African nations will struggle to be cost competitive. Though the oil price has picked up during 2018, producers are still focusing their investment on projects with lower capital, operational and regulatory costs, lower risk and higher returns.
This affects projects in Africa particularly where infrastructure constraints (and political risks) are relatively high.
Andrew Lane, Deloitte’s Africa energy, resources and industrials leader, said though these risks are not new to the continent, they continue to hinder investment flows into Africa’s oil and gas sector.
However, the continent holds great opportunity, he said. “Consumer spending on the continent is increasingly rapidly, the standard of living is growing, and it has a relatively young population … and it’s under-penetrated in terms of energy.”
Lane said he saw the most potential in a place like Mozambique, which holds Sub-Saharan Africa’s largest gas resources and is considered to have a fairly attractive regulatory environment for investors.