by MONTAGE AFRICA
Engineer Mahaman Laouan Gaya is the Secretary General of the African Petroleum Producers’ Organisation (APPO). In this interview with MONTAGE AFRICA, he discusses the history, objectives and achievements of the organisation and outlines the future of the oil industry in Africa.
MONTAGE AFRICA (MA): Can you please introduce to our readers the organisation you are responsible for?MAHAMAN LAOUAN GAYA (MLG): African Petroleum Producers’ Organisation (APPO) is an African intergovernmental organisation created on January 27, 1987 in Lagos, Nigeria, to serve as a platform for cooperation and harmonisation of efforts, collaboration, sharing of knowledge, skills among African oil producing countries. Its statutory headquarters is Brazzaville in Republic of Congo. With 18 member countries, it accounts for nearly 95 percent of Africa’s oil production and accounts for at least 12 percent of world production. One of APPO’s important missions is the promotion of joint initiatives (projects, infrastructure) in management policies and strategies across the entire oil industry value chain, to enable its member countries to draw better profits from the activities of this non-renewable resource. After more than a quarter century of existence, it was recognised
that despite some progress, APPO did not meet the expectations of the member countries. The organisation therefore encountered serious weaknesses and visibility challenges, as observers were constantly wondering what the mandate was. The long lethargy in which it languished for years has also resulted in low levels, if not a complete lack of cooperation among member countries in the oil sector, a lack of control of activities across the entire value chain of oil industry in Africa. This, among other things, did not allow it to establish a sharp and credible African expertise and there was total lack of visibility of the organisation at national, regional and international levels. This led to a very noticeable absence in the major centers of international decisions. The organisation that sailed by sight, in total ignorance of the global oil context, needed to be reframed on the global oil and energy scene to meet the challenges of the day. As rescue measures, the Council of Ministers decided on its deep reform. Thus, as soon as we took office, we were confronted with this reform. After many meetings of Committee of Experts and Council of Ministers, the draft of this reform was adopted in Luanda in Angola in January 2018. The resolutions that were adopted included among others, the new Vision and Mission, the new Strategic Objectives of the Organisation, the General Structure and a new Organisational Chart, the appointment of HE Dr. Emmanuel Ibe Kachikwu, Nigerian Minister of State for Petroleum Resources as APPO President effective April 1, 2018 for the implementation of the reform and the transfer of the activities of the organisation to Abuja in Nigeria during this period. APPA was thus renamed the African Petroleum Producers’ Organisation. The establishment of a Summit of Heads of State of the Member Countries of the Organisation was also endorsed in principle as and when necessary.
MA: The activities of APPO are tentatively transferred to Abuja in Nigeria. Why is this so?MLG: The activities of the organisation were relocated to Abuja during the transition period but the statutory seat remains in Brazzaville. The Council of Ministers made this transfer decision for technical and strategic reasons. Our primary objective is to see APPO align with the global oil and energy directions set out by the United Nations (with the SE4All Initiative…), the World Petroleum Council, the World Energy Council (with the resolution of the World Energy Trilemma), the African Union (with the Africa Mining Vision), the African Development Bank (with the “New Deal” for Energy in Africa), NEPAD and so on. APPO must position itself in the energy, oil and gas sectors in Africa and promote its activities like other similar institutions, such as OPEC, GECF, IEF and so on. The fundamental basis for this success is of course the political will of African leaders and a real change of mentality among some actors in the organisation, who must go beyond their personal interests and see only those of our common organisation. The methods of governance and management of the Secretariat since the creation of APPA, are obsolete and have not been effective. We need a fresh start, and today Nigeria, given its position on the African and world oil scene, its leadership and for various other reasons, offers better, political, technical, financial and diplomatic guidance to accompany this reform. Since moving to Abuja a few months ago, the Member Countries of the Organisation was also endorsed in principle as and when necessary.
MA: The activities of APPO are tentatively transferred to Abuja in Nigeria. Why is this so?MLG: The activities of the organisation were relocated to Abuja during the transition period but the statutory seat remains in Brazzaville. The Council of Ministers made this transfer decision for technical and strategic reasons. Our primary objective is to see APPO align with the global oil and energy directions set out by the United Nations (with the SE4All Initiative…), the World Petroleum Council, the World Energy Council (with the resolution of the World Energy Trilemma), the African Union (with the Africa Mining Vision), the African Development Bank (with the “New Deal” for Energy in Africa), NEPAD and so on. APPO must position itself in the energy, oil and gas sectors in Africa and promote its activities like other similar institutions, such as OPEC, GECF, IEF and so on. The fundamental basis for this success is of course the political will of African leaders and a real change of mentality among some actors in the organisation, who must go beyond their personal interests and see only those of our common organisation. The methods of governance and management of the Secretariat since the creation of APPA, are obsolete and have not been effective. We need a fresh start, and today Nigeria, given its position on the African and world oil scene, its leadership and for various other reasons, offers better, political, technical, financial and diplomatic guidance to accompany this reform. Since moving to Abuja a few months ago, the food security, the challenge of energy security must also be of concern of our governments. Also, oil is a highly sensitive sector that commands coordinated and highly specialised strategic approaches. In isolation, African countries are unable to fight against international oil capital. We therefore need a framework with a real device for economic and strategic intelligence. This is the role our organisation intends to play. In this, I believe that APPO must in the years to come, be one of the organisations on which Africa can count on.
MA: What is the future of the oil industry in Africa?MLG: When you take a look at the world’s oil geography, one realises that certain regions (North America, Near and Middle East, North Sea) once pioneers of oil production are today either in the depletion phase, or in that of the exploitation of unconventional hydrocarbons (gas shale and shale oil). In Africa, however, only four countries began a modest exploitation in the 1960s. Today, about 20 countries are identified as oil producers (that is the 18 APPO Member Countries, South Sudan and Tunisia) and about 30 others are conducting prospecting and research operations. Offshore and onshore basins, both off East Africa, the African part of Indian Ocean, West Africa, and the hinterland countries are underexplored but have very good prospects (they are mainly located in Tunisia, Morocco, Mozambique, Kenya, Uganda, Tanzania, Senegal, Sao Tome and Principe, Niger, Mali, Madagascar, Comoros). Africa has proven global oil and gas reserves, although variously estimated, they are surely very abundant. Certainly, the continent has more than 13 percent of the world’s hydrocarbon reserves (even if Western statistics tend to underestimate and devalue the potential of the black continent), and better – in the last 15 years, one third of the world’s oil discoveries have been in Africa. The underestimation by certain institutions and multinational oil companies of the reserves and the hydrocarbon potential of Africa shows a deliberate neo-colonial joke! There is no doubt that Africa’s oil and gas potential can compete today with that of any other region in the world. This leads me to believe that if Africa were to be considered as a single producer, it is certain the continent will challenge Saudi Arabia, Russia and the United States. But to do this, we must put an end to the disunity, hyper-balkanisation that characterise today’s Africa and deeply promote its integration. Anyway, the potential is there and, in the years to come, believe me, Africa will spring very big surprises in the oil and gas sector.
MA: How can Africa develop through its oil resources?MLG: In recent decades, Africa has been at the heart of all kinds of debates, both misery in which its populations are vegetated and on its immense potential plus incomparable natural wealth that could bring in more than US$ 30 billion in revenue per year over the next two decades. Looking only at the oil reserves of African countries, some statistics estimate these to amount to a hundred billion barrels, as much as Saudi Arabia. In general, it is recognized by all that the African subsoil is full of abundant fossil energy resources (oil, gas, coal, uranium) and those of renewable origins (hydraulic, solar, wind, biomass, geothermal). In addition, Africa is inhabited today by nearly one billion inhabitants, 60 percent of whom are young, while Europe, America and Asia are increasingly populated by those who are ‘aging.’ So, if with all this richness, Africa cannot kick off the ground, I am not sure that the oil resources can be the only resource responsible in the current socio-economic situation to meet the challenges of underdevelopment. The causes of Africa’s regression are more elsewhere than in oil. While the existence of extractive resources never fails to raise controversy and invite the use of negative clichés for Africa, you hear, here and there (and maybe for good reason), superlative terms such as “paradox of abundance”, “curse of natural resources”, “geological scandal” and so on. Let’s acknowledge that we have somewhere failed to be treated in this way! While the prospect of huge revenues from our natural resources may seem intoxicating, it also raises the issue of governance in this sector. Governance is a crucial element because almost all our countries, even endowed with abundant extractive and energy resources, have not yet applied this effectively in the road of development. Never before, have the primary sector and human resources been considered in Africa as the fundamental levers for true sustainable development. It is precisely in this respect that those who describe our situation as the “paradox of abundance” are not entirely wrong. However, a macroeconomic approach has shown that the recent decline in oil prices has resulted in recessive effects (falling currencies, sharp drop in tax revenues, slowing investments and projects diversification, re-debt, adjustment of the budget to a price twice as high) in almost all African net hydrocarbon exporting countries and more modest expansionary effects in other net importing countries. Only a few countries have seized the opportunity to support their growth in a slightly more diversified economy. Otherwise, they have not been able to stand out from the over-dependence of the oil rent; which made them suffer the sad fate of “Dutch Disease”. Added to all this, lack of basic infrastructure, shortage of skilled labour, poor governance, chronic and endemic corruption, we face the greatest danger; that of non-development, not to say “refusal of development.” If the African producing countries have suffered and are still suffering from the recent fall in oil prices (the threat of a relapse is not definitively ruled out), it is because they have always lived an unhealthy dependence on oil production and their savings are still too little or undiversified. Often mentioned as a solution to increase their resilience, the diversification of the economy and sources of budget revenue struggle to be implemented. Since the beginning of oil marketing in the 19th century, oil prices have always fluctuated…it’s almost natural. Unfortunately, very few oil producing countries in the world make structural arrangements to avoid fluctuations in the price of oil, as that could affect their economies. History repeats itself and will continue to be repeated; but the human being never learns from difficult moments. The instability of commodity prices in general and oil in particular again reveals the “short-term” nature of our developmental policies and weakness of stabilisation strategies and diversification of economies, which alone can lead to sustainable development. The strategy is to learn to play with the quirks of the oil market through a vision, have good economic governance in general and that of petroleum resources in particular. However, all the political speeches of recent years revolve around the diversification of economies. With the gradual rise in oil prices, we are very likely to witness yet another postponement of the economic diversification policy so much advocated for (until the next crisis certainly) or remember it only during an opportunity of the next election campaigns.MA: Can we say the rise of Africa depends on the continent solving its energy problems?
MLG: As stated above, it is recognised that the African subsoil is full of abundant fossil and renewable energy resources. But the paradox is that despite this abundance of resources, the annual energy consumption level of the African citizen hardly exceeds 0.6 TOE (tons of oil equivalent), against nearly 4.0 TOE per year for European, 7.8 TOE per year for American and a world average of 1.6 TOE. Excluding North Africa and South Africa, this rate of primary energy consumption falls between 0.3 and 0.4 TOE for the rest of the continent; and up to 0.1 TOE for some countries, where political rhetoric often echoes the slogan of “economic emergence.” Real emerging economies (South Korea, Singapore, Malaysia) have primary energy consumption ranging from 2.5 to 3.5 TOE. Worse, the countries of Sub-Saharan Africa show a consumption of wood fuels, which is close to 60 percent in their energy balance. This inefficiency linked to the abundant and abusive consumption of biomass energy explains why Africa is the most energy-hungry continent in the world. Africa consumes twice as much energy as Europe to produce one US$ of wealth. There is no doubt that modern energy is a powerful vector for both economic and social development, as the correlation between energy consumption and Gross Domestic Product (GDP) growth has always shown. So, I doubt very much that an economy can claim to grow with the energy of biomass (wood and straw for the most part) or with an average annual energy consumption per inhabitant 0.4 TOE. Far from it, no one can develop, for example, the iron and steel industry with the energy of wood. Development comes with large hydroelectric dams or nuclear power plants. If Africa wants to achieve sustainable economic growth and avoid falling into a fatal economic disrepair, it must in the coming decades, even years to come, face the energy challenges, which is essential for its survival. In a simplified way, these challenges consist, on one hand, of making sure the needs of Africans in are met with modern energy, at a lower cost, while reducing the environmental impacts. On the other hand, to make sure there is good governance of our extractive resources. Addressing challenges of such magnitude implies strong political will, well-designed energy strategies, much greater international, inter-African and regional cooperation, building of strategic and institutional capacities, skills training in the sector and the ability of countries to attract the required investments.
MA: Since June 2014 to a recent date, African producing countries have been affected severely by falling oil prices. How are their economies currently doing?MLG: In many African countries hydrocarbons account for a very high share of GDP, with export earnings and fiscal revenues close to 80 to 85 percent in some cases, mostly economies fully backed by oil revenue. In 2013, the oil barrel was US$140, before dropping to US$115 in June 2014; and it further dropped to below US$30 in January 2016, bringing devastating effects in almost all net oil exporting countries. The drop in oil price has had serious consequences, including fall in currency prices, slowdown in investment and developmental projects, fall in budget revenues inclusive of all their corollaries (re-indebtedness, delays in the payment of wages, decline in household purchasing power, decline in consumption, unemployment, deterioration of social services and risks of social tensions.) Growth rates fell between two percent and four percent; barely enough to absorb population growth. But we must remember that the impact of falling oil prices on the economy depends on how countries have benefited from the period of ‘’fat cows’’ to reorganise their economies or not and set up structuring projects. It is sad to say that Africans are still far off in considering to diversify their economies while their budget revenues are optimal. As I have often pointed out, if African oil producing countries have suffered from falling oil prices, it is because they are over-dependent on mono-oil production. The volatility of hydrocarbon prices is indicative of governments’ “short-term” policies and weak stabilisation and diversification strategies, which if improved alone can lead to development. However, this diversification of economies and sources of budget revenue in our countries, which is struggling to be implemented is often mentioned as a solution. Many have, however, proclaimed loudly that they do stand out when it comes to heavy dependence of oil revenue. Today, with the slight rise in oil prices, is the moment for the implementation of economic diversification policies. But this time, we dare to hope that the current situation would lead the oil producing countries to think seriously about implementing real economic policies. The economic diversification advocated for must be as broad as possible in order to have a positive effect on all segments of socio-economic activities, foster inclusivity, allow job-creation and income-generating growth for both governments and populations, as well as for other economic actors.
MA: Some African oil-producing countries are not members of APPO. What is your advice to them?MLG: Indeed, this issue is a concern for the President of our organisation, HE Dr. Emmanuel Ibe Kachikwu. Membership in APPO is not systematic to the status of the oil producing country. This question has been studied in the framework of reforms and arrangements being made to attract interest of these other countries to join the organisation. Africa needs unity and synergy in all sectors of its economy, for a harmonious development. Unlike OPEC whose member countries come from three continents (Latin America, Africa and Asia), the APPO member countries come from the only continent -Africa. So that we have above all a dimension of cooperation and African integration. We need energy solidarity among all African countries whether they are members of our organisation or not. Better still, one of APPO’s missions is to promote the security of energy for Africans in the face of endemic energy poverty and precariousness that has had a very negative impact on the continent’s socio-economic development. The frameworks for consultations and decisions for the new APPO have been reviewed, enlarged and improved. As soon as APPO really takes off, I am sure that there will be a scramble among the African states. Today, out of the 54 African countries, about 50 are identified as oil producers or conducting prospecting and research with very good prospects. In the new Statutes, it is stipulated that any African country with proven reserves in hydrocarbons (not necessarily in the production phase) can be a full member of APPO. Our concern for the time being is therefore to bring African countries together, synergise actions in their oil and gas industries and APPO is the ideal framework for this federation of efforts. In the 9th APPO Programme of Actions, many projects and studies that may interest the whole continent are inscribed. This is the case yet to be taken up with the Association of African Refiners and Distributors, which is conducting a study on the organisation of an African physical market for crude oil and petroleum products. With almost 12 percent of global crude oil production, a physical market for oil and petroleum products would shelter us from scarcity and make sure our energy security can later evolve into a financial oil market. This would protect us from strong fluctuations in the price of oil. We are also in the process of launching a study on the harmonisation of the stratographic nomenclature of the sedimentary basins of APPO member countries; but you know that sedimentary basins are transboundary and can therefore affect all African countries. This brings me to think of a broad inter-African cooperation to produce a document that would serve everyone. APPO is also in the process of developing a “Guide for the Promotion of Local Content in the Oil and Gas Industry in Africa.” The draft of this guide was presented during the 2nd Conference on Local Content Promotion in the Oil and Gas Industry in Africa last year November in Angola. The goal we are aiming for our countries is to achieve a 30 percent ownership rate of own activities across the entire oil industry value chain by 2030. There, we strongly encourage those African countries not yet part of our organisation to join it for synergies of actions and for better African energy integration.
MA: Gabon joined OPEC in 2016, followed last year by Equatorial Guinea, and Congo-Brazzaville this year. Are you also seeing a rise in number of countries joining APPO?
MLG: We were in Vienna from 19 to 23 June 2018 at the meeting of Council of Ministers and the OPEC International Seminar where a very large presence of African delegations was visible. In addition to the seven African member countries of OPEC namely Algeria, Angola, Gabon, Equatorial Guinea, Libya, Nigeria, and Congo-Brazzaville which had just joined the cartel, five other countries: Egypt, Uganda, Sudan, South Sudan and Chad were also present as observers plus the Secretary General of APPO. In his closing speech, Secretary General of OPEC, Dr Mohammad Sanusi Barkindo, warmly welcomed the massive presence of Africans and asked APPO to work on increasing the African presence at OPEC’s next meeting. With Qatar’s recent departure from the oil cartel, seven out of the 14 OPEC member countries are from Africa. Today, some African countries are in the research and or hydrocarbon exploitation phase with excellent prospects. From this consideration, the African presence could consolidate policy and position of the OPEC on the oil world scene.
MA: Is there no conflict of interest with OPEC?MLG: Of course, there is no conflict of interest between the two institutions! Unlike OPEC, whose member countries come from three continents (Latin America, Africa and Asia), member countries of APPO come from one and only continent -Africa. So we have beyond anything, a dimension of African cooperation and integration. Our concern at the moment is therefore to bring African countries closer and synergise actions in their oil and gas industries. The idea is maximise African energy and oil cooperation, of which APPO is the ideal framework for this effort. Currently, Africa does not benefit much from the rise or fall in oil prices. So, a greater presence of African countries in the oil cartel could, tomorrow, be better than today and favourably influence the price of a barrel of oil. The missions of OPEC and APPO are complementary and our organisation now intends to focus on cooperation and partnerships with sister institutions both within and outside Africa. Ultimately, our role should be that of a strategic focal point for hydrocarbon development in Africa. In this, I find a certain convergence of views between OPEC and APPO. Given this convergence of policies, we have therefore agreed with OPEC to work on translating the new vision of APPO into tangible and beneficial results for our member countries. Together, we must promote the efficiency and sustainable development of our hydrocarbon resources and maximise the individual and collective socio-economic value of oil industries in our countries. The envisaged strengthening of cooperation between the two institutions would be very beneficial to our member countries. MA