As ever, the entire African economy remains highly dependent upon the export of raw materials. The export of oil, natural gas, coal copper, iron ore and bauxite generates massive export revenues that help to drive the rest of the continental economy.
Globally, the continent accounts for 7% of oil output, 3.6% of coal production and 1% of gas output, all far less than its share of global population. However, Africa’s real importance lies not in its raw production figures but in its export capacity, as about half of all its primary energy output is shipped to elsewhere in the world.
With some notable exceptions, such as coal consumption by the South African power sector, there is limited local demand for such commodities. As a result, the African oil, gas and mining industries are massively dependent on global trends. Moreover, much of the development in each of these industries is undertaken by non-African companies. Yet as we discuss in this report, African firms are beginning to play a bigger role in commodity production.
Global oil prices averaged about $107 a barrel during the first quarter of this year, roughly in line with the 2013 average, but continued to be depressed by rising North American shale oil production. The number of African oil producers is continuing to increase, with Ghana and Niger joining the list and Uganda and Madagascar set to begin commercial production over the next few years, but the only country to match the tens of billions of dollars being pumped into Nigerian and Angolan hydrocarbons is Mozambique.
Eni of Italy and US firm Anadarko are leading consortia that are jointly developing a liquefied natural gas (LNG) hub in the far north of the country. Four liquefaction trains, or production lines, are planned in the first instance, although expansion to 50m tonnes a year in the longer term has been proposed.
With investment costs estimated at $1bn per 1m tonnes a year of production capacity, this could add up to $50bn in investment, making it the biggest investment project in African history. Securing the finance from international banks for such schemes should be straightforward, given that the LNG will be marketed to Asian buyers under long-term contacts, probably of about 20 years.