The fall in global oil and gas prices is multi dimensional and hinges on several large trends playing out all at once. These include slow growth in emerging economies, the “shale gas revolution” in the U.S., and a shift towards renewable energy in Europe.
However, for Stefan Andreasson, senior lecturer in comparative politics at Queen’s University Belfast and a specialist in Africa’s energy sector, the heart of the matter for Africa’s producers is the rise of shale.
He notes that between 2001 and 2010, exports from Western Africa to the American market increased by about 40 % on strengthening ties between the regions, only to be followed by “an absolutely astounding and precipitous drop.”
Other driving forces include slowdowns in emerging markets, and the Organization of Petroleum Exporting Countries (OPEC’s) apparent strategy of retaining market share at the expense of price support.
Considering the changes in the industry, the prospects afforded by shale extraction, and the level of new discoveries in Africa, it’s uncertain how prices — and thus extraction activities — will be affected in the coming years.
Godwin Sweto, managing director of Encorex, an energy focused consultancy, trading, and investment company, sees only a slow return to higher price levels.
“There will be some price reversal as supply is impacted somewhat,” from an eventual drop-off in spending on high-cost projects, Sweto said. “This will apply to the more marginal shale, ultra-deep, pre-salt, oil sands, and frontier plays where the marginal cost of the new barrel exceeds $90.”