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Africa’s premiere oil industry event

The Cape Town Africa Oil Week conference, organised by Global Pacific and Partners, is widely recognised as the premiere event on the oil industry’s calendar. Stephen Williams reports from the 2010 edition by profiling four companies’ presentations.

p>The Cape Town Africa Oil Week conference, organised by Global Pacific and Partners, is widely recognised as the premiere event on the oil industry’s calendar. Stephen Williams reports from the 2010 edition by profiling four companies’ presentations.

There was a distinctly upbeat tone to the 17th Africa Oil Week held in Cape Town in November. Described by Dr Duncan Clarke , the chairman and chief executive of organisers Global Pacific (and not generally given to hyperbole) as “the worlds largest and most significant exploration and development event on Africa for the global oil exploration and gas-LNG industry,” the event attracted a stellar roster of industry figures. As usual, most of Africa’s production companies were on hand to report on their activities as well as to meet and greet their peers. They could also reflect on a number of stunning exploration successes, a buoyant oil price and the increasing capabilities and confidence of a growing number of indigenous enterprises.



Oando’s group chief executive Wale Tinubu , for example, gave a presentation that defined the future of Africa’s upstream sector in terms of the emergence of indigenous independents. The snapshot he presented disclosed that despite international oil companies continuing to dominate African production (with Algeria, Angola, Libya and Nigeria leading the continent in reserves and production) there has been significant investments in offshore West Africa’s exploration and development with some one billion barrels recently discovered.

While the international oil companies continue to enjoy a clear financial and technological advantage over the local independents, and control the majority of the upstream infrastructure, there is change in the air.

Sixty per cent of Nigeria’s production is accounted for by joint ventures between the international oil companies and the Nigeria’s national oil company but Tinubu suggested that there is a growing trend for independents to “piggy back” on international oil companies’ infrastructure to get hydrocarbons to market.

In his opinion, the landscape has been changed by the rapid emergence of Africa’s national oil companies, improved service companies, and legislation and measures that have been introduced designed to encourage the indigenisation of the industry. He also envisaged technology transfer to indigenous independents to continue apace as a result of their partnerships with international oil companies.

He went on to identify Oando’s future growth arising from the Nigerian field award round due later this year, probably following the April presidential election and the publication of the Petroleum Industry Bill.

He also foresaw “the sustained curtailment of militancy and political strife in oil and gas producing areas” and complementing these developments, Tinubu suggested that there would be a continued global economic recovery that would ease capital markets and improve access to funding for smaller independent producers like Oando.



Sasol, just like Oando, is an indigenous, integrated oil and gas company with operations in the upstream, midstream and downstream sectors. But Sasol is a considerably older and larger company. Founded in 1950, the South African company is renowned as a leader in synthetic fuel technology as well as coal and gas to liquids systems for transportation fuels and chemicals. And this synthetic fuel technology, built over 60years, has created a company with operations in more than 30 countries worldwide.

Speaking at the Cape Town Oil Week conference, Ebbie Haan . managing director of Sasol Petroleum International, told the delegates that Sasol, with over to 33,000 employees, achieved a R122.2 billion turnover (US$18.3 billion) and an operating profit of nearly R24 billion (US$3.6 billion) in 2010.

Outlining the company’s integrated business model and the group’s strategy, he said that Sasol would continue to prioritise natural gas expansion because of the abundance of remote natural gas reserves, the arbitrage opportunity between oil and gas prices, shale-gas dynamics and the fact that gas to liquids (GTL) technology is currently more competitive than liquefied natural gas (LNG).

In a joint venture with Mozambique’s hydrocarbon parastatal, CMH, Sasol has already built the 865 kilometre pipeline between the Inhambane gas fields in Mozambique to its Secunda petrochemical plant in South Africa, a pipe line which as well as providing a feedstock also feeds into a natural gas pipeline network to markets in Maputo, Johannesburg, Pretoria, Richards Bay and Durban.

With recent substantial gas finds offshore northern Mozambique, it might be expected (although not confirmed by Haan) that Sasol’s expertise will again be called upon to monetize the new gas reserves.

Haan took some pride in recounting that in September 2010, the world’s first commercial flight, using fully synthetic jet fuel, took to the sky. A Boeing 737, powered by Sasol’s synthetic fuel, flew to and from Lanseria, Gauteng to the Africa Aerospace and Defence expo at Ysterplaat, Western Cape.



Ian Craig , the executive vice-president sub-Saharan Africa, Shell Exploration and Production Africa, profiled Shell’s activities in seven countries in Africa and the regions of the continent where the company is conducting exploration.

Some delegates were obviously hoping that some indication would be forthcoming regarding Shell’s intentions regarding rumoured future disposals of on-shore assets in Nigeria’s troubled Niger Delta – a move alluded to earlier by Oando’s Wale Tinubu. Perhaps predictably, Craig declined to comment on these market rumours, instead referring to two Shell projects in Nigeria that, as he put it, served to “meet the company’s aspirations”.

These are the Afam VI + Okoloma gas plant, a 650MW combined cycle power plant that will increase both the country’s domestic power and gas supply by 20 per cent. He also described the Gbaran-Ubie oil and gas project which, as well as providing feedstock for local power generation in the Niger Delta would, it is estimated, produce 70,000 barrels of oil a day at peak production for export.

Appropriately enough, given the conference’s location, Craig spent some time highlighting two South African frontier exploration projects. The company has applied for exploration rights in the Orange Basin deep-water area off the country’s west coast, in waters up to 4,000m deep and in an area of 37,000 square kilometres.

But this area is dwarfed by the on-shore Karoo Basin shale gas project. In 2009 Shell was awarded a technical cooperation permit to determine shale gas potential in the vast Karoo, a permit of 186,000 square kilometres that gives Shell exclusive exploration rights following completion of the study

Shale gas exploration and production is seen as the hydrocarbon industry’s “flavour of the month”, with huge interest being demonstrated, particularly in North America, for this form of energy. Shell’s shale gas activities in South Africa could, it is being forecast, transform the country’s energy landscape – but returning to the matter of indigenisation, Craig summed up his presentation by underlining the importance that Shell places on choosing how, and with who, to develop resources.


Tullow Oil

Tim O’Hanlon , Tullow Oil’s vice-president for Africa, told the extraordinary and hugely successful story of the company’s African ventures to the Oil Week conference. In a presentation that could not help but be celebratory, O’Hanlon described Tullow’s meteoric rise, calling it “a thoroughly African success story”. Now with operations in 16 countries, the focus was on Ghana, just weeks away from its first production in early December, and Uganda where major discoveries since 2006 have opened up East Africa as a hydrocarbon province.

With its value having grown 15 fold in just six years, Tullow now has a market cap of US$18 billion, an extraordinary ‘rags to riches’ legend since its formation 25 years ago. Today, 75 per cent of the company’s production originates from Africa and the continent represents 90 per cent of capital expenditure – US$1 billion in Ghana and Uganda, US370mn in the rest of Africa and US$130mn in the rest of the world.

With such an emphasis on Africa, Tullow Oil might be considered “an indigenous company in waiting”, especially if, as has been widely speculated, the company decides to dual list on local stock exchanges. But here lies a problem that needs to somehow be addressed – both Ghana’s and Uganda’s capital markets are minnows, so small that a company of Tullow Oil’s value would, it is feared, overwhelm their markets.

Yet, in another sense, Tullow Oil provides a clear example of how, with vision and tenacity, a small oil company can make a huge difference to an African economy. For not only will Tullow Oil be seeking local future African partners for key roles in its operations, but it has proved to similarly sized African companies (including some of the continent’s national oil companies) that you don’t need to be a super major to win the oil game.

O’Hanlon placed a great deal of emphasis on speed – pointing out that “especially in Africa, if you are not fast, you’re food!” In Ghana, Tullow and its partners recorded the fastest off-shore deep water development ever in Africa, and O’Hanlon predicted that the Uganda joint venture would be similarly speedy. That should encourage smaller indigenous oil companies as the majors and super majors are simply to large to achieve these sorts of results.


Stephen Williams