Pet­rosa (#84), too. The com­pany recorded a R14.5bn ($1.1bn) loss in 2015. That will not stop it from spend­ing an ad­di­tional R3bn on up­grad­ing the Mos­sel Bay re­fin­ery. The other heavy­weight staterun com­pany on our list, Al­ge­ria’s Sona­trach (#1), is in bet­ter shape. It spent the past two years de­vel­op­ing new wells. It says it will be ramp­ing up pro­duc­tion by 20% over the next four years, with new oil wells in the Berkine Basin and new gas projects such as Tiguen­tourine. France’s To­tal is also due to cre­ate what will be a ‘global-size’ petro­chem­i­cals com­plex in the next few years for Sona­trach. Mean­while, Sona­trach’s dis­tri­bu­tion sub­sidiary, Naf­tal (#31), is also on a big cap­i­tal ex­pen­di­ture drive and is set to open 20 large petrol sta­tions in 2017 while spend­ing more than D500bn ($4.5bn) on ex­panded stor­age ca­pac­ity. African com­pa­nies are also diver­si­fy­ing ge­o­graph­i­cally to pro­tect them­selves from the crunch that has hit African en­ergy com­pa­nies. Sa­sol (#4), South Africa’s lead­ing pri­vate en­ergy and chem­i­cals com­pany, fi­nally man­aged to up­grade all the roads lead­ing to its fu­ture $11bn petro­chem­i­cal plant pro­ject in the United States state of Louisiana in De­cem­ber 2016. The plant is due to open in late 2018 or 2019. De­spite the cost over­runs on the pro­ject, large fun­ders seem to like Sa­sol, with Dupont Cap­i­tal, JP Mor­gan and Old Mis­sion Cap­i­tal all buy­ing more Sa­sol stock in re­cent months.

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