Guillaume Doane is the CEO and co-founder of Africa Oil & Power, a platform for African energy investment and policy. Africa Oil & Power is a strong advocate of “Africa First,” which supports African countries maximizing local beneficiation of their natural resources. Doane has advised several African governments and energy companies, and before co-founding Africa Oil & Power, he was CEO of The Oil & Gas Year, a business intelligence and strategic networking provider. In an exclusive interview with business a.m.’s BUKOLA ODUFADE, from South Africa, Doane talks about how an upcoming Africa Oil & Power conference in Cape Town would address current issues confronting oil and gas exploitation, production, utilisation and maximisation in Africa, as well as problems hindering trade amongst oil producing and non-producing African countries. Excerpts:
The theme for the Africa Oil & Power conference this year is emerging energy coalitions among African oil producing and non-producing countries. How is the conference going to drive result-driven conversation amongst the countries?
This strikes at the core of our theme this year for the Africa Oil & Power conference in September in Cape Town, which is energy coalition. What we are promoting is engagement between African countries and having sincere, meaningful and long lasting cooperation between energy institutions. We start first and foremost with the government and trickle down to the private sector, associations and organisations that are dedicated to real cooperation. By real cooperation, we are talking about trade between oil and gas producing African countries, in the form of petroleum products, gas, power pools, things that are happening in the African continent at levels that are less than what you see across the world. There are a number of reasons responsible for this; there are not enough pipelines, not enough power lines, real infrastructure that allows Africa countries to trade amongst themselves.
Trade in the oil and gas sector amongst the countries create a foundation for them working together even more collaboratively, sharing information that would lead to improved policies, shared regulations, and African countries having a shared destiny when it comes to the energy sector.
We believe that the burden falls on the large oil and gas producers like Nigeria, Angola, Equatorial Guinea, to play a leadership role in the space and provide assistance to countries that are not producing, countries that are on the brink of producing, countries like Uganda, Mozambique, Tanzania, Senegal. We have seen some really great examples of how these countries have been demonstrating a leadership position, we just saw recently a breakthrough infrastructure agreement between Niger and Nigeria. We have seen it last year, severally, with Equatorial Guinea, signing cooperation agreement with Mozambique, Togo, South Sudan, Benin, Burkina Faso, Ghana; and really, [we need] oil and gas countries like Nigeria, Angola, and Equatorial Guinea taking the leadership position, utilizing and capitalizing on decades of their oil and gas experience, and bring that to other African countries.
We have also seen African countries engaging international organisations like OPEC, becoming members, having a seat at an influential body that is capable of influencing international oil and gas markets, I think this is very encouraging for the African continent. Now, out of the 16 members of OPEC, seven are from Africa, which gives the African continent an unprecedented voice on international energy issues. I think it enables those African countries to speak on behalf of their African neighbours, to speak to issues that are very important to them.
It gives them access to information and technology, the likes of which they have never seen before. So, I think these are the kind of issues we are trying to promote at the Africa oil and power conference.
The fact that you mentioned infrastructure as a major problem, and major political dignitaries are going to grace your conference, is it going to be more action-driven, rather than just signing agreement and MOUs?
I think that is exactly what we are trying to do. It is not enough for two countries to sign a memorandum of understanding, which is great for capturing headlines in newspapers, but doesn’t really translate to anything tangible. What African governments should be able to capture is what the real business opportunities for both countries are. And the fact still remains that African countries are consumers of oil and gas; and rather than to keep importing refined products from north America or Europe, products that are being produced on the African continent are exported in crude format and being brought back in as refined products, it is not a sustainable way for the continent to continue.
So how does this take shape?
It means taking advantage of scale, the millions of people on the African continent that need access to oil and gas products, whether it is for transportation purposes, or to power their houses, being able to tap into that and to build infrastructure at scale and make sure that the products are accessible to consumers. Finding those solutions requires meaningful engagement between the energy stakeholders on the continent; it starts with the government, but it also falls to the private sector, ensuring that there is a policy in place attractive enough for the private sector to get involved, for those oil and gas producers to engage in and then involve investors. I mean financial investors that have value proposition to get involved in the projects. So we are going to raise those value propositions in the conference and hope this leads to tangible results.
Apart from infrastructure being the major hindrance to African oil producers doing trade, in the case of Nigeria, some experts also see a cultural barrier because the country is surrounded by francophone countries; do you see this as a problem?
No. Of course, there are cultural issues but if I wanted to point to the European Union, how many different languages are spoken in the EU, and is that a hindrance to economic and diplomatic relations between those countries, and the answer is absolutely not. There is a very large economic bloc made up of countries that have very different cultures and languages, but still translates to a very large trade among those countries. What those countries do share is a common currency and goal to trade; and I think you can find that in Africa. A great place to start is an organisation known as the African Petroleum Producers Organisation (APPO) which has 17 members. Amongst them are the countries you are talking about; whether Nigeria, Republic of Congo, Gabon, Equatorial Guinea, Ghana, we are talking about a handful of countries who among them speak three different languages. These countries meet regularly, and speak a common language which is English. I think there are significant reforms which are taking place at APPO to try and upgrade, to scale up the organisation to be more of a body that translates to more cooperation amongst these countries. So, I think there is already a basis for this to take place. It is just about enhancing the structures that are already in place.
Also, since the cost of doing business in these countries varies, would this play a factor in determining trade among the countries?
I think rather than talk about the cost of doing business, it is more important to talk about the investment terms, whether there is good enough return on investment to justify working in the jurisdictions. Something we have been talking about at Africa Oil & Power since our inception is, are African countries competitive enough in attracting investment compared to the rest of the world? The answer is yes and no. African countries have a well-established resource base and therefore have a very good value proposition when it comes to international oil and gas companies putting their money into the market; but do they have good enough fiscal regimes based on international price levels? The answer is most of the time no, when it comes to government off take in other jurisdictions; whether you are talking about onshore, near shore or deep-water, African government are not very competitive against other jurisdictions. So, I think it is about having a conversation with African governments and asking if they feel they are competitive enough to attract investment and what are the reforms that need to take place to make the countries more competitive. I think having that discussion in a conference is something we are going to have this year and in years to come.
Given the trend of the emerging energy coalitions among the African producers, what should the next logical step be?
The next step is putting transactions in place that leads to meaningful cooperation. This has to lead to energy trade agreements, in form of supply agreements from one country to another; has to lead to establishment of construction of infrastructure, whether in form of pipelines, LNG export and import facilities, from country A to country B, additional power exchanges, via power pools that are already in place. I think there are already some good foundations in place for this to be carried out. So, it is not just a memorandum of understanding that is needed, but a firm agreement for the changes to take place.
Another issue is the fact that proper regulatory frameworks are not in place in most African countries and you are talking about enhancing the cooperation between the countries. As most investors don’t know what to expect, what are your views on this?
I think we should distinguish between the challenges of existing regulatory framework and the ability of a country to continue to attract investment. I think it is well established that the delay to passage of the PIB in Nigeria was a barrier to attract investment, but it didn’t slow FID [final investment decision] to an absolute crawl. Companies are operating in Nigeria, new investments are coming in, new projects were being announced, so there is form for the frameworks to be improved and even strengthened, but it doesn’t stop investors from coming in. So, I would say that the challenges notwithstanding, there are still plenty of opportunities for countries to work together. It is not like you have to strengthen all the frameworks before any cooperation happens.
Looking at recent oil price movement, oil prices have come a long way from a low $23 per barrel to as high as $80 per barrel, with the lower to longer mentality floating around the market, will outages in oil producing countries like Venezuela, Iran and Libya change this mentality?
I think low prices are appropriate for consumers but not great for producing countries, and I think everyone recognizes the need to strike a fair balance. We saw just how damaging to Nigeria’s economy low oil prices was. It had a destructive effect on Nigeria’s economy. Not just oil and gas, it had a reverberation on other economic sectors. So, I think there is an acknowledgement that if prices are too low, it would have a deteriorating effect on the entire economy and would handicap the economy. I think there needs to be a price level that is sufficient, ensuring continued investment in the oil and gas industry so that there is a supply to provide to consumers, while stimulating other economic sectors. Finding that right balance is what I think the oil market has been doing for the past year and half and I think the right balance is being found at the prices right now, which is what we are seeing right now, between $70 and $75 per barrel.
I think the market is becoming stabilized in a way we haven’t seen before and oil companies are becoming profitable again, there is economic growth happening among African countries and there is an acceptance among consumers that these are affordable prices. There would always be a push and pull between producers and consumers, but the current climate is better than 2014 and 2015, and it is manageable for consumers as well.
Energy December 20, 2019