Flipping the Script on Africa’s Natural Resource Development
AOP talks to Eric Williams, President of Royal Triangle Energy Solutions, about ensuring African countries benefit directly from their natural resources, especially through local content, as well as the opportunities for oil and gas in 2018.
What are the key trends for the African oil, gas and power sectors in 2018?
With few exceptions, oil is still exported and not refined on the continent, creating a wide-range of opportunities for midstream and downstream investment. The development of these downstream sectors will also better diversify African economies, many of which are heavily dependent on upstream activity.
Africa’s natural gas resources are being developed, but natural gas is largely exported as a fuel to other parts of the world. As many countries on the continent need gas to power electricity access, this resource can be very beneficial to domestic markets and for intra-African trade. Initiatives like Equatorial Guinea’s LNG2Africa could prove pivotal in this regard.
Power projects are still being seen as standalone projects, the result of which is that it is the domestic market that will pay for the molecules/electrons.
How can African countries best benefit from their natural resources?
The continent needs to flip the script and begin to view natural resource development as an opportunity to create nodes of socio-economic growth in their countries. Development of gas resources, for example, opens the possibility of a vast of array of economic growth, from the upstream sector to the development of gas-to-power, industrialization and manufacturing.
Additionally, the planning of projects should be guided by finding the right balance between returns to the shareholders of the investors and to the shareholders of the country — its citizens. When natural resources fail to benefit the citizens of the country, the resources are effectively wasted.
How can energy policies be improved in emerging African markets in order to be able to compete on a global scale?
Energy policies are a type of Productive Development Policy. As such, energy policy should be in-concert with other country policies and should seek to build the country by developing:
- A favourable climate for business and investment;
- Education for their people so that they are trainable and can access jobs that will be required;
- Basic enabling infrastructure (e.g. industrial estates, ports, pipelines, roads, etc.);
- A climate in which domestic suppliers can realistically access opportunities to supply goods and services.
Local Content has been a driving force in the energy sector in recent years. What countries are leading in terms of local content development and what still needs to be done to further local content?
Equatorial Guinea and Nigeria both stand out, though even in these countries there is still a long way to go to reduce barriers. For example, the local content sector is limited by the lack of in-country manufacturing available.
In order to influence the choices that will include significant Local Content in projects, countries should proactively seek to be investors in these projects that are unlocking the natural resource wealth within their borders. They need to have skin in the game.
Countries should analyze the entire value chain associated with natural resource development and seek to selectively maximize the socio-economic returns to their shareholders (their citizens).