Info!
UPDATED 1 Sept: The EI library in London is temporarily closed to the public, as a precautionary measure in light of the ongoing COVID-19 situation. The Knowledge Service will still be answering email queries via email , or via live chats during working hours (09:15-17:00 GMT). Our e-library is always open for members here: eLibrary , for full-text access to over 200 e-books and millions of articles. Thank you for your patience.

African NOCs need to evolve for the future in light of a challenging and disruptive environment

National oil companies (NOCs) across Africa have an enormous opportunity to secure a more sustainable future by transforming into ‘national energy companies’ (NECs), escaping the economic trap of a lower oil price and embracing the disruptive forces unleashed by climate change and a lowcarbon world, according to new analysis from PwC.

A new era of lower oil prices is challenging business models that have long relied largely on exploration and production of hydrocarbons, particularly ‘black gold’ oil, reports the market analyst. This is likely to prompt African countries that have for decades depended on their NOC as a key source of revenue to rethink the ‘nation-building’ role that their NOCs have played. In turn, the sustainability of NOCs will depend on their ability to transform into NECs, responding to the demands placed on them by consumers, governments and non-governmental organisations (NGOs) to respond to climate change and a new energy future.

Chris Bredenhann, PwC Africa Advisory Oil & Gas Leader, says: ‘Globally, the energy sector is experiencing significant change and upheaval. Whether it is in oil and gas or utilities, we are witnessing tectonic shifts in strategies, business models and ways of working. Whether we are talking about fledgling NOCs with limited hydrocarbon resources or established NOCs sitting on large reserves, all of these companies will need to work out how to seize the opportunities emerging from this disruption.’

The report, entitled The new nation builders: Creating the African national oil company (NOC) of the future, identifies three key factors which established NOCs should consider in order to diversify and grow beyond the historical reliance on oil – rapid moves globally towards an increasingly low-carbon energy industry; meeting the burgeoning demand for domestic power; and a need to meet crude and refined product requirements through storage and transport in domestic African countries.

To move towards this vision, NOCs may need to adopt partnership models to transform and operate successfully as NECs. In a budget-constrained environment with reduced access to resources and capabilities, partnering with IOCs will be key to delivering change. NOCs will also need to engage more widely with regulators and governments in order to ensure that they are playing an active role in the industry.

The report highlights six NOCs at various stages of maturity in Namibia, Ghana, Nigeria, Algeria, Angola and Mozambique.

The study also suggests that African NOCs should think about where and how best to invest in digitisation as they redefine their business models. Digitally-enabled technology systems are expected to substantially reduce the cost-per-barrel of future hydrocarbon resource exploitation.

‘It is notable that the sector has been slower than other industries to adopt digital solutions and has tended to focus rather on increasing production and recovery throughout the years. However, the new era of low oil is now forcing operators to shift focus from top-line to bottom-line growth, towards improving cost structures and margins in order to be competitive in current conditions and prioritising efficiency gains over production growth,’ notes PwC. ‘Digital also has a role in renewables and in shifting towards a low carbon energy industry. Digital is no longer an enabler but a game changer. African oil and gas organisations that respond to the need for reshaped business models by building digital capabilities will be well-positioned to win in the new market reality.’

News Item details


Journal title: Petroleum Review

Region: Africa

Countries: Africa -

Subjects: Policy and Governance, Economics, business and commerce, Low carbon

Please login to save this item