OPEC: Driving Africa’s Oil & Gas Growth
The current COVID-19 crisis and associated energy demand dip are creating conditions for greater cooperation between Africa and the Organization of Petroleum Exporting Countries (OPEC). OPEC has welcomed new African members in the last few years and recognizes the growing influence of African oil globally. Therefore, African countries have a unique chance to reinforce their position in the world’s energy sector.
In the midst of the pandemic and its effect on the global oil and gas sector, Africa is looking to take advantage of OPEC’s new focus on coordination and inclusive cooperation, as demonstrated by historic agreements signed with OPEC members as well as non-members. The African continent could benefit from its growing petroleum influence to have a stronger voice in the organization.
OPEC has, in the last few years, showed an increased openness to new players, benefitting numerous African producers. Libya was the first member from Africa to join the organization in 1962, followed by Algeria in 1969, Nigeria two years later, then Gabon in 1975. The latest additions to the group come from Angola in 2007, Equatorial Guinea in 2017, and the Republic of Congo the following year. The most recent recruits namely benefitted from OPEC’s decision to end the requirement for all members to produce at least 500,000 barrels per day.
Following OPEC’s deal on oil production cuts at the end of 2016, Gabon rejoined the organization after an absence of more than two decades and Equatorial Guinea, the third-largest oil and gas producer in Sub-Saharan Africa, joined the group for the first time. Non-member countries such as Uganda, Chad, Egypt, Sudan and South Sudan, among others regularly participate in OPEC’s meetings, while non-member states South Sudan and Sudan have even taken part in the production cuts.
The appointment of H.E. Mohammad Sanusi Barkindo as Secretary General of OPEC in 2016 was a clear signal from the organization to African producing countries. A Nigerian national, Barkindo came into office with a reputation for cooperation and a deep understanding of oil and gas markets, having previously served as Nigeria’s national representative for OPEC and the Managing Director of Nigeria’s national oil company. In September 2018, H.E. Barkindo was acclaimed by African energy stakeholders as he was awarded the ‘Africa Oil Man of the Year’ prize during the Africa Oil & Power 2018 conference.
In the last few years, Africa has shown its commitment to being an integral part of the organization’s discussions. Sudan and South Sudan joined the historic ‘Declaration of Cooperation’ in 2016. During the Third OPEC and Non OPEC Meeting in 2017, Chad, Congo, Egypt and Uganda issued declarations of support to the decision to amend the ‘Declaration of Cooperation’ to take effect for the entirety of 2018. The fourth OPEC and non-OPEC Meeting in 2018 saw the participation of four new countries – all African: Chad, Egypt, Uganda and South Africa.
During his keynote address at the Africa Oil & Power conference in September 2018 in Cape Town, HE Barkindo declared: “These facts show that not only is the African presence in OPEC thriving but also that we have an extremely productive and fruitful relationship with non-OPEC African countries and partners. It also reflects how widely OPEC’s battle-cry of working collaboratively to solve problems is being heeded.”
The years ahead will prove to be decisive for the growth of OPEC and Africa’s cooperation as the world finds itself in an unprecedented health crisis associated with slowed economies and low demand for oil. In this context, African countries and OPEC will work together to increase international dialogue, trigger an investment influx into Africa and encourage operators to initiate ventures in high production potential areas.
Africa remains an underexplored territory and boasts a recognized potential for oil production. Continuous discoveries in Nigeria, Senegal, Equatorial Guinea as well as revamped exploration strategies are making of the African continent an increasingly attracting investment destination. As markets develop, the level of perceived risk diminishes, and appetite grows.
While intra-African cooperation is key to developing the domestic market and expand local capabilities, the oil and gas stage is global and requires cooperation outside the continent’s borders. Upon pursuing OPEC membership in 2017, H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons Equatorial Guinea said the country would use OPEC as a “platform to advance the interests of all African oil and gas explorers and producers and all OPEC members.”
As the global market slowly resumes normal activities to pre-pandemic levels of demand and operators gradually proceed with halted or delayed projects, Africa is set to be more involved in international discussions. OPEC’s tremendous influence on global oil market stability has been yet again demonstrated through its historic latest agreements, and with it the organization’s commitment to cooperation and unity. The goal of African producers is now to keep the relationship strong through improved business environments, attractive policymaking and continuous participation in OPEC’s initiatives.