A few weeks before the oil summit in Malabo (APPO Cape VII) , Ann Norman, Africa Managing Director of Pioneer Energy, gives us her thoughts on the business environment in Africa and the outlook for the oil and gas sector.
For a few years now, African governments – individually and as a bloc – has been punting the idea that Africa is open for business. When you look across Africa in your industry, where is this true? And what are the remaining obstacles?
It’s true Africa is open for business. I don’t like to use the term Africa, unless I am referring to a continent on a map. It is comprised of so many countries, all of which have their own individual program, with individual strengths and challenges. When I think about my industry, gas, this particularly rings true in Nigeria and Equatorial Guinea. Nigeria has implemented the National Gas Commercialization Program (NGFCP). This program is aimed at investors with an appetite for gas development in Nigeria.
7e Congrès de l’Organisation des producteurs de pétrole africains (OPPA) – https://t.co/nMC468LZqW
— Financial Afrik (@Financialafrik) March 20, 2019
Equatorial Guinea has many opportunities in both gas and oil. I think that all countries across Africa are candidates for midstream and downstream investments. Africa is the last place on earth where huge margins are to be made for those bold enough to come and do it. I will say, it’s not always for the faint of heart, there are some obstacles. In many places red tape exists to the point it prohibits investments. A lack of middle management also seems to complicate situations. And then of course, one of the biggest obstacles is reputation management – for many investors, Africa seems too risky due to political instability, whether real or perceived, economic instability and corruption.
Events like the APPO Cape VII conference play an important role in presenting Africa as a destination for inward investment. When you look around the continent, where do you see opportunity?
When I look around, I see so many fantastic investment opportunities – it’s almost overwhelming. Gas is my personal favorite. The proper development will solve many challenges on the continent, especially the ability to develop power. So that’s where my own personal focus lies. The ancillary industries then can develop, like manufacturing for instance. We have a long way to go to develop the gas and the industries, but I think we are all collectively moving in the same, and right direction.
The break even price for oil produced in the Middle East is 44% lower than it was about four years ago. In Africa, the break even price is only 17% lower than it was in 2014. Why is there such a disparity between the two?
In my opinion, the answer to this is simple. Most places on the continent have not continued to invest in the infrastructure to produce oil and gas. It then becomes difficult to offtake product, pipelines are either don’t exist or they are often offline. Production fields in some cases are running on equipment that is decades old, and desperately needs replacement or significant updates.
How important will regional cooperation be to the development of the African petroleum and energy sector?
Regional cooperation in the oil and gas sector is critical in Africa, just as it is in many other industries. There are countries that don’t have the natural resources in the ground, and need to get them from neighbors. There is regional expertise, knowledge and lessons learned, for instance like in Equatorial Guinea, which are critical to the development of new areas. I was recently privileged to get a personal tour of Europa Punta in Equatorial Guinea. His Excellency Gabriel Obiang made a comment that they are lucky, they had other countries and history to look at so they could avoid some of the pitfalls other countries had experienced. This to me, is exactly the kind of cooperation which is critical – learn from the people and countries who have done it well. Egypt is another example on how to develop gas well, they have a lot of knowledge and expertise to share, in addition to the resources which can be sent to neighboring countries.
Africa, as a continent, has what is often referred to a youth bubble. A generation of Africans unafraid to ask for and work for a better future. In your opinion how can the private sector and governments work together to use the continents mineral – petroleum wealth – to build a more sustainable economy?
These young people – I love them! They are so much smarter that we “older folks.” They have access to resources, knowledge and technology that can allow them to excel and thrive if we only help them get on the path, and then get out of the way! They are creative, enterprising and passionate, let us foster that! I mentioned earlier that lack of middle management is a big problem across the continent. We need to do a better job of mentoring and providing the right educational opportunities both in universities and in the workplace, which allow for the youth to grow and develop into well experienced managers.
I see these young people with drive and desire to do this, and I am passionate about providing opportunities to help develop people with training programs and job opportunities that will allow them to grow. This isn’t just specific to the oil and gas sector, it’s for all sectors. Government’s role in this… I am a capitalist, I believe the best thing Government can do is ensure the laws allow for private sector success, and then get out of the way and let the private sector do what they do best, make money and make things work. When industries make money, everything prospers. Taxes are paid which go to schools, roads, infrastructure. I am a firm believer in the private sector as the real tool for development, especially when it comes to training our amazing, driven and intelligent youth.
In the way that automation can be looked at as an opportunity to upskill workers in Africa, financing infrastructure projects also presents opportunities to build a high skilled African workforce. Would you agree with that statement? Where do these higher skilled opportunities lie?
I absolutely agree with this. I am an “early adopter.’ I am always one of the first people who will buy a cool, new piece of technology even before the kinks are worked out, because you can help work the kinks out, and I love to see the progress. I think automation and investing in this infrastructure makes people and things much more efficient, and frees up mind share from menial tasks to higher thinking. There is so much to be done and discovered in the world, and if we can employ technologies efficiently to allow people, especially the youth, to use their imaginations and creativity to make industry, and for that matter the world better, we all win. Machines and automation can handle the repetitive tasks, let our human capacity collectively create and come up with better and new solutions for industry. That to me is the most important investment in “infrastructure.”
