Shale Oil Africa Threat

SENIOR GLOBAL ADVISORY TEAM:
Lord Paul Boateng
Fmr. UK Chief Secretary to the Treasury &
High Commissioner to South Africa
(*International Legal Counsel to DaMina
Advisors LLP)
Dr. Babacar Ndiaye
Fmr. President of the African Development
Bank
Dr. Ablasse Ouedraogo
Fmr. Foreign Minister of Burkina Faso
H.E. Kabine Komara
Fmr. Guinean Prime Minister
Dr. Ekwow Spio-Garbrah
Fmr. Ghana Minister of Telecoms, Education,
Energy/Mines & Ambassador to the US
Hon. Victor Kasongo Shomary
Fmr. DRCongo Deputy Minister of Mines
H.E. Isaiah Chabala
Fmr. Zambia Ambassador to EU & UN
H.E. Chris Katsigazi
Fmr. Ugandan Ambassador to the US &
Permanent Sec. Min. of Foreign Affairs
Dr. Ousmane Sylla
Fmr. Guinean Minister of Mines
H.E. Mamadouba Max Bangoura
Fmr. Guinean Minister of Planning and
Private Investment Promotion
Mr. Bismark Rewane
Fmr. Advisor to late Nigerian Pres. Yar’Adua
Ms. Rita Gail-Johnson
Fmr. Senior Executive at Big-4
Accounting/Consulting Firm
FRONTIER MARKETS SPECIALISTS
MAY 08, 2014
DaMina Advisors Paper: US shale oil revolution, an existential threat to
African energy exporters…
The accelerated development of hydraulic fracturing and horizontal drilling technologies by
American oil and gas companies which has catalyzed a domestic shale oil boom is dramatically
altering the future landscape of global energy. China, like the US, is also accelerating
development of domestic shale oil, ramping up offshore developments in disputed islands and
seeking to secure a more proximate stable oil source in a major pipeline from neighboring
Russia. With the US poised to become energy self-sufficient by 2020, marginal African energy
producers, who are also heavily dependent on oil export revenues to fund national budgets and
maintain social cohesion, face a growing threat to state stability as both the US and China curb
African oil imports.
By 2020 US natural gas production may outstrip Russia to become the world’s largest gas
producer, while US oil production, which has grown steadily by over 60% since 2008 threatens
to consign marginal African exporters to increasingly irrelevancy. Since 2003, the US has
reduced by almost 30% its imports of OPEC oil. Of the eight African oil exporters: South Sudan,
Libya, Chad, Angola, Algeria, Nigeria, Equatorial Guinea, Gabon and Cameroon, who depend
for more than 60% of government revenues on oil and gas exports, the acceleration of shale oil
production in the Americas Asia and Europe poses an existential threat to state fiscal stability
and ultimately state cohesion. South Sudan and Libya are already engulfed in civil war while
the other African oil exporters are grappling with growing relative levels of instability. Chad
and Nigeria remain particularly vulnerable in the short-to-medium term to greater instability
Mr. David Ensor
Fmr. Chief Credit Officer, AIG-Chartis
US Shale Oil Production Puts Key African Economies at Risk
Mr. Scott Korman
CEO, Nashone Inc
AFRICA DUE DILIGENCE,
REGULATORY AND
POLITICAL RISK ADVISORY
SERVICES
CONTACT:
Sebastian Spio-Garbrah
Managing Director & Chief Analyst,
[email protected]
Tel: +1 647 808 9671
Nicole Elise Kearse Esq.
Deputy Managing Director, Head of
Transactional & Cross Border Risks
[email protected]
Tel: +44 7415 131102
ABOUT THE COMPANY
DaMina is a preeminent independent
frontier markets risk research, due
diligence and Africa M&A transactions
consulting firm.
With a special focus on African capital
and commodities markets, DaMina
provides exclusive, highly-tailored, 360degree and around-the-clock regulatory,
political risk advisory, due diligence and
M&A consulting services to a range of
marquee global firms.
DaMina Advisors is registered in the UK,
US, Canada, Australia and Ghana.
www.DaMinaAdvisors.com
Oil & Gas as % of GDP
South Sudan
Libya
Chad
Angola
Algeria
Nigeria
Equatorial Guinea
Gabon
Russia
Oil & Gas as % of Govt. Revenues
Oil & Gas as % of Exports
80%
72%
9.20%
46%
25%
14.40%
98%
91%
80%
79%
70%
70%
99%
90%
90%
96%
97%
96%
47%
47%
22%
67%
60%
28%
87%
82%
64%
9%
7%
25%
5%
53%
54%
Cameroon
Ghana
Sources: Revenue Watch/ USGS/ DaMina Advisors
The asymmetry of a heavy state reliance on oil and gas exports revenues, plus a declining
global export market due to increasing US energy self-sufficiency and declining Chinese
demand for African oil, will leave many key African economies facing major fiscal imbalances
which will ultimately threaten state stability. Even in countries like Ghana, where the oil and
gas sector accounts for 5% of total government revenues, the mere presence of oil and gas in the
economic mix, with its attendant Dutch disease symptoms, has precipitated a rise in inflation,
high government spending, labor agitations, and rents of all kinds including corruption.
EUROPE
3 Abercorn Mansions
17 Abercorn Place
London NW8 9DY
AFRICA
AMERICAS (HQ)
ASIA
10 Abokobi
Roadoil revolution,
55 Fifththe
Ave, US has steadily
Level 11,
535 back
Bourke Street
Even ahead of the
shale
cut
on its African crude
East Cantonments, Accra
Suite 1702, NY 10003
Melbourne, Australia 3000
Ghana,
West
Africa
New
York
imports, reducing the geostrategic importance of Africa to the US energy balance.
SENIOR GLOBAL ADVISORY TEAM:
Lord Paul Boateng
Fmr. UK Chief Secretary to the Treasury &
High Commissioner to South Africa
(*International Legal Counsel to DaMina
Advisors LLP)
FRONTIER MARKETS SPECIALISTS
Over the past 10 years, total US oil imports from key African exporters Nigeria, Angola and
Algeria have dropped by a cumulative 180%. With significant amounts of the over 345 billion
Dr. Babacar Ndiaye
Fmr. President of the African Development
Bank
barrels of globally technically recoverable shale oil located in the Americas: in the US,
Dr. Ablasse Ouedraogo
Fmr. Foreign Minister of Burkina Faso
with high taxes, rising political risk, surging royalties, new forex controls, harsh local content
H.E. Kabine Komara
Fmr. Guinean Prime Minister
Argentina, Venezuela, Mexico and Canada; the high cost of E&P activities in Africa coupled
laws and unstable regulatory regimes will precipitate a significant fall off in E&P activities on
the African continent as well as in energy FDI if current global trends continue.
Dr. Ekwow Spio-Garbrah
Fmr. Ghana Minister of Telecoms, Education,
Energy/Mines & Ambassador to the US
U.S. Total Crude Oil and Products Imports from Africa
(Thousand Barrels per Day)
Hon. Victor Kasongo Shomary
Fmr. DRCongo Deputy Minister of Mines
H.E. Isaiah Chabala
Fmr. Zambia Ambassador to EU & UN
H.E. Chris Katsigazi
Fmr. Ugandan Ambassador to the US &
Permanent Sec. Min. of Foreign Affairs
Dr. Ousmane Sylla
Fmr. Guinean Minister of Mines
H.E. Mamadouba Max Bangoura
Fmr. Guinean Minister of Planning and
Private Investment Promotion
Mr. Bismark Rewane
Fmr. Advisor to late Nigerian Pres. Yar’Adua
Ms. Rita Gail-Johnson
Fmr. Senior Executive at Big-4
Accounting/Consulting Firm
Mr. David Ensor
Fmr. Chief Credit Officer, AIG-Chartis
Mr. Scott Korman
CEO, Nashone Inc
AFRICA DUE DILIGENCE,
REGULATORY AND
POLITICAL RISK ADVISORY
SERVICES
CONTACT:
Sebastian Spio-Garbrah
Managing Director & Chief Analyst,
[email protected]
Tel: +1 647 808 9671
Nicole Elise Kearse Esq.
Deputy Managing Director, Head of
Transactional & Cross Border Risks
[email protected]
Tel: +44 7415 131102
Year
U.S. Imports from OPEC
% Change '03 - '13
U.S. Imports from Non-OPEC
% Change '03 - '13
2003
5,162
-28%
7,103
-14%
2013
3,707
Year
U.S. Imports from Algeria
% Change '03 - '13
U.S. Imports from Angola
% Change '03 - '13
2003
382
-70%
371
-42%
2013
115
Year
U.S. Imports from Libya
6,087
217
2003
1
2013
59
% Change '03 - '13
U.S. Imports from Nigeria
% Change '03 - '13
5800%
867
-68%
281
Year
U.S. Imports from Cameroon
% Change '03 - '13
U.S. Imports from Chad
% Change '03 - '13
2003
12
-75%
4
1550%
2013
3
Year
U.S. Imports from Congo (Brazzaville)
% Change '03 - '13
U.S. Imports from Egypt
% Change '03 - '13
2003
31
-35%
9
-56%
2013
20
Year
U.S. Imports from Equatorial Guinea
% Change '03 - '13
U.S. Imports from Gabon
% Change '03 - '13
2003
67
-75%
131
-81%
2013
17
Year
U.S. Imports from Ghana
% Change '03 - '13
U.S. Imports from Ivory Coast
% Change '03 - '13
2003
3
0%
4
-100%
2013
3
66
4
25
0
Source: US EIA/ DaMina
ABOUT THE COMPANY
Unless marginal African energy producers such as: Chad, Cameroon, Gabon, Ghana, Cote
DaMina is a preeminent independent
frontier markets risk research, due
diligence and Africa M&A transactions
consulting firm.
d’Ivoire, Uganda, Kenya, the Congo’s and Equatorial Guinea dramatically alter their energy
With a special focus on African capital
and commodities markets, DaMina
provides exclusive, highly-tailored, 360degree and around-the-clock regulatory,
political risk advisory, due diligence and
M&A consulting services to a range of
marquee global firms.
DaMina Advisors is registered in the UK,
US, Canada, Australia and Ghana.
www.DaMinaAdvisors.com
sector fiscal and regulatory regimes to increase attractiveness to investors, the region will see a
drastic shortfall in FDI in coming years. Mexico, sensing the coming shift in global energy
politics, has moved swiftly in recent months to dramatically alter its non-investor friendly
energy sector laws, making Mexico more attractive than Brazil. Iran may be next. So unless
Africa moves quickly in a similar direction, the continent’s energy sector will atrophy.
EUROPE
3 Abercorn Mansions
17 Abercorn Place
London NW8 9DY
AFRICA
10 Abokobi Road
East Cantonments, Accra
Ghana, West Africa
AMERICAS (HQ)
55 Fifth Ave,
Suite 1702, NY 10003
New York
ASIA
Level 11, 535 Bourke Street
Melbourne, Australia 3000

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