“Sub-Saharan Africa” by Phillip van Niekerk and Aaron Sayne

NS4054: Energy Security

Author’s Thesis

• Sub-Saharan Africa will continue to play a relatively modest but active role in US energy interests in the future. Despite security and anticorruption challenges, opportunities for investment remain attractive and varied for both major energy companies and independents.

Overview

• Overall Energy Prospects within SSA

• U.S. Future Role in the Region

• U.S. Dependence of African Oil and Gas

• The Asian Threat to U.S. Interests in SSA

• Various Challenges to SSA’s

Energy Production

• Nigeria: “A Cautionary Tale”

Oil and Natural Gas Prospects

• Really Good Outlook!• All but 4 of the continent’s 54 nations are

producers

• West: Offshore prospects remain solid• Ghana: 5B barrels of proven reserves (2015)• Liberia/Sierra Leone• Mauritania and Côte d’Ivoire

• East: • Mozambique and Tanzania (Natural Gas)

• Kenya, Uganda and South Sudan (Crude Oil)

U.S. Role in SSA

• Only a Moderate Role in Exploration and Production• U.S. Oil companies have been slow to expand operations• Involvement has been tied to mega-projects• Reasons for conservative stances on new investment:

• Interests primarily in deepwater exploration and production versus frontier locations

• Increased sensitivity towards investing in nations that have violent, corrupt, or politically unstable places

Decreased U.S. Reliance

• Decreased U.S. Imports of SSA Oil have• Lower Domestic Demand

• Growing domestic light oil production

• Higher reliance on Canadian and Arab Imports

• No U.S. Imports of Natural Gas• U.S. has increased its own

domestic gas production

• Thus, East African gashave found other marketslike Asia

7

Question to Ponder

Do you think it is wise for America to decrease African oil and gas from its energy portfolio? What if any of America’s existing major suppliers (i.e. Venezuela or

Middle East) decides to do something irrational, like alter our supply, or cut the U.S. off completely?

Asian Threats to Western Interests in SSA

• Threats Have Been Mostly Overstated• Market and investment trends does not support

the claims

• No clear evidence indicating affects on Western supplies or prices

• Three main trends that define China’s position in SSA• Chinese firms have made only limited commercial advances• Conduct of China’s Big 3 Oil Companies• SSA producers becoming more skeptical of Chinese investment

Challenge 1: A Question of Governance

• Continues to hamper effective management of oil industry

• Consistently Poor Marks on International Indices

• Weak formal institutions

• Patronage- and sharing-based political economies

• Remedies Taken to Combat Corruption

• U.S. Foreign Corrupt Practices Act (FCPA)

• NGO Involvement

• Other nations Adopting Anti-Corruption Enforcement Measures

• Addition of Strong Transparency Language into laws and contracts

Challenge 2: Security and Stability Issues

• Interstate Conflict Over Natural Resources• Colonial-drawn boundaries have a long history of provoking

regional conflict• Angola and DRC• Uganda and DRC• Ivory Coast and Ghana

• Corruption and Wealth Distribution Concerns

• Implications on Future FDI

• Terrorism Concerns

SSA’s Broader Energy Agenda

• SSA Investment Prospects

• The “Energy Poverty “ Obstacle

• Better electrification could be a “powerful economic multiplier” across the region

• Renewable Energy Alternatives

Nigeria: The Chronic Underachiever

• Authors Point to Nigeria as a “Cautionary Tale”• The Undermining of Security and Development

• Violent Rebellions in the Niger-Delta • Islamist Rebellion in the North

• Foreign Companies Considering Exit Strategies

• Corruption and Bureaucratic Meddling

• Result: Oil Rents Set Aside for national development do not reach beneficiaries

13

Question to Ponder

How does stability in energy-rich African nations promote healthy world market performance and

other key U.S. priorities, such as democratization, reduced opportunity for transnational crime,

eradication of disease, and poverty alleviation?

14

Pop Quiz

According to the authors, the Asian threat to western energy interests in sub-Saharan Africa are:a. Minimalb. Cause for Concernc. Enough to Start a War Overd. None of the Above

15

Pop Quiz

The authors state that sub-Saharan Africa will continue to play a relatively _______but ______role in U.S. energy interests in the future.a. Small; Activeb. Low; Inactivec. Modest; Actived. High; Active

Summary

• Overall Energy Prospects within SSA

• U.S. Future Role in the Region

• U.S. Dependence of African Oil and Gas

• The Asian Threat to U.S. Interests in SSA

• Various Challenges to SSA’s Energy Production

• Nigeria: “A Cautionary Tale”

• Conclusion