Multinational professional service firm, PriceWaterCooper (PwC) has predicted that Nigeria and other oil-producing countries in Africa will lose an estimated $1tn in oil export revenues over the next 20 years as prices are forecast to remain on the low.
In its Africa Oil and Gas Review 2020, PwC said oil production in Africa saw a decline of 10 per cent in 2020 from 8.3 million barrels per day, which was largely caused by the COVID-19 pandemic which caused exports to slow down.
The report added that the continent’s proven oil reserves have remained static at 125.7 billion barrels from the end of 2019 to 2020.
“Nigeria, Algeria, Angola, Libya and Egypt could each be facing $20bn or more in lost export revenue in 2020,” the PwC said in the report.
“Oil exports saw a decline of more than 10 per cent in 2020, with the top five African crude oil-exporting countries experiencing a total decline of 11 per cent from 5.3 million barrels in 2019 to 4.2 million barrels in 2020,” the report adds.
PwC said Africa’s proven gas reserves remained at 527 trillion cubic feet between 2019 and 2020, with production declining by nine per cent in 2020 due to COVID-19 from 238 billion cubic feet in 2019.
According to PwC forecast, oil demand globally shows a curbed recovery over the next few years following the COVID-19 induced demand slump, with prices predicted to reach a ceiling of around $54 per barrel, compared to a pre-COVID view of long-term pricing ranging between $60 and $70 per barrel.
The report also said gas exports by African producers fell by more than six per cent to 37.3 million tonnes per annum in 2020 from 39.7 mtpa in 2019.
“Gas demand is expected to quickly recover from 2021 in mature markets and show steady growth in emerging markets.
“Much of Africa’s supply growth will come from Nigeria, but Tanzania, Mauritania and Senegal are also aiming to contribute to rising supply. The post-2021 demand growth will take place in China and India where gas benefits from strong policy support.
“Many of the major international oil companies in Africa have written off/impaired some of their assets this year based on anticipated oil prices and assets they believe to be stranded.
“It is estimated that this lower price forecast will cost Africa a potential $1tn in export revenues from oil over the next 20 years.
“The 2020 COVID-19 disruption has, however, reversed many of the sector gains and seen project delays and cancellations.
“Many oil and gas majors in Africa have announced that start-up date of their major projects are expected to be delayed by one to three years and smaller projects may be cancelled.
“Nigeria, Mozambique, Senegal, Kenya, Mauritania and Uganda are faced with project and FID deferrals, while two of Total’s projects in Angola are facing outright cancellation,” the report said.
PwC advised that African oil-producing countries must act quickly to consider their long-term market positions and potentially move to diversify their economies or risk even greater financial and economic stress.