South Africa: Emerging Themes In The African Oil & Gas Industry

Towards the end of last year, we attended Africa Oil Week in Cape Town, South Africa. With more than 500 delegates in attendance from all of the major players and many of the junior explorers and service providers in the sub-Saharan African exploration and production sector, the conference offered a good overview of the state of the industry.

Although Africa and London-based management teams tend to comprise most of the African junior and independent space, Canadian-listed companies and management teams are playing an increasingly important role in developing African assets.

Our firm has been involved in many of the leading Africa-based transactions that have a nexus with the TSX or AIM, whether through mergers and acquisitions, finance or underwriting work in Calgary, London and Toronto. Our view is that we are at the beginning of the next phase of the growth of the African oil and gas industry, and we have made a long-term commitment to be involved in its future through finance and M&A activity involving TSX-listed companies. 

Several major themes emerged from the conference:

The Key Regions in Sub-Saharan Africa

There is significant activity in many diverse geographic locations at the moment. The anchors of the sub-Saharan Africa upstream business are Nigeria, the rest of offshore West Africa and the emerging gas plays in Mozambique and Tanzania. In addition, offshore Namibia is seeing substantial activity, as is the Rift Basin that extends in Kenya as well as offshore Ghana. 

In Nigeria, a number of intermediates are working to develop large plays left behind by the majors, despite uncertainty around certain elements of the national petroleum law. For some, the story of Nigeria will continue to be chronic logistical issues for the majors and civil unrest, but there is an emerging group of players focused on repeating the "post-majors" era of development of assets in the US and Canada. Many participants felt that there are substantial opportunities that have been bypassed by the majors and that are waiting for clever management teams to develop. Oando Energy Resources (amongst others) is an independent that recently obtained a TSX-listing and is focused on this strategy. 

Outside of Nigeria, the rest of offshore West Africa continues to be prolific. Many independents, large corporates and national oil companies are operating and investing in the region, exploiting existing plays and developing new areas. Overall, the region is at a relatively early stage of development. There was optimism that it will continue to yield new discoveries as it is explored.   

Africa's Gas Potential

The emerging plays in Mozambique and Tanzania lead to a consideration of Africa's potential as a gas producer. South Africa is seen as having exceptional shale gas potential.

Some participants felt that the gas potential in the sub-Saharan region is as large as its current oil reserves and that this part of the energy complex will support substantial growth in Africa's industrial sector, which lags growth in other emerging markets. In Nigeria, this demand is already manifesting itself in the form of increasing demand for gas used to generate power. 

On balance, it was felt that much of this frontier work lies in eastern Africa and in South Africa.  Because of the scale of the resource and its early stage, there is a large opportunity get this development right and establish a sound foundation for liquefied natural gas (LNG) export and domestic consumption, on the scale of what has happened in Qatar. 

Other participants pointed out that the chemical sector will play an important role in this growth of gas in east Africa.  There are limits on the supply of methanol and other gas-derived chemical products internationally, and east Africa can service this demand. 

Gas Export

On the demand side, resources in sub-Saharan Africa are expected to play a major role locally and in Asia and Europe. 

India will need additional LNG supply in order to meet its internal demand. East African supply is expected to be priced competitively with Australia and Canadian supply, when it comes on stream. 

Europe struggles with a variety of problems. Fiscal crisis, nuclear shut-downs, limited unconventional growth and constraints on supply from the North Sea all mean that although gas demand is flat, there is expected to be a major shortfall in gas supply by 2040. 

Fortunately, Europe has access to a rich range of supply options and a flexible distribution system which will permit it to develop alternatives and avoid concentrating too much risk on one supplier. Some participants felt that North American supply would have no price advantage over African LNG in serving the European market. There was pessimism over the ability of European unconventional gas to compete at current gas pricing levels, leaving plenty of room for LNG to supply some of the shortfall. 

Market Conditions

On the equity side, capital-raising has been steady but not euphoric. There continues to be reasonable demand for the equity of African intermediates in London. Despite the somewhat tepid fund-raising conditions, the equity of African-focused companies has outperformed the equity of players working in other international markets and this seems to support additional capital-raises by high-quality independents. 

In the M&A market, most activity is focused on assets because the equity market continues to value corporates at less than the underlying value of the assets. Deal volume has returned to 2005 levels, but has not yet equaled the 2006 peak.   

Most of the juniors are well-funded and debt-free, with London and Australia serving as the preferred capital markets; with the Canadian market getting significant exposure on the back of the success of Africa Oil and the listing of Oando Energy. The conference heard from a number of technically-focused teams who are working on very early-stage plays in onshore and offshore east Africa using capital from those regions.  

State Interest

Governments were well represented at the conference. Emerging jurisdictions such as Comoros, Namibia and Somalia made presentations, and the national oil authorities of Senegal and Madagascar were represented as sponsors, all of whom are interested in fostering additional development. Representatives of most of the other national authorities were in attendance.

Independents are feeling competition from the majors in accessing assets. They are much more active than in prior years and good land is not as easy to get. 

Representatives of Statoil, CNOOC, Sinopec and ONGC all made presentations. They exhibited a range of strategies, largely geared to their current position in Africa. All of them acknowledge the importance of the region and its role in their future growth. Statoil, Sinopec (through Addax) and ONGC have substantial positions.

Getting the Deal Done

There is substantial focus on the management of political risk and the development of ties to local communities. Many argued that capability in this area is as important as "under the ground" skills and that it is not possible to be effective in the region without deal skills in this area, no matter how large or small the business. 

Our impression was that in some cases the smaller players have a substantial advantage over very large entities in creating positive ties to the communities in which they work, overcoming some of the limitations inherent in working in jurisdictions where economic and political systems are underdeveloped and state institutions are more informal and fluid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions