Report on current developments in the oil & gas industry in Africa August 2016

The choice to change Africa oil & gas review

Contents Foreword 3 Executive summary

5

Reserves and production

6

Growth and development

6

The challenges

6

Dealing with decline

8

Impact of renewables/alternative resources

27 28

Where there are threats, there are opportunities

10

Change in competitive environment

Next steps

13

Take away

14

Prioritising environmental and development imperatives 29

New energy futures Mergers & Acquisitions (M&A)

15 15

Discoveries 18 Foreign Direct Investment (FDI)

19

Capital spending

21

Dependencies 22 Oil price impact on oil rich African nations

22

Sustainability 24 New discoveries are not the only basis for sustainability 24 The bottom of the barrel

25

The Africa diagnostic

30

Policymakers’ understanding of the industry

30

Regulating local content and skills development in a complex world

32

The impact of local content on investment decisions 32 Compliance with local content requirements

33

Reaching for quality higher education

33

The digital oilfield

35

What is digital?

35

Digital technology in oil & gas

36

Are you ready

39

Infrastructure 26

Leading enterprise advisory playbook (Leap)

LNG as an option

26

Conclusion 42

Acreage and licence costs

26

Contacts 43

41

Acronyms 44 References 45

Africa oil & gas review – 2016 | 1

Methodology The project team, based in Cape Town, South Africa, developed a questionnaire that was distributed across PwC’s Africa network via email. Respondents included upstream, midstream, downstream and oilfield service companies, among other industry stakeholders. The project team used this information together with their knowledge of the industry gained from working with clients throughout the oil & gas value chain, industry events and interactions as well as additional research conducted by the team. The result is a piece of PwC thought leadership that represents the PwC point-of-view for the oil & gas industry in Africa.

Acknowledgements PwC Africa would like to thank all of the participants who contributed to this publication by responding to our survey questionnaire. We would also like to say a special thank you to our PwC colleagues in the knowledge management teams in Europe and the Americas for assisting us with research and statistics.

2 | Africa oil & gas review – 2016

Foreword This review of developments in the African oil and gas industry is our sixth in a series of reviews of the sector.

As in previous years, this review takes into account the experience and views of oil & gas industry players from across the African continent, including international oil companies operating in Africa, national oil companies, oilfield service companies, independent oil companies and industry commentators, to provide insight into the latest enablers and challenges impacting the business. In this year’s edition, we have taken a look at events that have taken place in the last 12 months within the major and emerging African oil & gas countries. With a sustained downturn in the oil price, the industry continues to respond by reducing costs, postponing or cancelling projects and exploring ways to reinvent itself. Navigating the future is increas