The revenues of oil-producing countries in Africa are at risk from peak oil demand and the global energy transition, which have been hastened by permanent working and travel changes brought about by the Covid-19 crisis, according to a report from accountancy firm PwC.
The report — Africa Oil and Gas Review: Energising a New Tomorrow — estimates that global oil demand has already peaked, partly because of long-lasting Covid-19 induced behavioural changes that will structurally impact future consumption trends. At the same time, the pandemic has accelerated the global energy transition by as much as five years, with developed countries using the shift to renewables to anchor their economic stimulus packages, the report says.
The developed world’s declining demand for crude is already weighing on Africa’s exports. PwC notes that the fall in global crude consumption this year — estimated at 7mn-9mn b/d — is roughly equal to Africa’s entire production. It estimates that total output across the continent will drop by 10pc year-on-year to 7.5mn b/d in 2020 as a result of the “unprecedented” collapse in demand and prices caused by Covid-19 lockdowns. And African crude exports will also fall by 10pc, the report says.
As a result, the country’s biggest oil-producing nations have had to contend with a sharp squeeze on their finances. Nigeria, Algeria, Libya and Egypt could each be facing $20bn in lost oil export revenues this year, PwC says.
Although crude markets partially recovered after the first wave of national lockdowns eased and the Opec+ group reined in production, long-lasting pandemic-induced behavioural changes will permanently lower future oil demand at a time when electric vehicle penetration is accelerating, PwC says. Given that transport fuels accounts for nearly two-thirds of global crude requirements, the report forecasts that demand will never again exceed 2019 levels.
The accelerated transition to renewables in key oil-consuming countries could cost Africa as much as $1 trillion in lost oil export revenues over the next 20 years, PwC says. Libya, Angola, Gabon, Equatorial Guinea and South Sudan are most at risk, as they all have production costs above $30/bl, it says.
PwC suggests that oil and gas producing countries in Africa should reconsider their reliance on fossil fuel exports and act quickly to diversify their economies through renewable energy strategies to avoid even greater financial stress. “But the majority of oil and gas exporting countries do not have adequate energy transition policies in place and are still largely focusing on hydrocarbons for domestic power as well as continued exports,” it says.
Despite having some of the best solar and wind assets, Africa’s global share of renewables remains way below other regions, with access to modern energy services barely outpacing population growth, according to the report. It is clear that Africa will not realise long-term sustainable and inclusive economic growth based on its oil and gas industries, and will ultimately have to transition to this new global energy market reality being created by the developed world, PwC says.
“Rather than resist this global shift, African citizens may be better served by their respective governments by the creation of clear country strategies and policy dialogue aimed at capitalising on the global energy transition,” the report concludes.
Source: Oriental News
The post Peak oil demand, energy shift leave Africa vulnerable – PwC appeared first on Energy News | Oil and Gas News.