By IPS Correspondents
ACCRA, Apr 7 1997 (IPS)

The enormous amount of hydrocarbons lying beneath Africa’s surface — on land and off-shore — should fuel a major boom in the oil and gas sector, industrialists and energy experts say.

“I believe this sector is going to be the next boom area for our continent because we are putting a lot of emphasis on industry,” Emma Mitchell, Ghana’s former Minister of Trade and Industry told IPS.

Mitchell was speaking on Friday at the close of a three-day international conference on oil and gas in Africa, organised by the Ghana National Petroleum Corporation (GNPC), which drew hundreds of participants.

Estimates say that Africa has about 66 billion barrels of oil reserve and 420 trillion cubic feet of gas, in over seven countries — Nigeria, Angola, Gabon, Chad, Equatorial Guinea and Cameroon, to name six.

The sector is expected to earn more foreign exchange and boost the capabilities of industries in these countries.

Mitchell, who worked with the United Nations Industrial Development Organisation (UNIDO) on the industrial aspects of the special initiative for Africa launched in 1995, said: “It was agreed without any doubt that Africa’s recovery depends on industry, and when you talk of industry it’s backed by energy.”

However, the potential of this energy remains grossly under- utilised, with the resources either lying dormant or being wasted. For example, gas in Nigeria’s Delta area is being flared at a high cost to the West African sub-region.

“Nigeria’s flared natural gas alone could literally light up every village and hamlet in West Africa,” says GNPC chief executive, Tsatsu Tsikata.

The wastage of energy resources may soon end, because across the continent, vigorous exploratory activities are underway as investors and governments seek to strike increasing quantities of both oil and gas.

“Africa has a lot of promise in oil and gas,” says Dick Murdock, geophysicist with the Ghana Hunt Oil Company, an affiliate of the Hunt Oil company of the United States, which has just signed an exploration agreement with the Ghanaian government and the GNPC, and is also operating in Ethiopia and Niger.

The GNPC hopes to generate about 130 megawatts (MW) of electricity from gas in the Western part of the country, to supplement the 1,072 MW generated annually by the Volta River Authority (VRA), the country’s power utility. Like many other African countries, Ghana relies largely on hydro-electric power, but this is subject to the uncertainties of the weather and leads to power disruptions when the rains fail.

“There is the need to look for alternative sources, and we have found oil and gas to be the next best source,” explains Mitchell, who is now running a private industrial safety firm.

Progress has also been made in Cote d’Ivoire which is now producing 20,000 barrels of oil a day, enough to meet its needs and do away with the need for imports, while Equatorial Guinea, with a population of just five million, produces 47,000 barrels per day and expects higher output in the near future.

Despite these developments, full realisation of the sector’s potential is constrained by difficulties that include lack of finance and technological know-how.

“What we are doing is extremely risky. We are looking for things that require a lot of expenditure and are risky,” says Murdock. Mitchell agrees, saying that “this area is capital- intensive and high-technology-dependent.”

The high costs — especially in West Africa, where a large percentage of oil operations are offshore — and risks of exploiting oil and gas have put participation in the sector beyond the reach of most local investors, and even some governments.

African governments have attempted to overcome these constraints through liberal investment codes that give incentives to foreign investors and permit joint ventures between such investors and local industrialists. These incentives include long tax holidays, accelerated depreciation allowances for equipment and machinery, and attractive profit-sharing schemes.

Co-operation between countries and companies, which operators in the sector agree is the way out of the difficulties, will soon become a reality through the proposed West African Gas Pipeline, that will link Nigeria with three other sub-regional countries, Benin, Togo and Ghana.

The project is designed to use Nigeria’s estimated 256 trillion cubic feet of gas — most of which is flared off — to supply the region with fuel at a much lower cost than alternative energy sources. Efforts will be made by the governments of the collaborating countries to attract private shareholders to the project, once the board of directors of the proposed company is put in place at the ministers’ next meeting in Nigeria in June.

Another example of inter-regional co-operation is the GNPC’s project which will draw on Ghana’s estimated 200 million cubic feet of gas, but whose long-term sustainability hinges on gas from Nigeria, where the GNPC is holding discussions with Chevron, one of the oil companies operating in that country. Chevron has in its concessions an estimated 19 trillion cubic feet of gas.

Although the oil sector has so much to offer to Africa, few of the continent’s inhabitants have benefitted from it.

While huge gas reserves are being flared off in numerous spots, the price of liquefied petroleum gas is rising — recently in Ghana by about 100 percent — forcing rural dwellers to cut down more trees to meet their energy needs.

Only about 30 percent of the Africa’s oil products are consumed domestically, while the rest keeps industrialised nations running.

“We face the paradox that Africa is producing many millions of barrels of oil, but very little of that production goes to service the continent’s needs,” said President Jerry Rawlings in his speech at the opening of the international meeting on oil last Wednesday.

He added: “The oil and gas industry cannot be immune to the overall living conditions of the peoples of Africa, or indeed anywhere you operate. We must explore every means of improving the lives of our people, and your industry must hold one of the keys to our aspirations on the continent.”

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