Executive Chairman of the African Energy Chamber, NJ Ayuk, has said that, amid the roaring Corona Virus ravaging key parts of the international oil market, the year 2020 and beyond contain huge opportunities for African oil-producing countries that can thread smartly.
The chief executive officer of the Centurion Law Group stated that the opportunities will present further drift from about $30 to $20 per barrel in the international market.
“The situation looks bleak. If Saudi Arabia and Russia go on having a price war, a USD$20 barrel is possible, if not probable,” he said in an interview.
According to him, some oil-dependent African nations will suffer reduced revenue. He cited Angola’s example, whose national budget was pegged at an oil price of USD$55. He pointed out that most African producers have learned from past experiences and have adjusted themselves to respond to price crashes.
The progressive economic diversification the continent has witnessed in recent years, he said, will also contribute to minimize the impact of this situation.
He posited that if 2020 is showing itself challenging for African energy, 2021 will be a year of opportunity, stressing however that for that to happen, APPO has to start adapting now; laying down the policies that will allow members to take advantage of future opportunities.
“It is in moments of crisis that true leaders have the opportunity to shine, While it is actually difficult to predict the future, there are a few deductions and inductions we can try to make with some certainty.
“One is that neither Russia nor Saudi Arabia wants a low oil price and there is a limit to how long they are willing to sustain it. No one gains from it and if anyone has the capacity and funds to sustain it for a longer period of time, it is Saudi Arabia.
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“Already, Russia has suggested it might be open to negotiate coordinated cuts within OPEC+ during the group’s next meeting in May/June.
The first to suffer from this will be American shale producers. This sector was already finding it hard to finance itself in recent years but continued to unbalance the market with its rapid response times to price fluctuations. These producers are highly leveraged, and it is likely that most will go bust in the present situation.
“Further, in three months time, at the time of the next OPEC+ meeting, the virus situation might also be very different. A fortnight ago, President Xi Jinping visited Wuhan, the epicentre of the epidemic, for the first time since the beginning of the outbreak, in a clear demonstration of a strong response to a rapidly evolving situation that seems to be stabilizing. It can be expected that demand in the country will start rising again in the foreseeable future.
“If that happens in a scenario when the US shale sector is no longer able to respond, it might just be that the price will climb higher than it was before the virus, and with Saudi Arabia securing for itself a much larger slice of the global marketplace. Again, things will get worse before they get better, but they will certainly get better,” he said
He, therefore, posited that this is the time for African nations to position themselves correctly, and that will require close attention to international developments and close cooperation, to be able to take advantage of new opportunities.
“The African Energy Chamber will be instrumental in that, but so will be the African members of OPEC. The time to show statesmanship and stay close to Saudi Arabia and the decision-making table is now.
“To grow Africa’s relevance in the international oil stage by showing level-head and cooperation in the face of a global crisis. If we take that route, we will come out of this stronger than ever,” the energy expert said.
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