Renaissance Capital Expects More Oil Discoveries In Africa

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VENTURES AFRICA – Leading investment banking firm Renaissance Capital says in its latest report that Africa holds billions of oil barrels and more countries in the continent will discover oil deposits in the next decade.

“Africa is the last remaining region with billions of barrels of conventional oil resources that can still be accessed,” said Renaissance Capital in its latest report.

“The continent has come to the forefront of the global exploration drive over the past decade, contributing 80% to new reserves additions
globally (excluding OPEC countries), and becoming the second-biggest contributor after the FSU to the global oil supply. While production was previously concentrated in just two key Sub-Sahara African (SSA) countries (Nigeria and Angola), we estimate that by the end of this
decade this oil club could already include up to 22 country members.”

The Renaissance Capital report added that with security situation in the Middle East worsening and general geopolitical uncertainty growing, Africa will attract more interest as an alternative source of oil supply. “Additionally, we believe booming energy demand in local economies should significantly improve the commerciality of recent discoveries.”

The report also said structural policy change is key to the stock-selection process and an energy deficit creates the need to support a high oil-production growth rate.

“We note that indigenous companies are at a structural long-term advantage to international peers, due to better fiscal terms and access to new assets. Most indigenous companies benefit from the ability to secure low-risk brownfield assets with ‘low-hanging fruit’ opportunities, on relatively attractive terms,” the report said.

Renaissance Capital report also said African Exploration and Production (E&P) universe spans 27 companies with a combined market cap of $30 billion.  “African E&Ps have tended to show more robust economics than their peers, breaking even at a $40/bl oil price, while North American shale E&Ps require a $60-70/bl price. Correlation with key indices has been declining, while beta has been increasing. We believe a buy-and-hold strategy no longer works in this universe: stock selection – now, more than ever – drives performance”.

 

 

By George Mpofu

 

 

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