Though the depressed global oil price has led to reduced activity in the oil and gas sector across Africa, the industry should improve skill levels and governments should improve regulatory frameworks and licence systems to prepare for when price and activity increase, says PwC Africa Oil and Gas advisory leader Chris Bredenhann.

While the decline in the global oil price has had an significant impact on countries that traditionally depend on oil and gas revenue, it is an opportune time for local governments to attract oil and gas investors. With little control over price, businesses have focused on improving efficiency and driving down costs.

“The top challenges identified by organisations in the oil and gas industry have remained unchanged over the past few years – uncertainty in regulatory frameworks, corruption and deficient ethics, poor physical infrastructure and a lack of skills.

“It remains important for the industry to look beyond the challenges caused by depressed prices and consider other forces that are shaping the industry. PwC’s ‘Africa Oil & Gas Review 2016’ suggests that the ongoing focus on cost reduction in the industry will drive demand for innovation in technology and, consequently, skills,” says Bredenhann.

Regulatory uncertainty has remained the primary challenge facing oil and gas businesses in Africa for the third consecutive year, with 70% of organisations citing it as one of the five most significant issues. There was also a significant rise in meeting taxation requirements over the past year, with government relations also having become increasingly strained.

“For the first time since PwC’s series of annual reviews began in 2010, government relations were identified as one of the top six challenges and many organisations have experienced difficulty obtaining government sanctions for new projects on the continent.”

Relations are proving to be extremely difficult in the so-called new hydrocarbon States, such as Mozambique, because governments do not have experience in the intricacies and scale of oil and gas projects.

As a consequence of poor relations, organisations are beginning to ally themselves with governments to ensure that they are a strategic and supportive partner.

Several digital trends will transform the oil and gas industry, including the Internet of Things, alliances, simplification and standardisation, as well as solutions-based buying and knowledge transfer from international oil companies to oilfield services companies.

“Companies must look at the current state of the industry as an opportunity to reinvent themselves and must consider changing their business models in the ‘new energy future’. The industry must produce new business models, products, energy sources and strategies to meet new demands,” says Bredenhann.

Meanwhile, the sustainability of the industry will be affected by the oil price, the impact of renewable-energy sources, the emergence of new competitors, the environmental impact of the industry, legislative frameworks and taxation.

However, more than half of respondents expect acreage and licence costs to either decrease or decrease sizably, likely as a result of a lower oil price devaluing acreage and licences.