With 12% of share in the total output and 10% consumption in the threshold, Africa is a significant player in the world’s oil production.
In the last 10 years, Africa has witnessed new oil and gas discoveries along with multi-dollar investment plans. However, due to the shockwave of the novel Covid-19 on oil and gas-reliant economies, many oil projects will stay on the back burner, until complete recovery.
Most analysts including NJ Ayuk, CEO of Centurion Law Group agree that 2020 is witnessing a negative demand growth for oil globally. This has also affected the African oil industry in a big way.
Reduced global demand:
The reduction in demand by China will have drastic fiscal and budgetary implications on the African oil industry. According to the latest statistics, the coronavirus outbreak will reduce global oil demand by 4 percent, or 4.1 million barrels a day. As per NJ Ayuk, this reduction in global demand will not only jeopardize economic growth prospects for the near future but also shrink the returns on existing projects.
Operational disruption in the SCM:
Even though ‘Oil and gas’ activities are exempted as an essential service but failed agreements on production cuts, less demand for chemicals, industrial slow-downs, and travel restriction, the supply chain is completely shattered. Furthermore, the shortage of workforce and lack of physical contact, have also disrupted the interdependent operation of the supply chain drastically.
High slump in oil rates:
For the first time in history, today the prices of oil have reached the lowest level and currently stand below $25 a barrel. African countries may find it difficult to survive the price war and serious competition by Saudi Arabia, USA, Russia, Latin America and Iraq. To repay the loan to foreign financiers including China, Africa will be forced to pump more in the international market at relatively lower costs. This means Africa would be the hardest hit continent in the world and therefore, needs to adopt austerity measures and revise the budgets.
Lack of government assistance:
Most African nations have failed to develop a robust, integrated, and fair structure of tax regulation, tax collection, and associated service delivery. Additionally, the COVID-19 outbreak has spiked the unexpected healthcare costs, thus, deviating their focus from commercial investments.
As a palliative measure, the African countries should frame immediate strategies such as efficient management of revenues, diversification of their economics, commitment to local value, and proper allocation of available resources.
To repair the economic woes and build a stronger African economy in the longer run, the leading energy lawyer NJ Ayuk is bringing major energy issues to the table constantly. As the current chairman of the African Energy Chamber, NJ Ayuk is undertaking several significant steps to mitigate the negative impact of the COVID-19 pandemic on the African oil and gas industry.
NJ Ayuk centurion law group is providing professional and financial assistance to their African clients across various energy sectors during this crisis.
