African state oil companies must 'shape up and compete'

Cape Town - Africa governments should not base the continent's oil industry on resource nationalism, but on being able to compete internationally, warned Dr Duncan Clarke, president of the African Institute of Petroleum at the 22nd Africa Oil Week taking place in Cape Town.

"Over the last 15 years there have been massive inflows of ventures and foreign direct investment, but governments built unsustainable tax and regulatory structures," he said.

"State oil companies in Africa must shape up and be competitive. They have not adjusted to the cycle of low oil prices. This requires unlocking the natural advantage and operating on a level playing field for all. Companies in Africa are under stress and this leads to cuts and consolidations for survival."

The oil business in Africa has reached its low tided mark and things can only improve from here on, in the view of Tim O'Hanlon, vice president of African business at Tullow Oil.

Tullow is an upstream exploration and production (E&P) company with a focus mainly on Africa. It currently has a presence in 22 countries.

"We believe the potential in Africa remains enormous. Just look at new players like Ghana, Uganda and Kenya," he said.

He did admit that Tullow has restructured in order to adjust to the impact of the lower oil price, since costs - including security costs - are the main driver.

At the same time he emphasised the importance of creating long term social and economic development on the continent.

Guy Maurice, president for Africa E&P of Total, agreed with O'Hanlon that cost reduction is still the core message in the African oil industry since last year, due to the challenging environment.

At the same time Africa has 13% of the world's oil resources and 10% of the global gas resources.

"We have a strong pipeline of projects over the next few years and believe one needs the right mix of local and international skilled people. Operational excellence, good governance and anti-corruption are also important to face challenges in Africa," he said.

He too sees deep rooted involvement in local communities and community development as very important for companies in the oil industry in Africa.