Stakeholders advocate African continental credit facilities for oil, gas project financing
Stakeholders in the African petroleum industry have called for the creation of a continental local content fund or energy industry intervention funds, in form of financial institution, to provide funding for the development of oil and gas projects in Africa amidst foreign spending cut in the petroleum industry.
They made this known at the just concluded Sub-Saharan African International Petroleum Conference (SAIPEC) organised in Lagos by the Petroleum Technology Association of Nigeria (PETAN) in Lagos.
According to them, the international spending cuts on oil and gas production is likely to have impact on the opportunity for the African oil and gas producing nations to take advantage of the oil boom that is likely to occur in the event of a prolonged war between Russia and Ukraine.
Engr. Simbi Wabote, Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), in his keynote address at the SAIPEC, said African leaders need to initiate intervention funds that can be utilized to develop huge mega oil and gas projects in the continent, particularly as world financial institutions were getting reluctant to finance hydrocarbon-related projects.
He said, “l want to canvass for the creation of an African Local Content Fund that could be utilised to set up a bank or finance institution to provide funding for the development of oil and gas projects in Africa.
“This is especially important against the backdrop of the reluctance and outright declaration by some banks and financial institutions to stop funding of hydrocarbon-related projects.
“I hope the AFRIEXIM Bank, AFDB, or the AU through the AFCFTA Secretariat need to institute a form of contribution, no matter how little, as a fund to support the continent’s need for funds,” the NCDMB boss noted.
Wabote further explained that “in our own case, the deduction of one percent of every contract awarded to any contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity, or transaction in the upstream sector of the Nigeria oil and gas industry has resulted in us having a pool of funds to support various intervention programmes.”
Speaking further, the Executive Secretary described the recent spike in crude oil prices above $100 a barrel as an excellent opportunity for African oil producers and its service providers to develop new fields, ensure security of supply and affordability as well as increase revenue generation.
He noted that the price of crude oil has increased by 50 percent in 12 months and African oil producers should use the opportunity to also make plans towards energy transition, and lowering the cost of services.
Dwelling on the topic “Sub-Saharan Africa Local Content Collaboration Strategy,” Wabote stated that an enabling regulatory framework backed with the appropriate legislation is very fundamental in Local Content practice and commended African oil producers for putting in place investor-friendly laws to promote the oil and gas industry as well as ongoing collaboration among the countries to advance the local content journey.
He noted that such laws will align with the goals of the Africa Continental Free Trade Agreement (AFCFTA) which seeks to create the world’s largest free trade area by integrating 1.3 billion people across 54 African countries, with the objective of tapping into a combined Gross Domestic Product (GDP) of over $3 trillion.
He described AFCFTA as the practice of Local Content on the continental level, noting that it is a huge trading and collaboration platform for the participating countries.
The NCDMB boss harped on the need for African oil producers to utilize existing cross-border infrastructures to unlock the development of stranded assets or bring energy closer to the people. He mentioned that the existing West Africa Gas Pipeline (WAGP) and ongoing AKK gas transmission infrastructure provide a good opportunity to serve regional markets. He also pointed out that the SHI-MCI yard in Lagos which is the only FPSO integration yard infrastructure in Africa has put Nigeria at a vantage position to serve the wider African market.
Mr. Nicholas Odinuwe, Chairman, PETAN on his part advocated for regional collaboration and innovation to enhance the future of energy sector. He disclosed that the key enabler for the continent is to create a collaborative ecosystem between the local industry stakeholders alongside the African Continental Free Trade Area (AfCFTA).
Odinuwe encouraged governments across Africa to provide necessary incentives to attract private sector investments across the entire value chain which would trigger a massive economic revolution, human capital development, and deepen local content across the continent.
Mazi Sam Onyechi, President of the Oil and Gas Trainers Association of Nigeria (OGTAN), on his part, called for stronger collaboration among African oil and gas producing countries in order to deepen local content.
He also recommended the establishment of formidable pressure groups that would initiate policies that will better harness Africa’s oil and gas resources through human capacity development and indigenisation of technologies.