Africa’s upstream spend drops to $14bn, FIDs from 22 to 3; LNG hardest hit – AOW Reports

For More Enquiry: 08052442020

As Africa Oil Week key reports have been released, the vital questions seems to be “What’s next after the Crash?” as it looked at the impact on Africa’s upstream and deepwater LNG, which appears most hit by the latest demand and supply crisis in the oil and gas market following the Covid-19 pandemic.

The two complimentary reports, produced in association with Wood Mackenzie, compared AOW’s latest data with its Q1 2020 view. It states that this year (2020), global oil and gas markets suffered a double crisis of supply and demand. And Africa has been hit hard, and widespread cuts and project deferrals have been implemented. As a result, what has changed in the African upstream and offer future projections.

According to AOW, the comparison reveals striking changes in investment, production and value, as companies adjust to the new market conditions. These include: upstream spend in 2020 is down $14 billion; foreign direct investments (FIDs) targeted in the next 18 months are down from 22 to 3; upstream value in Africa is down one-third ($200 billion); deepwater and LNG investment are hit hardest; no resource theme is immune.

But cuts are particularly severe in deepwater and LNG.

Capital expenditure revisions on deepwater West Africa projects and deferrals on large LNG projects in Senegal,

Mauritania and Mozambique both contribute.

The oil majors (Shell, Chevron, ExxonMobil, Total, Eni) are responsible for most international investment in Africa’s upstream sector, and they are cutting heavily. Cuts are expected to be larger than elsewhere in their portfolios. The report said national oil companies (NOCs), led by OPEC+ members, have cut deepest in the short-term. Africa-focused Eni and Total account for the bulk of production cuts by the majors in the next five years. But where does this leave valuations, and how core is Africa to their portfolios now?

AOW said oil and gas supply versus demand crisis had a hit on investment to Africa, which had been hit hard, resulting in deep production losses, with upstream capital spend down $14 billion in 2020, reducing by 23 percent over the next five years. High cost deepwater projects in West Africa and LNG projects in East Africa have equally suffered the deepest cuts. The oil majors lead on cost cutting, with capital spend down $6 billion in 2020. Their spending reductions in Africa are expected to be greater than global portfolio averages. As a result, the expected foreign direct investments (FIDs) in 2020 have fallen from 10 to one.

“FIDs decimated: down from 22 to just three over 2020-21, most project deferrals will be in excess of one year, highlighting the scale of the crisis,” the AOW report said.

On the production side, AOW said African production will decline for the first time since 2016, down 1.3 million b/d in 2020 as demand falls, and OPEC cuts take effect. It is “the first year-on-year fall since 2016.” Also, delayed, deferred and cancelled investments will slow the rebound.

On the gas sector, weakened gas demand will cause short-term losses in North Africa, while East Africa faces mid-term losses as LNG projects are delayed. National oil companies (NOCs) led by OPEC+ members have the deepest production cuts.

On the economic front, upstream value in Africa is down by one third or $200 billion. African upstream NPV10 falls by one-third. LNG and conventional shelf projects have been hardest hit, with the value reduced by less than 50 percent. Overall, NOCs lose most value, but mid-caps suffer biggest percentage reduction. Sub-Saharan Africa suffers the biggest reduction, while value from LNG projects more than halves. The oil majors have lost 32 percent of upstream value.

Africa Oil Week says with upstream spend in Africa down by $14 billion in 2020, the share of hydrocarbons in global energy demand could fall from 90 percent today to 50 percent by 2050. Furthermore, Africa’s deepwater and LNG suffered deepest cuts to 2020 capital investment. With this development, onshore lower-cost developments are expected to receive smaller cuts. The majors lose 32 percent of upstream value, mid-caps fair worse with 39 percent losses. The impact of this aligns with hardest-hit resource themes, production shut-ins and project downgrades.

Nevertheless, Africa Oil Week says, with a growing, energy-hungry population, Africa appears to be resilient, with upstream capital expenditure forecast to exceed 2019 levels by 2022.

Africa Oil Week is an event that brings together governments, national and international oil companies, independents, investors, the G&G community and service providers.

MINDS – Mass Initiative for Non-illicit Drug Society – Support & Participation, please visit: – +234 805 244 2020,

Share Buttons
For More Enquiry: 08052442020


Please enter your comment!
Please enter your name here