A regional effort was needed to overcome the disconnect between Africa’s gas and oil production and its refining capacity, PricewaterhouseCoopers (PwC) Africa oil and gas advisory leader Chris Bredenhann said on Wednesday.

Citing South Africa’s Project Mthombo – a planned 400 000 bl/d crude-oil refinery in the Eastern Cape – as an example, he said that there had been a lot of talk about investing in refining capacity, but that such plans had yet to materialise.

Africa currently supplies about 12% of the world’s oil, boasting significant untapped reserves estimated at 8% of the world’s proven reserves. The continent has natural gas reserves of 513-trillion cubic feet (tcf) with 91% of the yearly gas production of 7.1tcf coming from Nigeria, Libya, Algeria and Egypt.

However, Africa’s refining capacity accounted for only 3.6% of global capacity with actual throughput 2.9%, unchanged for 20 years.

Bredenhann said at the launch of PwC’s third ‘Africa oil and gas review’ in Johannesburg that uncertainty regarding emissions and greenhouse-gas regulations, as well as concerns over the impact of Euro V clean-fuel specifications, which would to cost South African refiners $4-billion, were delaying refinery development projects.

He,highlighted the risk of companies purchasing used refining plants from abroad, warning that this posed many challenges, as the plants had been decommisioned and were possibly out of date.

Meanwhile, the report showed that the oil and gas industry in Africa held significant potential, backed by recent large gas finds in East Africa.

“Large gas finds in Mozambique and Tanzania, and oil potential in Uganda and Kenya, have sparked a flurry of exploration activity across Africa,” Bredenhann noted.

However, respondents in the report stated that infrastructure and corruption were the two main challenges that were hampering the growth of Africa’s oil and gas sector. Other concerns included an uncertain regulatory framework, lack of skilled resources, local content requirements and set-up costs.

Bredenhann noted that shale gas development in South Africa was being hampered by infrastructure shortages and that the production of this energy fuel would only take place locally in the next eight to ten years.

Bredenhann proposed that the move to liquid petroleum gas as an energy source in South Africa would stimulate gas infrastructure development, which shale gas could then leverage.

He added that political interference, uncertainty and delays in passing laws, energy policies and regulations were also stifling oil and gas investment in various African countries.

“Governments around Africa are reviewing or developing their energy policies. Many countries are investigating changes in the government take, taxation regulations and State participation,” he indicated.

Bredenhann warned that proposed amendments to South Africa’s Mineral and Petroleum Resources Development Act would see some functions devolved to the Department of Energy, which could allow government to partially nationalise licence blocks and create an unlevel playing field.

He further noted that it was concerning that despite the global trend towards local content, a quarter of respondents indicated that more than half of their workforce comprised expatriates, of which 35% were in senior and middle management positions and 25% specialist technical roles. Only South Africa had expatriate figures below 10% in all categories.

“While oil and gas companies would like to see a relaxation of local content regulations, governments are instead making regulations and policies more stringent. Investments in skills development and training are, therefore, an ongoing requirement,” Bredenhann urged.