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Africa builds an integrated energy economy

Africa is increasingly taking ownership of its own energy destiny in the private-sector space.

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By Paul Sinclair

The continent is making policy and legislative progress toward a new dispensation where firms from the region can exploit and develop their own resources for the benefit of its people. The key to this is ongoing regional engagement.

Africa is increasingly taking ownership of its own energy destiny in the private-sector space. But – equally importantly – it is also developing the policy and regulatory tools that support economic self-determination.

Nowhere is this more evident than in Nigeria, where the long-awaited passing into law of the Petroleum Industry Act (PIA) last year is poised to unlock the vast potential in the domestic and regional energy sector.

The Act has legislated the creation of two regulatory agencies to oversee critical parts of the industry. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) will be responsible for the technical and commercial regulation of petroleum operations in their respective sectors.

The upstream comprises resource exploration, as well as drilling and operation of crude-oil and natural-gas wells. Midstream usually refers to the transportation and storage of petroleum products by pipeline, barges, tankers or trucks, while the petroleum downstream is mainly concerned with refining and processing of petroleum and natural gas and marketing and distributing end products to consumers.

The establishment of these regulatory bodies will provide a rich space for engagement with industry associations representing the enterprises that help to drive the industry. Prominent among these is the Petroleum Technology Association of Nigeria (PETAN), an association of Nigerian technical oilfield service companies straddling the upstream, midstream and downstream sectors.

This long-established association brings together Nigerian oil and gas entrepreneurs specifically for the exchange of ideas with major operators and policymakers, and to help develop Nigeria’s petroleum-technology industry for the benefit of Nigerians.

Under the leadership of chairman, Nicolas Odinuwe, PETAN looks to support and enhance the involvement of indigenous companies in the Nigerian petroleum-products sector.

Across sectors, there has long been talk of the need to enhance Africa’s beneficiation capacity, to help the continent move downstream from being a primary commodity producer, and to reverse the centuries-old pattern of developed nations exploiting Africa’s resources, then processing them elsewhere for an enormous profit.

PETAN is in the forefront of helping Africa achieve this in the petroleum sector. It describes itself as “the initiator of local content in Nigeria … championing the quest for increased local participation in the Nigerian oil and gas industry.”

As an association that focuses on local content, PETAN also has a role to play in the regional context, in ensuring Nigerian businesses are equipped to win international or regional tenders for the processing of primary commodities such as crude oil and natural gas.

In the petroleum industry, there are already numerous situations where a shallow-water asset owner in Nigeria might contract a European company to service its wells, despite there being a local supplier who can do the same thing.

The solution to overcoming this misalignment lies in ongoing industry communication, to ensure standardization of local content so that it meets local needs, thereby boosting private-sector participation in domestic production.

The establishment of Nigeria’s new regulatory bodies offers an exciting opportunity to drive this kind of intra-industry partnership and to help build an African energy industry characterised by mutual benefit, instead of unequal power relations.

A critical forum for this kind of engagement will be the forthcoming Africa Oil Week in Cape Town, (AOW), the global platform for stimulating deals and transactions across the African Upstream.

The event brings together governments, national and international oil companies, independents, investors, the geological and geophysical community and service providers.

Within this context, the African Union’s strategy for an Africa Continental Free Trade Agreement looks to create a single continental market for goods and services, with free movement of capital and investments.

A better integrated African energy sector can be a major driver of this vision, with, for instance, Nigerian firms partnering on Angolan energy projects and vice versa. In the long run, there is potential to establish a semi-autonomous oil and gas industry that delivers products to domestic, and external markets on its own terms.

Reaching this stage requires communication and ongoing strategic engagement. The foundations for this are being laid through progressive policymaking and regulation.

To take its rightful place as an energy powerhouse, Africa must continue to engage and partner across domestic and regional borders.

*Paul Sinclair, Vice President of Energy & Director of Government Relations, Africa Oil Week and Green Energy Summit Africa, writes from the UK.

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