Africa's oil industry, which currently accounts for 10% of total world output, is set to enter a period of robust growth in the new millennium, as oil multinationals are encouraged by new deep-water discoveries off the west coast.
The estimated value of the continent's oil industry is around $75bn, equivalent to 24% of sub-Saharan Africa's GNP. But its value could be twice as high if ongoing problems associated with wastage and spillage, especially in oil procurement, refining and distribution, can be eliminated.
According to the IMF, and The World Bank, crude oil accounts for 70% of all energy produced. About one-third of total export earnings are deployed on exploration and development, and taxes on petroleum products average at about 38% of African governments' indirect revenue.
Oil is thus the single most valuable commodity which could sustain long-term economic developments in some of the region's most highly impoverished nations, such as Angola, Chad, Sudan and Equatorial Guinea. Providing foreign investors are willing and able to cope with project and country-risks, it could be of use well into the 21st century.
The continent's economic and political record of civil wars, inadequate infrastructure, and hostile and inaccessible territories acts as a deterrent to foreign direct investment (FDI) in the hydrocarbon sector. But international interest remains high as the search for new oil supplies has intensified in recent years.
Africa's west coasts huge untapped reserves will constitute an important new source of energy for the next century. A report by NatWest Securities (UK) has estimated total offshore reserves off Angola, Congo-Brazzaville, Nigeria, and Equatorial Guinea as between 15bn-20bn barrels, of which 5bn barrels are proven so far.
Multinationals such as Shell, Chevron, Elf Aquitaine, Mobil, Agip, Exxon, Texaco, and British Petroleum, are planning to invest between $40bn-$60bn on exploration and development over the next two decades. Analysts estimate at least 1m b/d in additional output will come on stream from west Africa by 2005.
In marked contrast to the situation of the 1980s, governments have now improved the foreign investment climate by offering far less stringent licensing, generous production and profit-sharing terms, and attractive fiscal incentives, as well as legal safeguards for the multinational companies.
Notwithstanding financial risks and the heavy costs of facilities for constructing and maintaining...