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Fraud a problem in the energy sector

Jul 23 2014 15:55

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Johannesburg - Africa's oil and gas sector shows growth despite regulatory uncertainty, but fraud and corruption remain an impediment, according to a report released on Wednesday.

"As a result of numerous challenges in the market, meticulous planning is required," PwC Africa Oil & Gas advisory leader Chris Bredenhann said at the release of the report in Johannesburg.

"Some key players have delayed or cancelled projects until further clarity can be sought in their respective jurisdiction as they cannot move forward with doubts, given the long-term nature of the needed investments".

Despite corruption, fraud, poor infrastructure, and lack of skills on the continent, the sector showed growth.

The report titled "On the brink of a boom" analysed events in the past 12 months in the oil and gas industry across major African markets.

Multinational oil companies, exploration, and independent oil companies operating on the continent took part in the survey. They included Shell, Statoil, Petrobras, Sasol, and PetroSA.

Six percent of respondents indicated that their anti-fraud and anti-corruption programmes were ineffective.

Bredenhann said the perception was that oil and gas sector companies were more likely to be affected by corruption.

"Some of the reasons given for paying bribes or facilitation fees is to bypass customs bureaucracy inefficiencies and the related cost of delays to companies," he said.

The bureaucracy fuelled corruption.

"Something that should take two days to go through government would take three months instead. The inefficiencies in the bureaucracy gives rise to corruption and fraud."

Inadequate basic infrastructure also ranked higher in the survey

Despite the problems facing the industry, new hydrocarbons were developing at a significant pace, he said.

"Large gas finds in Mozambique and Tanzania have caused the world to take note of east Africa as an emerging player in the industry," he said.

Respondents were concerned about the lack of infrastructure in developing countries, especially in Nigeria, Madagascar, Namibia, and South Africa, and its impact on their businesses.

The continent had 8% of world oil reserves.

"Africa's consumption is at 4%, and is expected to increase by 50% over the next 20 years," said Bredenhann.

A great deal of the continent's gas reserves are in north Africa.

Libya had the fifth-largest shale oil potential in the world with 26 billion barrels.

Algeria's shale gas potential was third in the world, while South Africa's was eighth.

Shale gas is seen as a new player in South Africa, said Bredenhann.

"The hype over shale gas is accompanied by uncertainty over environmental impact, and we have government having a keen interest in the shale gas, but indicating that environmental issues should be resolved."

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africa  |  oil and gas  |  energy

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