THE fall in crude oil prices since 2013 has slowed down investments in the exploration works for oil and gas in Africa, including Zambia, Energy Forum-Zambia chairperson Johnstone Chikwanda has said.
Mr Chikwanda, who is also Indeni Petroleum Refinery chairman, said the fall in oil prices had wreaked havoc on oil exporting African economies in terms of revenue generation.
He was speaking in a presentation to the Africa Energy Indaba held from 16-17th February 2016 at the Sandston Convention Centre, Johannesburg, South Africa.
“The crude oil price has been falling since 2013 and has fallen by over 60 percent as of today. This has had a tremendous impact on oil producing African economies.
“This fall has wreaked havoc on oil exporting African economies in terms of revenue generation which has been lost. This scenario has slowed down investments around exploration works for oil and gas in Africa,” he said.
Mr Chikwanda said the scenario was likely to persist for the next couple of years.
He however said Africa had not benefited from low prices because of currency deterioration in most African countries to the point that some countries had been increasing pump prices during this period.
He said that fuel pump prices were dictated by a separation of the exchange rate and the spot price on the global market.
African countries needed to increase refinery capacity including building new ones to support regional economic growth and invest in projects such as pipelines, rail and fuel storage facilities.
He explained that these projects would strengthen regional integration and intra-Africa fuel trade because most African countries that produced crude oil exported the product and then imported refined fuel at high cost.
“It is anticipated that by 2025, increased demand for fuel would create serious logistical challenges in terms of critical shortage of storage facilities and transportation of fuel by road would not solve the problem in a significant way. Hence the case for investing in rail and pipelines remains valid,” he said.
Mr Chikwanda called upon investors to assist African governments in setting up strategic fuel reserves.
“I would like to call upon investors to assist and collaborate with African governments to set up strategic fuel reserves that can last a minimum 90 days which is about a globally accepted benchmark for fuel reserves.
“It is a sad scenario that most of African countries have no strategically held fuel reserves which can last a number of months,” he said.
He also warned of putting pressure on the national treasury for capital expenditure and stock procurement while setting up robust national fuel reserves.