The dramatic global slump in oil demand, triggered by economic lockdowns across the world and the downgrading of long-term global oil demand outlook – estimated to never again exceed 2019 levels – has left African economies under significant economic and fiscal distress, especially those reliant on oil and gas. This is according to the tenth edition of PwC Africa’s Oil and Gas Review 2020 which maintains there is opportunity for Africa to take advantage of the global energy transition and the new global markets taking shape.“The Covid-19 pandemic has played havoc in global economies and energy markets, with oil being shown to be particularly vulnerable. In response, the developed world has accelerated the renewable energy transition through greening policy, economic stimulus and investment,” said James Mackay, PwC director: energy strategy and infrastructure. “It is ironic that after decades of climate change denialism, it has taken a global pandemic to tip the scales in favour of our environment and greening our economies. ‘Net Zero’ and the energy transition are significantly transforming the energy and utilities sector, with 2020 seeing the five super-majors in oil and gas having written down reserves by $87 billion, rapidly diversifying portfolios towards renewables and redefining their business strategies.” According to Mackay, while this disruption and change were taking place against the backdrop of increasingly fragile African economies under fiscal pressure, the development and early adoption of clear, regionally aligned country strategies and policy dialogue aimed at capitalising on the global energy transition and harnessing the attractive wind and solar array across Africa could be an attractive and sustainable outcome for the continent.He said a number of challenges had arisen in 2019 for the oil and gas sector. These included the ongoing rise in shale production, a slowing global economy and talk of a potential global recession, the prospect of a deepening trade war, structural oversupply of LNG production, and concerns over security of supply, with increased attacks on oil production sites. Oil production in Africa saw a slight increase of 0.5% from 2019, amounting to 8.3 mmbbl/d. This accounts for 8.82% of global production. However, in 2020, production declined by 10% compared to the previous year – driven by the Covid-19 demand slowdown for exports. Africa’s proven oil reserves remained static at 125.7 Bbo from end 2019 to 2020. 41% of these reserves are located offshore while 59% are onshore.Africa’s proven gas reserves also remained at 527 tcf between 2019 and 2020 — with 34% of these reserves situated offshore. Production increased slightly by 0.36% from 2018 to 238 bcm in 2019. But production declined by 9% in 2020 due to Covid-19.The global energy transition and harnessing the attractive wind and solar array across Africa could be an attractive and sustainable outcome for the continent.– James Mackay“
