The ongoing energy crisis has underlined the global economy’s dependence on fossil fuels, according to Simon Flowers, chairman and chief analyst at Wood Mackenzie.“Much has happened in the global economy over the past 12 months. Oil prices have all but doubled and gas prices in Europe and Asia have gone through the roof,” he said, pointing out that geopolitical uncertainty and a possible economic recession were also on the cards. “The Russian invasion of Ukraine has shown us just how dependent the global economy is on oil and gas. The loss of gas volumes in Europe and the strain on commodities such as oil have led to a supply tightness around the world.”According to Flowers, the world has for some time faced an energy trilemma, which involves the security of energy, its affordability and, of course, the sustainability aspect.“A year ago all the focus was on sustainability, but with the security of supply under huge pressure in Europe and prices skyrocketing, the picture has now changed. Now, energy security is at the top of the agenda. This decade the world will need more oil and more gas – and maybe even more coal than was ever anticipated.”Flowers said one of the challenges, however, was that investment into the oil and gas sector had decreased significantly over the past few years, with most of the major oil companies showing little appetite for increased expenditure in the sector.“Oil and gas investment has been lagging the growing demand we are seeing. Investment decisions and corporate strategies have restricted investment. The major players are apprehensive about long-term demand and worried about the payback on capital-intensive projects. In this environment, we have seen a move to rather invest in short-cycle, low capital-intensive projects that have low carbon footprints and quick paybacks.”Flowers said that Africa, with its large oil and gas resources, was poised to take advantage of the increased demand for the commodities.“A f r i c a has a huge undeveloped resource, and no doubt more yet-to-find volumes,” he said, indicating that in the decade to 2020, 61 billion barrels of oil equivalent (BOE) of conventional resource had been discovered in Africa, almost twice as much as any other upstream region. Natural gas accounted for the bulk of these resources, much of it yet to be commercialised.Ongoing exploration was good news for the continent, said Flowers, while recent finds verified that Africa had an important role to play in the oil and gas sector.He said the giant Côte d’Ivoire and Namibia discoveries were two of the exciting projects currently on the continent.Eni’s Baleine project in Côte d’Ivoire is considered the biggest find ever and is already under development only a year after being found. It is estimated to hold 2.5 billion barrels of oil and 93.4bn cubic metres of associated gas. This will see the country that is the world’s top cocoa grower significantly extend its extractive industry.The Namibia find, said Flowers, was another important discovery. Woodmac currently estimates it at around six billion barrels, but the upside could be more than twice that, depending on future appraisal.
