Oil producers across Africa say they can operate profitably so long as oil prices remain above $50 a barrel.

Two years ago these companies said they relied on $90-plus to operate successfully but after a tough 24 months, they are finally beginning to adapt to the slump in world oil prices, according to an article by africanbusinessmagazine.com

It uses analysis published by the energy consultancy Wood Mackenzie that examine 56 companies.

Adapting to this change in fortunes has not been easy. Most companies have had to make deep cuts, amounting to as much as 49% of spending on exploration and production, or $230bn, compared to 2014 levels, according to the Wood Mackenzie study.

Although these cuts have made companies more resilient, investors are feeling nervous about where they spend their money and are placing ever greater importance on the cost efficiency of projects.

This shifting dynamic has a particular bearing on Africa’s upstream sector, says the report. After a boom in exploration and production activity in the late 2000s and early 2010s, companies are now looking at investments in the region with much greater scrutiny, Chris Bredenhann, a partner at PwC in Cape Town, told africanbusinessmagazine.com.

A study by Bredenhann’s team published in August 2016 found that, despite the sharp fall in the oil price, Africa remains an attractive prospect. The study found that the continent produced eight of the top 20 discoveries globally in 2015, and nine out of the top 20 in the first eight months of 2016.

These include major discoveries such as the “supergiant” Zohr gas field off Egypt, containing 30 trillion cubic feet of gas, and Kosmos Energy’s discovery of 11–15 trillion cubic feet of gas off Mauritania. “The difference now”, Bredenhann says, “is that companies are approaching investments with a much more critical view.”

READ THE FULL STORY AT AFRICABUSINESSMAGAZINE.COM

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