By NJ Ayuk, Executive Chairman of the African Energy Chamber (www. EnergyChamber. org).
Six months after the World Health Organization (WHO) declared COVID-19 no longer a health emergency, it is still difficult to fully measure the extent of the damage caused by the pandemic, from the high cost of lives to the economic devastation.
In fact, chaos was felt in the oil industry, which experienced record distortions during the pandemic period, especially in the early months.
As David Gaffen wrote for Reuters in February 2022: “Like many other things during the pandemic, what happened in fuel markets was unprecedented. Demand had fallen so much that other people had stopped traveling, that the oil industry simply couldn’t cut production fast enough to stay on its feet. “
Add to that a source war between OPEC members Russia and Saudi Arabia in early 2020 (flooding already saturated markets), and in April of that year we saw the value of a barrel of West Texas crude fall below $0 and distributors had to pay to get it. get rid of él. de it.
Of course, the oil market is simply volatile, but few eras comparable to those of recent years have experienced dramatic ups and downs. At the beginning of 2022, when Gaffen wrote his article, Brent crude futures were reaching $100 a barrel, as a result of the Russian invasion. of Ukraine.
For now, the excesses of the pandemic era seem to be us. As reported by the African Energy Chamber in its recent report “The State of Energy in Africa 2024”, we expect a “relative calm” in the liquids market for the rest of 2023. We expect 2024 to remain balanced and somewhat flat, with only marginal growth.
A strong market is also expected in Africa, our report notes, with oil production slowly declining in 2024.
While on the one hand it is attractive to move away from dramatic market fluctuations, marginal expansion and declining production are precisely good news. Moreover, even if the points influencing oil demands are out of our control, I don’t think the African oil industry deserves to give up a complacent “that’s just the way it is” mentality about a decline in production over the next year.
We take advantage of any and every opportunity to tap into our oil and fuel resources. Every drop of oil extracted is a path to economic expansion: revenues that can fund social programs, infrastructure development, and much-needed generation transfers from foreign oil corporations (IOCs). ) make an investment in Africa.
Even in calm times, we will have to act with a sense of urgency.
Global demand and production
So what will drive global oil demand in the short term, outside of major events like pandemics or global conflicts?
As our Outlook indicates, with COVID-19 restrictions, demand for liquid products for trucking and aviation (primarily from the United States and Asia) will likely account for more than a portion of global demand over the next 18 months.
Another key driving force will be commercial demand, specifically from the petrochemical sector in the Middle East, Asia and the United States, as well as power generation projects.
Our report also takes into account the increase in oil demand in the northern hemisphere in the third and fourth quarter of 2023, as well as the reduction in origin due to reduced Russian exports and voluntary production cuts from Saudi Arabia . The source deficit paves the way for increasing production, at least in some parts of the world, in 2024.
We expect global production to reach a total of more than 84 million barrels per day (bpd) next year, an increase of 1. 6% from 2023. The Americas, North and South combined, are expected to see a marginal 4% expansion in year-on-year (year-on-year) production in 2024, while the Middle East is expected to see a 2% year-on-year decline in production expansion through 2023.
But those increases are likely to be offset by marginal declines in output in other regions, including Russia, Asia, Europe and Australia.
Falling in Africa
As for Africa, our production for 2023-2024 is expected to remain solid at around 6. 77 million b/d. But monthly output looks a bit bleaker, falling from 6. 9 million b/d in January 2024 to about 6. 62 million b/d. d in December 2024.
Currently, a handful of African countries are increasing oil and condensate production. This includes OPEC member countries Nigeria, Libya, Algeria and Angola, which are expected to achieve production of 1. 51 million b/d, 1. 31 million b/d, 1, respectively. Matrix of 18 million b/d and 1. 01 million b/d in 2024. In this group, Nigeria leads a star producer, contributing just over one-fifth of the total combined annual volume of those countries.
Egypt, Chad and Ghana are also the source of Africa’s oil production. Egypt, for example, is expected to see its oil production reach 560,000 b/d until the end of 2023, while it will reach a total of 520,000 b/d in 2024.
Learn more about OPEC’s African countries
Our report also explores the effect of the OPEC club on African countries, specifically in production cut requirement spaces. The cartel sets up these discounts to control the overall balance between source and demand and volatile market conditions or irregular global highs or lows. oil prices.
“Member countries deserve to adhere to these discounts so that the cartel maintains its global markets instead of wasting market share and North American shale,” explains our Outlook report.
For years, OPEC’s African members had production capacity above the cartel’s quota and tended to produce more, even in periods of year-on-year production cuts. But that’s no longer the case. Nigeria, for example, has experienced production disruptions caused by pipeline vandalism, activist activities, and force majeure imposed by operators, exacerbated by dwindling existing deposits and a lack of new businesses. Angola and Equatorial Guinea have also experienced disruptions, which will most likely average 25,000 bpd in 2023.
These flaws need to be addressed: existing production projects in African OPEC countries account for about 44% of our continent’s total liquid reserve potential, or more than 70 billion barrels. It is estimated that 33% more comes from undeveloped discoveries in these countries, as well as 2% from underdeveloped projects.
With this in mind, African leaders will have to do everything imaginable to encourage and capitalize on oil and fuel activity here. Our governments want to create business-friendly environments for them to operate in their countries and do everything they can to minimise investor pressures. dangers by creating safe and attractive trading environments and attractive tax situations for investment. And now is the time to act NOW. This is especially true for the governments of OPEC member countries.
Download our 2024 outlook at: https://apo-opa. co/3QLEoHd
© Press 2023
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