African Energy Commission (AFREC) AFREC Presentation to the UNCTAD 10th Africa Oil and Gas Conference Algiers, Algeria 2-5 April, 2006 African Hydrocarbon Resources at the Cross Roads: The Need for Coherent Strategies and Directions Dr Hussein Elhag, AFREC Executive Director NOT AN OFFICIAL UNCTAD RECORD

The Current Situation The rate of discovery of new oil reserves in Africa has been the fastest in the world in the past decade. Africa produced over 9 million barrels per day (bbl/d) of oil in Total African oil consumption in 2005 was little than 3 million bbl/d. At the present, 16 countries in Africa produce oil and prospects are high in at least another 5 countries.

General Observations Africa is a net exporter of petroleum and gas Africa is a net importer of petroleum products Africa has enough oil and gas to meet its continental needs although Africa is unable to meet its energy needs now Africa has an energy distribution problem within the continent African oil refining capacity utilization has been falling when globally the trend has been increasing.

Areas of Strategies 1. Upstream 2. Downstream 3.Exploitation of Natural Gas 4. Refineries 5. Delivery Means 6. Price Volatility 7. Institutional Reforms 8. Socioeconomic Dimensions

African oil policymakers and decision makers should continue to: Highlight the importance of fostering cooperation in hydrocarbon sector. Attracting capital for investment. Setting up joint projects in exploration, production and refining sector. Promote joint manufacturing of petrochemicals. Create an integrated oil industry in Africa. Monitor developments in the world oil markets and probe their implications on the African producer’s as well as consumer’s countries. The General Strategy

Areas of Strategies (1) Up-Stream: 1.Promote the idea of a Pan-African Oil Company. 2.Strategic harmonization among Africa’s giant hydrocarbon companies (Sonatrach, Sasol, Sonangol, NNPC, EGPC, NOC, PetroAS, etc…) 3.Support the AFREC’s proposal on the creation the “African Oil Producing and Importing Countries” (AfrOPIC) as initial step for carrying this task.

(2) Down-Stream: 1.Strengthened political will and removal of political barriers. 2.Support the creation regional energy markets. 3.Institutional strengthening and financial and political support to organizations such as APPA, AFREC and AU among others. 4.Empowering RECs to play their mandated role in this regard.

1.Stoppage of gas flaring in Africa should get priority. 2.Natural gas and LPG should be considered as part of an integrated energy solutions. 3.Where LPG is deployed safety training is particularly important. 4.African countries should benefit from the South Africa’s experience in rolling out LPG for low income households. 5.Support AFREC’s proposal for the creation of the “African Gas Market Agreement” in short (AGMA, of AfriGas) as initial step for carrying this task. (3) Exploitation of Natural Gas:

(4) Refining Sector: 2. Encourage of policies aiming at pooling of refineries. 2. Support RECs policies for oil products procurement with their geographic regions. 3. Support SEN-SAD plan to build a new refinery in West Africa. 4. Encourage construction the fair distribution of refineries around the continent. 5. Sponsor joint Work towards harmonization of fuel specifications and standards in order to get benefits from: (a) Economies of scale of oil refining: (b) Economies of scale for petroleum product importing countries. (c) Reduced health hazards associated with other cleaner fuels. (d) Alleviation of dumping of poor quality fuels and motor vehicles from outside africa; and (e) Inability of newer vehicles to operate on inferior fuels.

(5) Delivery Means: 1.Construction of new refineries in strategically based locations. 2.Promote African pipeline industry and construction. 3.Empowering of the private sector to engage in the tanker services. 4.Support RECs to develop regional fuel products procurement programs

(6) Price Volatility: 1. The following options be considered: a. Allow flexible exchange rate to cushion prices. b. Price smoothing mechanisms. c. Fiscal relief to low income groups. d. Creation of African Solidarity Oil Fund to help poor oil-imported countries. 2. Supply side measures. 3. Demand side management measures. 4. Invest more in research to find energy carriers to replace oil. 5. Encourage research in bio-fuels. 6. African energy policies be reviewed on a continental and regional basis including: a. Levelling the playing field with other energy carriers. b. Measures to promote regional integration of trade and investment, particularly for landlocked countries.

(7) Institutional Reforms: 1.Joint work together towards a common vision and policy. 2. Support AFREC so that it can undertake its tasks. 3. Support cooperation among countries in tackling capacity building challenges. 4. Reverse the perception by donors that African Governments do not regard energy as a priority. 5. Support partnerships between international oil companies and local oil companies. 6. Strive towards making energy a priority in national budgets as an important signal.

1. Support programs developed by RECs and be reflected in their national plans. 2. Support economic reforms, good governance, democracy and human rights issues. 3. Gender equity in the petroleum sector. 4. Reverse negative environmental impacts such as desertification and flared gas. (8) Socioeconomic Dimension:

CONCLUSIONS: The strategic goal of the energy sector is to advance the national economic viability. The need for a “Strategic Security” through integration of energy projects. Integration would result in diversification. All energy options should be kept open. Huge potential greater energy trade. Africa should endeavour to acquire skills and expertise in hydrocarbon industry. There is a growing need for a “Joint African Continental Hydrocarbon Companies”.

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