East Africa is expected to be a major driver of the new offshore oil boom. Companies including Anadarko, ENI, British Gas, Statoil, ExxonMobil, Total, Ophir, Apache and Tullow are already heavily invested. Offshore Tanzania, Anadarko’s deepwater operation reported new finds in 2012, while Brazil’s Petrobras is preparing to drill in two offshore blocks where it expects to produce more than 2 million barrels per day by 2020.
Offshore South Africa, foreign investment didn’t enter the picture until apartheid ended in 1994. Today, Royal Dutch Shell is looking to drill off the coast close to the border of Namibia, with each well costing $150 million to $200 million because of the depth of the water. And ExxonMobil was recently granted permits with South Africa’s government to conduct a one-year study on the potential of a deepwater basin off Durban.
In fact, five international companies now have licenses for seismic surveys along the east coast from Jeffreys Bay to the Wild Coast.
But the area covers more than 17,400 square miles of pristine tourism region popular with whale-watchers, and that has caused some concerns over just how much energy development versus tourism business is good. Following a complaint over the impact of underwater sound pollution from seismic surveys on sea life and the seasonal migration of humpback whales, South Africa briefly suspended oil and gas exploration until the government-run petroleum agency of South Africa could hold discussions between international oil firms and environmentalists.
While the ban was lifted Dec. 20, it raised questions: Can big international oil companies put influential pressure on bending local laws?
“No, U.S.-based oil companies have no influence in changing South African Laws,” O. Mans, Acting CEO of the Petroleum Agency of South Africa told AFKInsider. “All companies, whether local or international, that are interested in operating in South Africa have to adhere to South African rules and regulations.”
But for other regions, the power of some companies has been brought into question.
“I can say they are pressuring,” Energy & Corporate Africa CEO Oputa told AFKInsider.
Energy & Corporate Africa’s Sunny Oputa uses the historic case of Nigeria as an example of how some oil companies could pressure unstable political regimes.
“Nigeria tried to get this new petroleum industrial bill,” Oputa told AFKInsider. “It has been delayed a little because the international oil companies want to make sure it’s a win-win situation fully to the side of the company.”
Six years after it was first introduced, Nigeria’s Petroleum Industry bill remains in legislative limbo over disagreements with its proposed financial terms to increase Nigeria’s share of revenue. Companies such as Shell, Chevron and ExxonMobil think the new terms are too strong and could threaten continued investment.
“There are people that still feel that if government is putting a lot of pressure on international oil companies, foreign direct investment might reduce and these guys might pull out or reduce their investment in the offshore sector, which for most African countries including the South want to really double up,” Oputa told AFKInsider.
Nigeria may be an extreme example. Nigerian President Goodluck Jonathan is under pressure from the central bank to produce information on what happened to $50 billion in revenues from January 2012 to July 2013. And the London Royal Institute of International Affairs did an investigation of stolen Nigerian oil and its international money laundering connections. Concluding that “Nigerian crude oil is being stolen on an industrial scale,” the report notes that the U.S., Brazil, China, Thailand, Indonesia and the Balkans were the probable destinations for the stolen oil.
Despite Nigeria’s current issues, Oputa says the most important local issue throughout the entire oil-developing region that’s pitting local governments against pressure from international oil companies is the need for a greater use of local employees.
“You might be changing the extent of the law then because there are some areas where you may not have qualified level (of local skills) and if you say you must take from the local you may not get the degree of professionalism because some of them are not yet acquainted with certain technologies,” Oputa told AFKInsider.
One example is Angola. While BP’s PSVM project in Angola was developed using more than 20 percent local content in the manufacture and assembly of drilling equipment at local construction yards, Angola has been urging companies such as Total, Chevron and ExxonMobil to use more Angolans. On average, the oil industry employs just 1 percent of Angola nationals, though it accounts for nearly all the country’s exports.
Oputa says one of the things that will happen in Africa in the next five years is what he calls a “regional content” shift.
“Regional content is where some new countries will depend on countries like Nigeria and Angola that have had some professionalism for long time. You can see how Nigeria has Kenya to develop this new oil sector. Nigeria has helped Uganda to develop their new oil sector,” Oputa told AFKInsider. “Africa will create a balance.”
