Common solutions in Africa
NJ Ayuk, president of the Africa Energy Chamber (AEC) and CEO of Centurion Law Group, talks to The Energy Year about how the Covid-19 pandemic has impacted African economies and the path forward for attracting investment and generating local jobs in the changing energy industry. The AEC promotes the interests of the African continent, its companies and its people.
What is your overall sentiment on the pandemic and its impact on African economies?
The pandemic was a gradual tsunami in the world markets. We always say that when Western countries have a recession, Africa has a depression. With a pandemic that came on as a wave and put the whole world in shock and then an OPEC meeting without an agreement in March 2020, now we have a new shock again, where the markets have collapsed.
African nations rely a lot on commodities, such as returns on the sale of crude, so the collapse hit Africa very hard. And when this happens, we see jobs being cut. When a job is lost in the Permian Basin in Texas, many people know because of the media. But in African oil-producing cities like Malabo, Port Harcourt or Accra, there have been a lot of silent waves of people losing their jobs, and companies just have not been able to perform. We at the chamber believe that we need to move away from the narrative of talking about oil and gas from the perspective of just prices and tariffs. It is about people, and how it affects everyday people’s survival.
This pandemic has been a nightmare and for emerging oil basins it gets even more difficult because now, with stringent rules and guidelines put in place, you have to figure out how you get people in and out and keep them safe. It has been a tough time, but we are resilient people and we firmly believe that we can come out of this stronger. We don’t see this pandemic as a time to bury our heads in the sand; we see it as an opportunity to start planning the comeback and how we can make Africa better and stronger.
We have to live with this new world order, where things like Covid-19 are going to happen. This has been our main focus at the chamber. We also share the pain of lives lost and companies going bankrupt. We have to pay attention to the many developments that have happened with small companies and local content, while also watching the FIDs on the continent and the new oil and gas hotspots like Mozambique and Senegal.
Some of the FIDs that were close to finalisation were postponed, as companies elected to wait and see. Ongoing projects in Republic of Congo and Nigeria were delayed, along with investments that were much needed to spur economic development in these areas.
But there is hope. In the midst of this pandemic, Total was able to reach an agreement with Tullow [on the Lake Albert project in Uganda]. There has been a lot of pain, but also a lot of progress. We have found in this situation that some governments are paying close attention and trying to find ways to work with the chamber.
With a massive number of companies working with the chamber, we were able to give them a voice and get them in front of governments, who have been able to listen and pay more attention. There has been more dialogue based on knowing that we are all in this together, and that we can find common solutions.
Can Africa use the current period as a catalyst to embrace local content?
We have to embrace local content more; we have to be ready. For example, those operating in Republic of Congo or Equatorial Guinea can’t move people in or out. They are going to require locals to do the job and keep the platforms and fields going. And if they want to bring in expats or services, it might be too expensive. Now, this gives us an urgent need to empower skilled Africans and start programmes to bring them back home.
Local companies have to be ready. They can’t just play the game of setting up a company and taking commissions from the international players. That has to stop: African companies have to become more accountable and responsible during these moments. That is the only way forward. We must move away from being agents and towards being entrepreneurs. This is how we will survive the next phase of oil and gas; local content has to have a major role in it. We need a corrective course.
The chamber is very focused on seeing incentives put in place. Countries cannot legislate and regulate themselves to prosperity. They cannot continue to tell international companies that they must do A, B, C and D. It is all about sticks and carrots. On top of that, you cannot love jobs but hate those who create jobs.
We need rules that create changes. So we proposed a tax incentive for services companies that will train, prepare and qualify locals to replace expats. You might see some revenue being lost today, but in the long term you create local taxpayers. You will have more contracts being created locally, more services offered locally. This is what we see as the future of local content. Of course, there have to be some regulations and they have to be carefully worded and drafted to fit within the market to make sure that market forces do work with them.
What would be a role model for frontier exploration countries in Africa to follow?
The beauty of starting late is that you have a chance to pick and choose. I can’t say I would take much out of the Nigerian or Ghanaian local content model and implement it in Mozambique. It would not work. There is one thing I remind my friends about in Europe and the US: Africa is not a country. It consists of 54 states with different people, businesses and communities, so you have to get local. You have to think globally, but act locally.
So you look for the fundamentals of local content such as training and development. You can look at how Oman, Nigeria and Ghana have been able to do something in that area and learn from them. When we talk about procurement contracts and domestic supply chains, we need to look at what has not worked.
We like to have rights, but what about responsibilities? Governments have a responsibility to set up the fundamental frameworks like education. We cannot expect the IOCs to be the ones who are going to train, develop and prepare our people to serve the industry. It is not their job; we have to set up our education and ensure schools are ready and competitive globally. Once you set up that base, every African child can compete. It is about rights and responsibilities.
We celebrate the implementation of the African Continental Free Trade Agreement, but it cannot come without African content. In a small country like Gabon or Equatorial Guinea, when companies can’t find qualified people, they immediately go to Europe or the US to find them. We need to think in terms of African content: If you can’t find them in the local community, you should look within Africa. We can’t be people that do not employ, promote and contract Africans to compete for projects around Africa.
You also have to consider the role of black women in local content. While they represent 40-50% of the African population, only 5% of workers in Africa’s oil and gas industry are black women. This is a time for us to make a paradigm shift. For the chamber, there is no real local content without a very firm role for women in oil and gas.
Women should be at the forefront of African oil and gas. Women have proven to be better managers and employees and more ethical workers, and they deserve a great place in Africa’s energy industry. This industry is not just about prices and stocks; it is about being a catalyst for our economy to become what we dream of.
What was the impetus behind launching your job portal?
We want to bring African talent and give companies a chance to provide African jobs for this talent. Most of the time, when an IOC or an international service company wants to hire people, they advertise the job in Houston or London and Africans do not always see those jobs.
We have partnered with governments and IOCs and every energy job that is coming out of Africa will be on this portal. Be it expats wanting to work in Africa or locals, all of them will have access to these jobs. We need to be more transparent with opportunities in the oil and gas industry.
We are also coming out with a contracts portal which will include all contracts on offer in Africa’s oil and gas industry. Whether bidders are in Port Harcourt, Nairobi or Dakar, they don’t have to be well connected or be insiders to compete. They can use their talent and hard work to really benefit from this industry.
What is the level of digitalisation and the preparedness to embrace digital transformation across frontier exploration areas in Africa?
Digitalisation is the only way forward. Regions that have embraced digitalisation, big data and AI quickly are doing better now when it comes to recovery, production and exploration. They are doing better in making sure you have cheap, fast exploration to reduce the possibilities of having a dry well and improve prospects during an upstream campaign.
Suriname and Guyana are places we can look at as being most similar to some of the frontier exploration areas in Africa. They have some of the newest big discoveries, in which they deployed some of the most robust technologies out there, and look at the results.
Africa can do the same. Technology has been pushing developments in Mozambique and Senegal, but it has largely been left in the hands of IOCs to do this. This needs to be embraced within national and local companies. How do you do that? You do an investment upfront, then turn to the IOCs to share technology. When they make their annual work programmes, there has to be a part that involves sharing technology with national oil companies.
Many of the old white males that championed the industry are retiring and young people need to be brought into the industry. However, young people are not looking at working at Exxon or Chevron, but rather for Amazon or Google. If you don’t do something, you will lose talent. This is a chance for Africa to succeed by bringing in young Africans, who are already more technology driven and who will be able to shape the oil industry of the future. The industry of old is gone – it is not going to be oil and gas, but the energy industry.
Is this crisis an opportunity for countries like Uganda to further fine tune future agreements between the government and IOCs?
Absolutely. This is time to make the foreign market work for you and get back to the drawing board. You are competing no longer with just Nigeria and Angola, but with Nigeria, Suriname and Guyana. First we need to cut the red tape, and create fiscal terms that can deal with the market realities of today. We also need to incentivise exploration and look at tax rates. We are facing a global energy transition with funding cut for exploration for fossil fuels. There is a lot of competition for oil and gas exploration dollars.
If you can’t give hedge funds, private equity firms and IOCs the kind of fiscal terms that will encourage them to invest, it becomes difficult to attract investment. On the other hand, we have to improve our way of doing business. We have to look at transparency, mismanagement and ESG [environmental, social and governance] issues and create an enabling environment where everyone can come and do business. Now we need to look at creating fiscal terms that are driven by gas, as we need to use gas to transform Africa’s economy.