africa oil & gas - sanea.org.za · 2017-11-22 · pwc pwc 2 learning to leapfrog agenda 1. oil...

Africa Oil & Gas: Learning to leapfrog

SANEA21 November 2017

PwC PwC 2

Learning to leapfrog

Agenda

1. Oil & Gas in Africa

2. Challenges & Impacts

3. Areas of Focus

4. Partnering for growth

5. Innovative technologies

6. Local content

7. Cyber security

8. National oil companies

9. Conclusion

PwC

Moving into the future of energy – take up the challenge in “learning to leapfrog”

Growth and Development

• Investment focus only on few select projects

• Exploration activity at historic low

• Only a handful of discoveries

• Midstream and downstream activities are picking up some pace – opportunities in storage or transport facilities

• Gas seen as the bridging fuel moving to renewables

• Need to harness innovation and technology

PwC Africa Oil & Gas Review


7th

Challenges

• Fourth consecutive year where uncertain regulatory frameworks comes top of the list

• Players continue to be more discerning in choosing projects they wish to take forward

• Renewables will become an ever-important part of energy company portfolios

• Utilise technology as an enablerFit for Growth

• Top internal hurdle to growth: too little investment in developing capabilities

Sustainability

• Low carbon

• Almost half the growth in Africa’s electricity generation up to 2040 is set to come from renewables

• M&A and partnerships are key to delivering intended and repositioned strategies and growth

Leveraging local content

• Technical skills seen as most important criteria for a local partner

• Governments need to work on realistic and reliable regulatory frameworks to be attractive for investment

Cyber security

• Operational efficiency through digitisationis creating plenty of opportunities for cyber criminals to exploit

3


PwC

Oil & gas remains a key industry on the African continent

4


PwC

We have seen some significant shifts in the top challenges facing the industry in the current environment

5


__________________________Figure 1: Top five challenges over time………………………………………………………

Q What do you see as the five biggest external challenges in developing an African oil & gas business in your country? Please rate on a scale of 1-5 with 1 being the highest priority and 5 the lowest.

Source: PwC Analysis

PwC

We also asked about the factors most likely to impact commodity prices…

6


__________________________Figure 4: Drivers of commodity prices………………………………………………………

Q What factors do you think are impacting commodity prices most?


PwC

… and also looked at anticipated changes in the competitive environment

7


_________________________________________Figure 9: Changes anticipated or recently experienced in the competitive environment………………………………………………………………………………………

Q What changes do you anticipate, or have you recently experienced, in the competitive environment?


PwC

We analysed the top strategic focus areas…

8


_____________________________Figure 10: Top three strategic focus areas……………………………………………………..………

Q Please select the top strategic focus areas for your company over the next three years

PwC

… and key areas of expenditure focus

9


_____________________________Figure 11: Expenditure: Companies are investing in themselves (capabilities, infrastructure, efficiencies), but compliance and local content remain priorities……………………………………………………..………

Q In what key areas will you focus your expenditure over the next three years?

PwC

We analysed intentions to cut costs…

10


…and areas being considered for these cuts

_________________________Figure 12: Intention to reduce costs……………………….…………………..………

Q Are you looking at formal cost reduction measures for your Africa operations in the next three years, and if so by how much?

_________________________Figure 13: Cost-cutting areas……………………….…………………..………

Q What areas of your business are you considering for cost cutting?

PwC

Partnerships are key to delivering intended and repositioned strategies and growth……


11

…and these are the reasons for pursuing them

_____________________________________Figure 15: Proportion of companies related to M&A or partnership opportunities……………………….…………………..………………………………..

_____________________________________Figure 16: Reasons for M&A or partnership pursuit……………………….…………………..………………………………..

Q What was the reason to pursue M&A or partnership?

PwC

We also looked at technology implementation


12

_________________________________Figure 17: Innovative technologies implemented……………………….…………………..……………………..…

Q Which innovative technologies have you implemented to surpass your competitors?


PwC

We analysed views on local content…


13

…and the challenges to establish local content

_________________________________Figure 20: A quarter of respondents find that local content delays projects, 10% have cancelled, 10% accelerated……………………….…………………..……………………..…

Q How have current / proposed local content and regulatory policies affected your investment decisions?

_________________________________Figure 23: Challenges to establishing local content……………………….…………………..……………………..…

Q Where to you see the challenges in establishing national content in your country?

PwC

We looked at the criteria for an ideal local partner


14

_________________________________Figure 24: Criteria for selecting a local partner……………………….…………………..……………………..…

Q What are your criteria for an ideal local partner?

PwC

Despite exploration activity being at a historic low, there were still a few exciting discoveries


15

PwC

Oil & gas companies must embrace cyber security

16


PwC

The challenges facing NOCs (1/2)

NOCs in Africa stand on the brink of significant disruption – and of substantial opportunity – as a new era of structurally lower oil prices challenges business models that have long relied largely on exploration and production of hydrocarbons, especially ‘black gold’ (oil).

African countries that have for decades depended on their NOC as a key source of government revenue will need torethink business models to avoid being captive to a single energy source and to allow them to rebalance budgets.

Three factors mean that established NOCs must seize the opportunity to diversify beyond historical reliance on oil: rapid moves globally towards an increasingly low-carbon energy industry; meeting burgeoning demand for domestic power; and a need to meet crude and refined product requirements through storage and transport in domestic African economies.

This will become an increasing priority with the emergence of social and political challenges amid slowingregional economies: Sub-Saharan growth slowed sharply in 2016 and averaged 1.4% – the lowest in two decades1.This year has seen equally slow growth.


17

PwC

The challenges facing NOCs (2/2)

Adoption of digital technologies will be key to the transformation and not only benefit established NOCs, but could also allow early-stage NOCs to ‘leapfrog’ stages of development much in the way telecoms and financial services are already doing across the continent.

Developing a new generation of digitally-enabled talent as well as creating new ways to engage robustly with domestic regulators and governments will be key to this journey.

Partnering with IOCs offers significant advantages as NOCs pursue a new strategy of diversification, allowing them to source and develop new capabilities.

For fledgling NOCs these factors make it all the more important that their sponsor governments carefully assess the rationale for establishing and developing national champions in oil & gas – and find the right model for this newenvironment.


18

PwC

NOCs should transform to become national energy companies

African NOCs are going through a major period of disruption. Some fundamental questions to pose might be the following:

On strategy…

• How are you preparing for industry-wide disruption in the African energy sector?

• Have you undergone a scenario planning exercise to map out possible future outcomes and assess the strategy required to navigate this disruption?

• What are the different business models you can explore to build a sustainable NOC of the future?

On digital…

• Should you be a digital leader or a fast-follower? Can you afford to take the risk of lagging behind competitors?

On partnerships…

• Who should you partner with to develop the kind of capabilities that best complement your strategy?

Legacy

busin

ess

Fu

ture

gro

wth

busin

ess

r tGas

E&P and LNG

Renewables Power

Solar, wind, Generation / Hydro distribution

Figure 3 A potential future NEC model

Current NOC activities Future NEC activities


19

PwC

Resource rich NOCs

Description

Examples

Key focus areas

Emerging players

Capability builders

Resource custodians

Nation builders

Foreign ambassadors

New NOCs in countries with discovered reserves but a fledgling upstream oil & gas sector as yet

NOCs with an established industry and a need to build core capabilities

NOCs with an established industry and well-developed core capabilities

NOCs with a remit that extends beyond the oil & gas sector

NOCs with a remit that involves international expansion

• ENH (Mozambique)

• GEPetrol (Equatorial Guinea)

• Petrosen (Senegal)

• SHT (Chad)

• SNH (Cameroon)

• SNHG (Gabon)

• SNPC (Congo)

• Sudapet (Sudan)

• UNOC (Uganda)

• TPDC (Tanzania)

• GNPC (Ghana)

• SNPC (Congo)

• SNHG (Gabon)

• ETAP (Tunisia)

• EGPC (Egypt)

• NOC (Libya)

• NNPC (Nigeria)

• Sonatrach (Algeria)

• Sonangol (Angola)

• Sonatrach (Algeria)

• Sonangol (Angola)

Establishing basic frameworks for the industry and establishing initial production

Acquiring core technical and project managementcore capabilities to increase production

Adding value to existing production and applying technologyto maximise recoveries

Supporting national development through employment, education and diversification

Establishing a position inselected countries and regions

Figure 5 Roles for resource-rich nations


20

PwC

Resource poor NOCs

Figure 6 Roles for resource-poor countries

Description

Examples

Keyfocus areas

Product purchaser

NOCs with only a focus on participatingin the fuels import and sales market

Product aggregator

NOCs with a remit to own all imports of fuelsto manage and ensure sufficient national access

Hydrocarbon refiner

NOCs with a focus on downstream activity to support national fuel consumption

Nation builders

NOCs with a remit that extends beyond the oil & gas sector

• Cohydro (DRC)

• NOCK (Kenya)

• ONHYM (Morocco)

• SMH (Mauritania)

• SONIDEP (Niger)

• Namcor (Namibia)

• BOL (Botswana)

• PetroCI (Côte d’Ivoire)

• PetroSA (South Africa)

• Petrosen (Senegal)

• PetroSA (South Africa)

Importing, distributing and marketing fuel products

Utilising sole import rights to distributeand market fuel products

Refining crude oildomestically, distributing and marketing fuel products

Supporting national development through employment, education and diversification


21

PwC

Given the state of the industry, we think that stakeholders must make changes to their business models.

Change is the way to survive in the ‘new energy future’. We need to see new business models, new products, new energy

sources and new strategies to meet the new reality.

22


Questions

Chris Bredenhann

Africa Oil & Gas Advisory Leader

: [email protected]

: +27 21 529 2005

: +27 82 373 2680

mailto:[email protected]

africa oil & gas - sanea.org.za · 2017-11-22 · pwc pwc 2 learning to leapfrog agenda 1. oil...

Documents