I had the honor of being invited to attend AfricOil’s 20 Year Anniversary Celebration held at the Johannesburg Stock Exchange a few weeks ago, courtesy of MoneyWeb. I refer to the words “few weeks ago” because the firm’s celebratory occasion has stuck with me ever since. I am thoroughly amazed how little I knew about AfricOil’s existence and how much I have come to know about the company and the industry since – that compelled me to pen an article in continuous celebration and appreciation of AfricOil’s successes and their relentless determination to positively grow this industry, which was monopolised by global multinational oil and gas companies. Africa is home to some of the world’s largest petroleum discoveries in recent years. A relative lack of exploration throughout the continent continues to offer huge lucrative opportunities for the further exploitation of untapped resources with prospect findings in Kenya, Tanzania, Ghana, Uganda and even Mozambique. This has re-positioned Africa as home to some of the world’s fastest growing economies. There are challenges that are currently plugging this specific sector worldwide – but this specific article doesn’t attempt to highlight or even dwell on the current status quo of the oil and gas industry. This article is out of gratitude and is the continued celebration of the story of AfricOil.
Africa has a long list of oil producing countries. According to the 2010 data from the US Energy Information Administration (EIA), 16 of the 54 countries in Africa are exporters of oil. This includes Angola (which recently toppled Nigeria as number one largest oil producer in the continent), Nigeria, Libya, Algeria, Sudan, South Sudan, Equatorial Guinea, Congo (Brazzaville), Gabon, Chad, Egypt, Tunisia, Cameroon, Ivory Coast, Democratic Republic of Congo and Mauritania. There are more than 500 oil companies that participate in Africa’s hydrocarbon exploration, and we find that Africa’s oil history runs into periods of several decades. The EIA has noted that Africa’s proven oil reserves have grown by nearly 120% in the past 30 years – from 57 billion barrels in 1980 to 124 billion barrels in 2012, with an estimate of at least another 100 billion barrels which are offshore Africa, waiting to be explored and discovered. Closer to home, Africa’s proven reserves of natural gas have grown from 210 trillion cubic feet (TCF) in 1980 to 509 TCF in 2012, representing growth of over 140%. In 2010, Africa’s oil production represented 12.4% of the world’s total crude oil output, while Africa’s crude oil exports stood at 20% of the world’s total exports of crude.
South Africa Oil and Gas Industry Remains Agile
South Africa has very little in the way of proven oil and gas reserves. The year 1913 saw a huge uptake in oil and gas exploration in the country. Fast-forward that to the 1990’s; exploration companies started discovering locally useful and potentially globally insignificant amounts of oil and gas. That tide has turned significantly since then, with the possibilities of prospects for natural gas (Shale Gas, Coal Bed Methane (CBM), Conventional Gas) being a reality for exploration companies. South Africa has proven crude oil reserves of about -+ 15 million barrels, situated in the Orange Basin of the West Coast and the Bredasdorp Basin in the South Coast of the Western Cape, according to the Council of Geoscience.
This, however, has resulted in an uptake by exploration companies to actively pursue this resource opportunity. Today PetroSA’s (state owned energy company) crude oil production amounts to less than 5,000 barrels per day (bpd) a significant decrease from an output of 160,000 bpd in 2014. But all is not lost, as data from the EIA suggests that South Africa’s recoverable offshore gas is at an estimate of 9 TCF, while another 9 TCF of unconventional gas is situated in the arid Karoo Desert and some 1.5 TCF of CBM gas. Most of South Africa’s natural gas produced by PetroSA comes from the maturing offshore 65,000 boepd (barrels of oil equivalent per day).
The Advent of AfricOil 20 Years Ago
South Africa currently consumes about 180 billion cubic feet (BCF) of gas per year. It imports 120 BCF via a pipeline from central Mozambique for customers in Johannesburg, according to the 2016 data from the EIA.
AfricOil was launched in 1994 as the first black-owned and operated oil company to market and sell refined oil products in South Africa. The company deals in a broad range of refined oil products, ranging from diesel, petrol and jet fuel, through to paraffin and lubricants. As an emerging black-owned oil group, AfricOil is 69% owned by Pembani Oil, 28% by the Public Investment Corporation (PIC), and 3% by the Ikhwezi Trust.
AfricOil’s journey from inception is highlighted by the major milestones below:
- 1994: Worldwide Africa Investment Holdings (later renamed Pembani) founded by Mr Phuthuma Nhleko, Professor Wiseman Nkuhlu, Mr Khanya Ngqula and the late Mr Max Masiela.
- 1995: Pembani launched AfricOil.
- 1997: Pembani Group acquired a controlling stake in Zenex Oil.
- 1999: Pembani Group acquired a 20% stake in Engen Limited, which in turn acquired a 45% shareholding in AfricOil.
- 2000: South Africa oil industry’s leadership sign an empowerment charter.
- 2010: Phuthuma Nhleko is voted the Financial Mail’s Lifetime Achiever.
- 2013: AfricOil wins the Transnet contract.
- 2015: AfricOil celebrates its 20-year Anniversary.
As mentioned at the beginning, this article celebrates the continued success of AfricOil. The company was generous enough to compile a 20-year corporate history book that paints a rather interesting and brilliant story of resilience, commitment and passion for oil and gas development in South Africa by black participants. The corporate history book is titled, AfricOil 20 Years: African Voortrekkers. The following is an excerpt from the corporate history book, “In 2000 as the broad-based BEE project was gaining momentum, with government using its muscle to help along on the transformative project; oil industry’s top leadership, including multinationals, on one hand, and smaller outfits and newcomers, such as then five-year old AfricOil, signed an empowerment charter”. Empowerment charters were a commitment by key industry players to actively support deployment of the BEE project. The South African Petroleum and Liquid Fuels Charter was signed by all major international and emerging players within South Africa. AfricOil is the only black owned distribution company still active 16 years after the charter was signed. This sentiment has been echoed by the current Chief Executive Officer (CEO), Mr Tseke Nkadimeng as he said “we have stuck it out and grown ourselves to the position we find ourselves in today through hard work and determination, because we have only had larger and more resourceful competitors to deal with since we were founded”. According to a recent article on Moneyweb – “AfricOil built its success to become the largest distributor of its type in South Africa and having assumed scale, it considered opportunities for vertical expansion that included acquiring and building a refinery or extending its brand into a retail presence. The latter was achieved through the acquisition of Zenex, which was comprised of 200 service stations, and gave the company exposure to 6% of the retail market”.
While AfricOil continues to operate successfully, it also faced hurdles along its journey, hurdles that didn’t derail the company’s vision and objectives, hurdles that made it stronger over time. AfricOil had to rebuild its business model when the relationship it had with Engen Limited ended. With this, AfricOil had to learn the ins and outs of the oil industry, as the piggy banking on Engen no longer existed. Also, AfricOil suffered a case of bad management that saw the company being on the brink of liquidation not once, but twice, with no funds available or income to speak of. But AfricOil lived to see its success manifest to this day through resilience, commitment and hard work.
Snapshot of the Investment Opportunities in Oil and Gas
As the oil price has plummeted worldwide, the time is now to invest in new acreage to guarantee future reserves in anticipation of an eventual market rebound. Fiscal conditions, investment incentives, and resource opportunities all factor into the appeal of an oil and gas prerogative. Africa continues to be a home to some of the biggest oil and gas discoveries and remains highly under-explored; also its untapped hydrocarbon reserves are enormous.
Legato Consultancy has done a comprehensive top end research for oil and gas investment for 2016 in Africa, and this article will only highlight three countries that present themselves as positive to investments and open to business in the oil and gas industry.
- Mozambique: has a number of significant offshore discoveries, making the country instantly a global relevant player, which is set to become a major Liquefied Natural Gas (LNG) exporter and capable of influencing gas markets.
- Kenya: has capitalized on its strong reputation to command the attention of investors keen to explore for first oil. The country has been looked at as the most promising exploration player in East Africa.
- South Africa: An ongoing advance in technology and seismographic equipment have rekindled renewed interest in the country’s hydrocarbon resources by some of the world’s largest oil companies such as Exxon Mobil, ENI, Anadarko, Shell, Statoil, Total, Chevron becoming involved in pre-drilling exploration. During October 2015, Shell was given the go-ahead to start drilling in South Africa’s Orange Basin; however, current exploration activities are focused on the Karoo Desert for shale gas - on the North Coast fields for coal seam gas and for gas off the West and Southern Coasts of the Cape and Natal Coasts.
In conclusion, in reference to AfricOil’s 20 Year corporate history book “two decades down the road, AfricOil, which was in the red as recently as 2009, is firmly in the black. Landing accounts, coupled with institutional memory, the critical roadmap and transformative founding principles (as well as loads of resilience and tenacity) mean a lot by the way of sustainable growth, which is what AfricOil’s current CEO, Mr Tseke Nkadimeng also speaks of. Having the PIC on board as a shareholder in the 20-year old company affirms its status as a player destined for greater things. AfricOil now dreams of a future where it could play a bigger role on its home turf and on other parts of Africa”. It serves it right and proper to end this celebratory article with the words of Mr Phuthuma Nhleko as he once said “it may have taken us 20 years to get here, but we’ve earned credibility and made some fine achievements. I’m happy we’re where we are and believe we’re on the threshold of something larger now”.
With those words, from Legato Consultancy, we say, the future indeed looks bright for AfricOil and we are looking forward to 20 more years of continued success, growth and sustainability. From humble beginnings two decades ago, AfricOil is indeed destined for greatness, now and in the future.
Well done AfricOil.
By Mr Dipolelo Moime, CEO of Legato Consultancy Pty Ltd