FEATURE – The future of Africa’s energy sector is big and bright, says Pan African businessman

JOHANNESBURG – Pan African businessman and entrepreneur NJ Ayuk, chairperson of the African Energy Chamber (AEC), who will speak at the FT Africa Summit in London later in the month, outlines problems in Africa’s energy sector as well as its potential in an interview with the African News Agency (ANA).

What do you regard to be the five biggest myths about the African Energy sector now?

— The myth that Oil and Gas is for men and that there is no place for women: “I think this is wrong. Women can play a mighty big role in this industry. I have met many women in the industry who have excelled more than men,” says Ayuk.

— Africa’s Oil and Gas reserves are drying up: “Natural resources are finite, but how we quantify reserves depends on technology and the economics of production. With better technology and growing demand keeping prices high, the world will not run out of gas any time soon. You are going to see more discoveries in many African countries like Democratic Republic of Congo, South Sudan, Senegal, Equatorial Guinea, Kenya, etc.”

— Oil and gas companies don’t care about local communities: “The oil industry in Africa is the biggest job creator and taxpayer. The oil companies take on a huge task in operating in difficult and sometimes risky environments. Yet they continue to invest and open the market. Each year many oil companies spend vast amounts of capital to minimise the impact on their environment and clean up after themselves,” Ayuk explains.

— African countries will never reform and oil will never benefit Africans: “Angolan President João Lourenço continues to move forward on the reforms he initiated immediately upon assuming the presidency. This is boosting investor confidence. Nigeria is struggling to get the PIB right and it will happen especially with the new political environment. Gabriel Mbaga Obiang Lima is driving the monetising gas revolution around Africa, by creating value with gas and advocating for LNG for Africa when it comes to electricity, petrochemicals and industrialisation. Gabon and Congo are drafting new petroleum laws to make investment easier. South Sudan’s has brokered a new peace agreement and increased production while pushing local content,” says the entrepreneur.

— Oil and Gas companies are corrupt: “It is true there have been a lot of cases of corruption in the oil industry like in any industry. Many Western oil companies over the last few years have cleaned up their act and existing legislation like the FCPA and the UK Bribery act have been very helpful in ensuring a more transparent industry. The Extractive Industries Transparency Initiative (EITI) has been a champion in this industry and progress has been welcomed,” explains Ayuk.

What are the major challenges and reasons for hope in the Industry on the continent, at present?

According to Ayuk, the biggest challenge many African countries must focus on at present, is that of critical energy infrastructure assets. “We must protect pipelines and oil and gas platforms – both onshore and offshore,” he says.

“The unanticipated loss in oil and gas production was one of the drivers of Nigeria’s recession. South Sudan’s loss in revenue and Cameroon’s failed license round, and investors and financers not willing to take the risk to invest in credible projects have all presented challenges. However, in Nigeria, Minister of State for Petroleum Resources, Dr Emmanuel Ibe Kachikwu, has led an effort which has seen some stabilisation in oil and gas production and the re-ignition of investment interest.

“Kachikwu engaged Niger Delta militants in various outreach initiatives and it is working. It is a lesson Cameroon can learn from, especially as a group of Cameroonian activists announce plans to ‘target foreign companies investing in Cameroon’ causing the government to threaten more crackdowns on Anglophone activists,” says Ayuk.

“The responsible development of natural resources, with the people’s interests in mind, will spur the creation of economic diversity and jobs in local communities where oil infrastructure is located. This approach to natural resource development is one of the best paths to security and stability for many African countries, especially those in the Gulf of Guinea, that enjoy huge resource endowments but great inequality at the same time,” the Pan African businessman explains.

Why do you think do African power utilities keep facing bankruptcy?

“I believe poor management has been key and we need to recognise it and fix it. There is a problem when many rural areas, villages and towns have no access to clean water and electricity. At the same time, millions of dollars are spent on similar projects that never take off. Many African utilities which are state-owned have done a poor job in securing revenue streams. I have always believed that negligence and a lacklustre attitude has been a lethal disease to African state-owned utility companies, especially when the maintenance management of power stations leads to shedding supply deficiencies which impact many small businesses and people,” Ayuk points out.

“We must understand that we cannot build and run industries with generators. We need to replace legacy systems with more nimble, flexible applications and make it cost effective at the same time.”

Is there hope for the African energy sector?

“Absolutely. The price of oil hit $80 recently. The OPEC-Non-OPEC agreement has been a major success. The oil industry responded to price fluctuations pretty much exactly as predicted a year ago. African gas demand is growing rapidly for domestic and foreign use. Gas has been and will continue to be the fuel of choice to replace coal-fired power plants,” Ayuk explains.

Nigeria, Equatorial Guinea, Cameroon, Angola, Mozambique, Gabon, Tanzania, Congo and many African countries have rich gas deposits. Africa’s LNG export volumes are about to rise dramatically, with Gazprom in Cameroon, Fortuna in Equatorial Guinea, Anardarko in Mozambique, and the new LNG train in Nigeria, he adds.

“With many more export terminals planned to come online over the next two years, this aspect of the natural gas business is poised for a boom around Africa,” Ayuk concludes.

– African News Agency (ANA)