African governments urged to woo oil and gas investors

23 Aug 16

The global crash in commodity prices presents an opportune moment for local governments in Africa to make their areas more attractive to oil and gas investors, PricewaterhouseCoopers has said.

PwC’s Africa Oil and Gas Review 2016 found that oil and gas companies identified the price of their products as the most significant factor affecting their business over the next three years.

However, regulatory uncertainty remained the top challenge facing oil and gas businesses in Africa for the third year in a row, while there was also a significant rise in the challenge of meeting taxation requirements and government relations.

The industry has no control over prices, so PwC said that businesses are focusing instead on countering more manageable challenges, including by finding efficiency gains and allying themselves with government to ensure they are a strategic and supportive partner.

Across the continent, the slump in prices has led to decreased activity, with big consequences for African governments that depend on commodity revenues for their budgets, such as oil giants Angola and Nigeria.

But PwC said that over the next three years many companies are set to focus on exploration and the identification of new resources ahead of an anticipated upturn in price.

“It is an opportune time for local governments that want to attract oil and gas investors to reform their regulatory, fiscal and licensing systems,” said Chris Bredenhann, PwC oil and gas advisory leader.

An uncertain regulatory environment is one of the main issues facing the industry, and one that governments should avoid to attract its business, PwC said, highlighting how the failure to pass or implement bills in Nigeria, Tanzania and South Africa has created difficulty.

Elsewhere, companies are finding it difficult to obtain government sanctions for new projects, especially in new hydrocarbon provinces such as Mozambique, the report found. It attributed this to the fact that governments “do not fully comprehend the intricacies and scale of oil and gas projects”.

“The complexities and challenges facing Africa’s oil and gas industry have become daunting,” said Bredenhann.

“As uncertain regulatory frameworks, taxation requirements and corruption continue to rank at the top of the industry’s challenges in Africa, it is high time that governments make significant changes.

“Players must look at the current state of the industry as an opportunity to reinvent themselves,” he concluded. 

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