Africa Often More Stable for Oil Firms - Business Day, October 3
By Dave Marrs
CAPE TOWN - There is often more "fiscal stability" for foreign oil companies investing in Africa than there is in North Sea projects, according to Energy Africa MD John Bentley.
Commenting during a panel discussion at the Association of International Petroleum Negotiators conference in Cape Town yesterday, he said a change of government in the UK was quite likely to result in a new energy tax or other changes to the status quo, whereas this was seldom the case in Africa.
"We have been in places where governments have changed hands sometimes undemocratically but the fiscal situation stays the same," he said.
Energy Africa focuses on oil and exploration in Africa and is listed on the Johannesburg Stock Exchange. It is indirectly controlled by Petronas, the Malaysian state oil company.
Bentley's point on fiscal stability was echoed by other panellists during a discussion on investing in African exploration and production projects. They pointed out that revenues from oil and gas accounted for the bulk of many African countries' income, and they were therefore less likely to "rock the boat" than developed countries.
On the perception that the cost of operating in Africa was higher than elsewhere, Pioneer Natural Resources vicepresident Mark Withrow said cost factors had to be considered early in the investment process, but should not change the expected return on capital.
He said risk could be reduced substantially during the initial negotiations by resolving issues such as repatriation of profits, international arbitration in the event of disputes, and how to cope with fluctuations in exchange rates.
The five panellists, all of whom represent oil and gas exploration companies that are active in Africa, said it was important for host countries to take a long-term view rather than seeking to maximise revenues immediately.
This was of particular concern in the established oil fields of west Africa, where prohibitive entry costs ran the risk of reducing long- term investment.
They agreed that the fiscal terms offered to foreign exploration companies by African governments were generally favourable, and promising geological data in many areas held out the prospect of significant returns.
Bentley said small independents such as Energy Africa were also in a good position to benefit from the consolidation taking place among the oil majors, which were rationalising and farming out smaller concessions. |
