Nigeria, other economies to lose $1trn in oil revenues next 20 years: Report

*PricewaterhouseCoopers (PwC) in its Africa Oil and Gas Review 2020 report observes African continent’s proven oil reserves remained static at 125.7 billion barrels from the end of 2019 to 2020

*As OPEC mandates Nigeria to slash oil output by 939,000bpd in 3 months

Isola Moses | ConsumerConnect

A new report by PricewaterhouseCoopers (PwC) in its Africa Oil and Gas Review 2020, has revealed that oil production in Africa witnessed a decline of 10 percent in 2020 from 8.3 million barrels per day.

It was gathered the development was attributed to the impacts of the novel COVID-19 heralding demand slowdown for exports in the international oil market.

The report noted that the continent’s proven oil reserves remained static at 125.7 billion barrels from the end of 2019 to 2020.

Oil exports saw a decline of more than 10 per cent in 2020, with the top five African crude oil-exporting countries experiencing a total decline of 11 percent from 5.3 million barrels in 2019 to 4.2 million barrels in 2020, according to the report.

PwC stated: “Nigeria, Algeria, Angola, Libya and Egypt could each be facing $20bn or more in lost export revenue in 2020.”

The firm further said Africa’s proven gas reserves remained at 527 trillion cubic feet between 2019 and 2020, with production declining by nine percent in 2020 due to COVID-19 from 238 billion cubic feet in 2019.

Gas exports by African producers also fell by more than six percent to 37.3 million tonnes per annum in 2020 from 39.7 mtpa in 2019.

The report further noted that “gas demand is expected to quickly recover from 2021 in mature markets and show steady growth in emerging markets.

“Much of Africa’s supply growth will come from Nigeria, but Tanzania, Mauritania and Senegal are also aiming to contribute to rising supply.

“The post-2021 demand growth will take place in China and India where gas benefits from strong policy support.”

According to PwC, the onset of the COVID-19 pandemic had dealt Africa’s oil and gas industry a significant blow, eroding most recent gains and short-term upside.

“Many of the major international oil companies in Africa have written off/impaired some of their assets this year based on anticipated oil prices and assets they believe to be stranded.”

Forecast oil demand globally shows a curbed recovery over the next few years following the COVID-19 induced demand slump, with prices predicted to reach a ceiling of around $54 per barrel (compared to a pre-COVID view of long-term pricing ranging between $60 and $70 per barrel).

It added: “It is estimated that this lower price forecast will cost Africa a potential $1tn in export revenues from oil over the next 20 years.”

The African continent confirmed itself as a global exploration hotspot in 2019 with key projects primarily from West and East Africa advancing to exploration and development, it said.

The megaprojects include Shell’s Bonga South West offshore field in Nigeria, which was expected to reach final investment decision in 2019, but has still not been sanctioned.

It stated: “The 2020 COVID-19 disruption has, however, reversed many of the sector gains and seen project delays and cancellations.

“Many oil and gas majors in Africa have announced that start-up date of their major projects is expected to be delayed by one to three years and smaller projects may be cancelled.

“Nigeria, Mozambique, Senegal, Kenya, Mauritania and Uganda are faced with project and FID deferrals, while two of Total’s projects in Angola are facing outright cancellation.”

PwC suggested African oil-producing countries must act quickly to consider their long-term market positions and potentially move to diversify their economies or risk even greater financial and economic stress.

“This is particularly important for oil exporters with a high degree of sector concentration. Even countries that are seen as highly resilient should still consider how to benefit from the economy shift and the significant investment stimulus being mobilised by the developed world,” it added.

In a related development, the Organisation of Petroleum Exporting Countries (OPEC) has mandated Nigeria to slash oil output by 939,000bpd in three months.

The global oil cartel in a document Tuesday upheld its December 3, 2020, decision to increase crude oil production output by 500,000 barrels per day for February and March 2021, Bloomberg report said.

The plan will, however, see Nigeria cut production by 939,000 additional barrels in adherence to the resolution, with reference production set for the country by OPEC put at 1.829 million barrels per day in January, February and March of the year.

But the required production per month will be 1,516 million barrels per day, a reduction of 313,000 barrels per day for each of the months.

Russia and Saudi Arabia have a reference production of 11 million barrels per day respectively, but will only be allowed to pump 9.1 million bpd for the period under review, according to the document.

OPEC, therefore, directed its members and allies that have not fully complied with the output curbs agreed upon in April when the prices of some grades of oil in the international market became negative, to submit a compensation plan by January 15, 2021.

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