WPC calls for investment in African oil and clean energy

Sep 29, 2005 02:00 AM

A global oil conference concluded in South Africa's Johannesburg with calls for more investment in African oil. While delegates from around the world argue over high oil price, clean energy including a green gas to liquid technology steal some of the show as world oil supply tightens.
The 18th World Petroleum Congress was convened against a backdrop where Africa plays increasingly important role in the global oil market, in which crude oil prices have soared sky-high during the past two years. With large oil reserves, Africa, the world's poorest continent, and an environment-friendly technology that can turn natural gas to diesel are now receiving more attention from oil-hungry countries and petroleum producers, amid rising oil prices, instability in the Arab world and production slowdowns in the hurricane-hit Gulf of Mexico.

Vast investment opportunity in Africa
Officials from oil-rich Nigeria, Algeria, Angola and Libya told delegates attending the congress that vast oil and gas investment opportunities are emerging in Africa.
Managing Director of the Nigerian National Petroleum Corporation, Funsho Kupolokun, said that the global oil sector was at "new dawn," with the price of oil facing long-run upward pressure. About $ 67 bn is sent to be invested in Nigeria's oil and gas sector by 2008, Kupolokun told representatives at a plenary session titled "African Perspective."
"There are tremendous opportunities for participation in Nigeria," he added.

Nigeria has proven oil reserves of 35 bn barrels and annual production of 2.5 mm bpd and produced about 10 % of the Organization of Petroleum Exporting Countries' (OPEC) oil production. Nigeria is also developing a number of gas fields and is seeing the second largest liquefied natural gas (LNG) growth in the world, Kupolokun said.
For northern Africa's Libya, the ending of sanctions in 2003 has opened up oil and gas opportunities in the country, Chairman for Libya's National Oil Corporation Abdullah Salem El-Badri said on the same occasion. The country currently has oil production of 1.6 mm bpd and about 4 bn dollars in investment opportunities available.

A presentation by Angola's state oil company, Sonangol, revealed that the company was producing 1.3 mm barrels of oil per day and was set to increase output to two mm barrel per day by 2008. The company also has reserves of 12.5 bn barrels of oil.
A new law enacted in Angola allowed for the establishment of private Angolan oil companies. Angola is also developing natural gas and liquefied natural gas projects.

President of Algerian state oil company Sonatrach, Mohamed Meziane, said that Africa held 7 % of the world's proven oil reserves and remained very much under-explored.
Algeria's oil sector, though, is not completely open to foreign companies. All foreign operators must work in partnership with Sonatrach, with Sonatrach usually holding majority ownership in these production-sharing agreements.

No consensus over oil price
During the past two years crude oil prices have sky-rocketed and reached a record $ 70.85 a barrel in August after Hurricane Katrina shut off US Gulf of Mexico supplies and flooded refineries. On the issue of high oil price, delegates attending the congress have expressed different views.
Saudi Arabia's Petroleum Minister Ali Al-Naimi thought that " turbulent times" experienced by the world oil market at present was not the problem of oil availability, but rather one of deliverability, or the capacity to explore, produce, transport, refine and deliver oil.
"Prices are under pressure because the petroleum industry's infrastructure is stretched thin," he said, adding that the tightness in supply chain was caused by rising demand, insufficient investment in capacity, and a mismatch between crude quality and the existing refining base.

Although believing both very low prices and very high prices are not sustainable, Al-Naimi said the current oil price level is providing the returns needed to attract adequate investment and overthe next several years significant new capacity will begin to come on-stream.
However, Leo Drollas, chief economist of Centre for Global Energy Studies deemed that the price of OPEC basket will drift gently downwards to $ 33 a barrel in 2010.

Brighter future for clean gas to diesel technology, renewable energy
With world diesel demand rising at about 3 % a year for the past decade, interest in gas-to-liquids (GTL) diesel is now gathering pace and experts attending World Petroleum Congress has forecast a brighter future for the technology.
Pat Davies, chief executive of Sasol, the world's leading producer of GTL said the high oil price has renewed international focus on his company's Fischer-Tropsch technology.

Tony Pytte, another official with the Johannesburg-based company, commented that GTL diesel has already demonstrated its potential in the global transport market. The availability of fuel from Bintulu in Malaysia has allowed the product to be tested extensively in international markets.
GTL diesel from Bintulu is being used in the Thai, Japanese and Californian markets, and has been introduced to a bus trial in central London, Pytte said, adding that GTL fuels produced in South Africa has been consumed domestically. Pytte said the technology has not been used on a global scale before simply because oil supplies have been abundant and refining has been less expensive.

But the cost of GTL technology today is increasingly competitive with oil refining because refining costs for cleaner fuels are rising and because GTL producers can target the products slate to produce diesel and other middle distillates, for which demand growth is highest. In addition, GTL diesel is already ultra clean, with virtually no sulphur or aromatics. Because of this, there is continuing research and development focus on GTL technology to further lower capital and operating costs.
Pytte said it is safe to assume the international commercial era of GTL will commence in earnest over the next five or soyears as BP, Exxon and Shell and other players start to bring GTL production capacity on line and GTL products to an eco-conscious market.

Renewable, environmentally friendly sources of energy make up just 2 % of the global energy market but are growing and the production will equal that of oil and natural gas by 2040, said Christopher Flavin, the president of the Worldwatch Institute, during the congress. Flavin said $ 24 bn was being invested in the industry this year, the largest part by major corporations that do see the potential.
Jeremy Bentham, vice president of Shell's hydrogen business, told the congress that the production of renewable sources of energy would equal that of natural gas in 25 years and that of petroleum by 2040. Renewable sources of energy include wind, solar power, biomass, geothermal, hydro-electric, hydrogen and energy from ocean resources.

Flavin said oil accounts for about 30 % of the global energy market now, while renewables make up just 2 %. But he said wind power was growing at an average rate of 30 % a year, solar power at 23 % a year while the growth in fossil fuels was about 2 % a year.
Bentham also said the desire for some energy independence and the need to reduce air pollution in cities were major factors in the drive to increase the use of renewable energy.

Source: Xinhua
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