World’s Energy Future Could Lie In Africa, If You’re Patient

World’s Energy Future Could Lie In Africa, If You’re Patient

Africa could be a major player in the world’s energy future but investors need patience and the knowledge to tap the right niches, panelists said at a Wharton Africa Business Forum, according to a report in knowledge@whartontoday.

Each day, panelists said, there are stories of energy finds in places like Mozambique, Kenya or Tanzania, all of which are more accustomed to dealing with European or Western business models than Chinese.

About 25 times more is invested in energy in Nigeria than in all of East Africa.

Nigeria and Angola already produce more than two million barrels of oil a day and countries including Equatorial Guinea, Chad, Gabon, Ivory Coast and Ghana have found reserves.

Nigeria leads Africa in production of natural gas, producing more than 23 billion cubic meters of natural gas per year since 2009.

Other countries have started to develop reserves, especially Mozambique, South Africa, Ivory Coast, Gabon and Senegal.

But change is slow to come in Africa.

“Seven years ago, (the Nigerian government) had a natural gas master plan,” said Lolu Adubifa, CEO of Lavayo Energy, a power generation and oil and gas industry development and advisory firm based in Lagos, Nigeria’s capital. “There has not been much progress.”

Adubifa said he learned to be patient. Many entrepreneurs think that they can quickly move a project from being 20-percent completed to 80 percent. “But in this industry and in Africa, you have to reset your mind…because it takes so long to get government policy right and to push the industry forward.”

Many African government officials see energy production as a path to riches, panelists said. “The regulations are just not well thought out. You are never sure why they are pushing in certain ways,” said Yomi Jemibewon with CardinalStone Partners, which invests primarily in Nigeria’s energy sector. “As a capital provider, you have to find out what game they are playing…. Regulators need to figure out what they want and stick to it or they will not get the investment.”

Nigeria is developing oil and natural gas resources but subsidizes the kerosene industry, keeping the price low so local consumers use it even though it is more dangerous and less efficient than other sources, the report says.

Dikko Atanu, head of gas and business development at Afren Nigeria, said some Chinese firms have entered the market, but Western oil companies with a presence in the region are still the most likely to invest.

“Besides, culturally, Nigerians are not a good mix with Chinese,” Adubifa said, according to the knowledge@whartontoday report. “They just do not do business, or anything else, in the same way. There are Chinese in Nigeria, but they are not getting the same kind of traction because they do not understand the culture.”

West African countries are the most advanced in energy production, but if they fail to capitalize on their markets, panelists said, the focus of investment may shift to East Africa, where governments tend to be more progressive, or at least more stable.

“The more stable the government is, the quicker the investment,” Adubifa said. “But if it explodes in East Africa, those countries will have better access to the Chinese and Japanese markets, and will be better able to deal with investors from those countries.”