To protect foreign exchange reserves in the region, the Bank of Central African States (BEAC) implemented stricter rules on currency transfers and payments in January 2022. Despite opposition from energy stakeholders and leaders, the BEAC has not reversed this decision. The new regulations have a significant impact on industries that rely on the dollar, such as the oil and gas sector. Reforms are necessary to restore foreign investor confidence in West African oil and gas.
The upcoming African Energy Week (AEW): Invest in African Energy conference, scheduled for November 4-8 in Cape Town, will focus on the vulnerability of the West African region due to foreign exchange regulations. The event aims to facilitate investment in African oil and gas by bringing together regional energy leaders, financial institutions, and foreign investors to discuss strategies for improving business environments, facilitating cross-border deals, and reassurring investor confidence.
AEW: Invest in African Energy is the platform of choice for project operators, financiers, technology providers, and government and has emerged as the official place to sign deals in African energy. Visit www.aecweek.com for more information about this exciting event.
E&P Remains Top of the Agenda
Member countries of the Central African Economic and Monetary Community (CEMAC) – Cameroon, Chad, Central African Republic (CAR), Equatorial Guinea, Gabon, and the Republic of Congo – have set targets to increase hydrocarbon exploration and production through regional collaboration. Gabon aims to produce 220,000 barrels per day (bpd) in the short-term, while Congo plans to increase oil production to 500,000 bpd within a year and double gas production within two to three years. Equatorial Guinea also plans to increase regional gas monetization with agreements in place with Cameroon to develop the Etinde gas field.
Recent E&P developments are crucial for achieving these goals. In Gabon, independent oil and gas company Perenco has started appraising the Hylia South West field to assess its full potential. Vaalco Energy extended the life of the Etame field in Gabon, while TotalEnergies has extended its presence in Gabon for another 25 years. In Cameroon, Perenco initiated a drilling campaign at the Kita Eden field, and Chevron is developing the YoYo Block. Energy major Eni began feeding gas into the Tango LNG facility in Congo, and Vaalco Energy is progressing with the Venus development in Equatorial Guinea.
Investment Hinges on Policy Reform
Despite the potential in West African oil and gas, policies need to be reformed to attract foreign investment. CEMAC countries rank low on the World Bank’s Ease of Doing Business index due to ineffective fiscal policies, high tax rates, weak Production Sharing Contracts, and delays in project approvals. The BEAC’s foreign exchange regulations also pose challenges for foreign currency accounts in the region, impacting FDI.
The Africa Energy Chamber (AEC) is hosting the Africa Energy Finance Summit at AEW to discuss enabling environments for growth. Incentivizing investment is essential as FDI trends towards capital-intensive projects. The judiciary can provide long-term security for operators by reviewing labor, arbitration, disputes, and treatment of companies. Shifting from resource nationalism to independent systems can reinstate investor confidence in CEMAC oil and gas.
Local content laws have also been restricted by the BEAC regulation, limiting growth opportunities for local players. CEMAC countries can utilize local content to stimulate new developments and attract investments, making the market more competitive. Policy reform will not only attract foreign capital but also foster the growth of domestic markets.
Improving the investment environment in the CEMAC region will be a key focus at this year’s AEW conference in Cape Town under the theme Energy Growth through an Enabling Environment. The event aims to increase investment and eliminate energy poverty by 2030.
Distributed by APO Group on behalf of African Energy Chamber.