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