Stimulating African E&P Through Attractive Regulatory Frameworks  

2019 is going to be a big year for the African oil and gas industry. New licensing rounds are being announced, explorers are pitching up camp across the continent, and drilling activities are spreading quickly. The number of mega-projects is on the rise, and the renewed appetite for capital-intensive projects is an indication of the returned confidence in the industry. After a year of rebound and recovery, Africa’s old and new hydrocarbons markets have an opportunity to further solidify the continent’s position as the world’s hottest oil and gas frontier in 2019.

Africa continues to offer abundant opportunities to explore for hydrocarbons in frontier markets. Amongst a multitude of attractive destinations for explorers, one of those standing out from the crowd is the Kingdom of Morocco. Recently described by Forbes as a “North African economic powerhouse”, Morocco’s promising oil and gas industry has been drawing a lot of attention from international players, and with good reason.  A still relatively nascent industry, knowing that only a tenth of its natural gas reserve potential has been realised and that there’s a visible potential for shale oil exploration the Moroccan government is pulling out all the stops to attract foreign direct investment. How? By creating a highly attractive business climate and creating numerous incentives for oil and gas players.  Morocco’s national oil company ONHYM has, as Forbes puts it, “rolled out a fiscal red carpet” for oil and gas exploration companies, by offering an attractive operating and investment framework. This includes elements such as the removal of corporation tax for the 1^st 10 years of production. By creating this utopian setting for E&P players, Morocco is expecting investment in the energy sector to reach $40 billion by 2030. 13 E&P companies are already covering over 127,000 square kilometres, bringing high hopes for tapping into the country’s substantial hydrocarbon potential. One of the key players in the arena is SDX Energy, with a determined plan revolving around 12 planned wells meant to be drilled before the end of 2019.

Of course, Morocco isn’t the only African nation making moves to attract foreign players by making changes to its regulatory frameworks. Creating an attractive setting through changes to petroleum codes and/or fiscal regimes is a well-known practice, and quite a few other countries have recently been making their move. South Africa, buzzing from news of the Brulpadda discovery, is re-working its MPRDA regulation (Mineral & Petroleum Resources Development Act), which previously acted somewhat as a restrictor and resulted in some explorers giving up their stake in the region. Now, the regulation is being negotiated in collaboration with E&P companies, making the region much more encouraging for junior players. The Gabonese government recently revised its Hydrocarbons Code to scrap income tax for oil producing countries. Hon. Pascal Houangni Ambouroue, Minister of Oil & Hydrocarbons, highlighted how the new code prioritises competitiveness and transparency and is adapted to oil price fluctuations. Senegal, thriving on its growing popularity following BP’s FID decision in late 2018, has also approved a new petroleum code aiming to reinforce the preservation of national interests and local content, while increasing attractiveness for international companies.

Come June, we can expect to have witnessed a number of new developments in the African E&P industry, with so many projects on the go. To get the latest on these activities, the Oil & Gas Council will be bringing together key players to highlight opportunities across the continent once again at this year’s Africa Assembly (24-25 June, Paris).  Amina Benkhadra, ONHYM’S General Director and recipient of the 2018 Africa Assembly’s Executive of the Year award described the gathering as a “unique opportunity to meet and exchange with world’s key industry players on African energy key challenges”. The Assembly will bring together over 400 senior industry stakeholders all under one roof, from E&P C-level executives, financiers and investors as well as key representatives from NOCs, ministries and regulators. If you’re an investor involved or looking to get involved in the African energy industry, it would be our pleasure to welcome you as a guest at the Assembly. If you’d like to know more please contact Dominique Broomes (T: +44 207 384 7989; E: [email protected]).

Written by Esme Till, EMEA Portfolio Manager, Oil & Gas Council ([email protected])