North Africa – which, according to the UN definition, is made up of Algeria, Egypt, Libya, Morocco, Sudan, Tunisia, and Western Sahara – bears more than half of Africa’s oil and gas reserves. As one of the world’s largest fossil treasures, it has been not only the backbone of the region’s economy, but has, regretfully, also become a reason for geopolitical instability.
If we start with Sudan, this country has been through multiple violent conflicts over the last few years – it currently has 1,500 million bbl of oil reserves (BP, 2015), the ninth biggest in Africa, and oil production was estimated at 105,000 bbl/day in 2015. Crude oil accounts for about 70-90% of Sudan’s overall export, making it the greatest contributor to the country’s economy.
Oil transit from landlocked South Sudan has also brought good income. Until recently, Sudan charged approximately $25 per barrel of oil-transit but, as of February last year, had to agree on a fee calculated based on prevailing oil prices. This was in order to prevent a complete stop of the oil flow from South Sudan.
As a means to establishing social stability, as well as attracting foreign investment, it is of vital importance for the government to ensure transparency and to eliminate corruption in the oil sector. In January 2016, as a response to the Sudanese government’s efforts to improve regional security, the US lifted 20-year trade and financial sanctions – opening access to modern equipment and technologies for the oil and gas sector and giving a boost to its development.
Neighbouring Egypt is the third largest oil – and fourth largest gas – producer in Africa, with 723,000 bbl/day and 45.6 bcm/year of production respectively (BP, 2015). The Egyptian oil and gas industry is one of the oldest in Africa, having mature fields and refineries. Consequently, oil production has not risen for the last 10 years, and natural gas production fell by 27% since the peak reached in 2009.
Production is lagging behind the country’s energy consumption, which is growing rapidly, mainly thanks to large state subsidies. It has turned Egypt from a net energy exporter to a net oil and gas importer at an estimated value $16bn in 2015.
In August 2015, Eni SA announced the discovery of 850 bcm offshore gas field, Zohr – the largest field ever found in the East Mediterranean and one of the largest worldwide in recent years. Commercial gas production is expected to start in IVQ 2017 and to gradually increase to a level that covers internal gas consumption by 2019.
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Moving further west, Libya holds the greatest of Africa’s oil reserves, estimated to be 48,400 million bbl, and was the continent’s second largest oil producer before the recent armed conflict, when oil production fell nearly four-fold, to an average of 479,000 bbl/day in 2011. In November 2016, OPEC exempted Libya from its agreement to curtail oil production, in order to allow the country to restore its pre-conflict oil production levels.
In January 2017, Libyan oil production reached 675 bbl/day and is expected to remain at an average of 688,000 bbl/day throughout 2017, according to a Bloomberg forecast. Libya also possesses abundant natural gas reserves, estimated at 1,500 bcm, and gas production of 12.8 bcm in 2015. About half of Libyan gas is exported to Italy via the ‘Greenstream’ pipeline, generating much-needed revenue to invest back into the oil and gas industry.
The chairman of National Oil Company (NOC) stated in January 2017 that Libya needed an investment of $100-$120bn to rebuild its oil industry. NOC is to lift “its self-imposed moratorium” on foreign investments. In February 2017, the state-owned Russian giant, Rosneft, and Libyan NOC, signed a cooperation framework agreement to create a working group for cooperation in export and production.
Tunisia is the northernmost country of Africa, bordering Libya in the east and Algeria in the west. Tunisia is a modest oil and gas player in comparison to its neighbors. Until the year 2000, domestic production covered the country’s energy needs. At that time, Tunisia’s energy balance shifted from surplus to deficit.
To this day, Tunisia remains a net energy importer. In 2016, crude oil production dropped by 6% and natural gas by 11%, continuing the decline of previous years, and the country imported around 15% of its energy needs.
Algeria is the top producer of natural gas and third largest oil producer in Africa, with an output of 82.5 bcm of marketable gas and 586,000 bbl/day of oil in 2015. Algeria’s proven gas reserves – amounting to 4,500 bcm – are the second in Africa and the 10th largest in the world.
State-owned Sonatrach is the largest oil and natural gas company, not only in the country, but also in all of Africa. By law, Sonatrach gets a major ownership of all Algerian oil and natural gas projects.
After a decade of gas production decline, Sonatrach reported a rise of around 3% in 2016, as a result of increased production at existing fields, and new gas fields commissioned in the southern Sahara region. In 2016, Algeria – the largest gas supplier to Europe – also increased its gas export by 8%, up to 54 bcm, including 20 bcm to Spain, which is equivalent to 55% of the country’s need.
The challenge for the Algerian energy sector is to cover the rapidly growing domestic gas demand, which has nearly doubled in the last 10 years, reaching 39.5 bcm in 2015.
“It is, therefore, the country’s number one priority to boost energy production by 30% by the year 2020,” said the Algerian Energy Minister.
One of the potential ways to increase production is to develop the world’s third largest shale gas and oil reserves – estimated (IEA) at 20,000 bcm and 5.7 billion barrels, respectively. However, shale activity is currently stopped by a “people’s moratorium on shale gas”, fearing its damaging impact on water supply and the environment, as well as by a number of objective factors, such as remote location, lack of infrastructure, and low water availability.
Considering that half of Algerian gas supply is used for power generation, the government has set an ambitious goal to produce 40% of electricity from renewable sources by 2030.
Renewables is also a main strategy for Morocco, the largest energy importer in the Middle East and North Africa (MENA) region, fulfilling 97% of its energy needs externally. Morocco aims to reduce energy consumption by 15% in 2030 through improvements in energy efficiency, and to increase the renewables share in its energy mix from 34% in 2015 to 52% in 2030, through the development of wind and solar energy industry.
North African countries continue their efforts to establish peace, political cohesion, and social stability as a mandatory basis for boosting their economic development and its core driver – the oil and gas industry.
