Africa consumes twice as much energy as Europe to produce just $1of wealth, says Mahaman Gaya, APPO’s Secretary General

After more than 25 years in existence and not meeting the expectations of its member countries, the African Petroleum Producers Organisation (APPO), in 2015 embarked on major reforms to enhance its effectiveness. To fast-track the implementation of the reforms the Organisation moved its operations to Abuja, Nigeria from Congo, Brazzaville temporarily for one year, in order to have a stronger support for its transition.

By March 31st 2019, the APPO would complete its one year transfer to Nigeria. MAHAMAN LAOUAN GAYA, Secretary General of APPO, in this interview with NSE ANTHONY-UKO in Abuja, Nigeria’s capital city, speaks on the reforms undertaken by the 18-member group, as well as its future plans.

How has the APPO encouraged African petroleum producing countries to cooperate, collaborate, share knowledge and competences since inception?

It should first be noted that the African Petroleum Producers’ Organisation (APPO) is an African intergovernmental organisation created on January 27th, 1987 in Lagos (Nigeria), to serve as a platform for cooperation and harmonization of efforts, collaboration, sharing of knowledge and skills among African oil producing countries. With 18 member countries, it accounts for nearly 95 percent of Africa’s oil production and accounts for at least 13 percent of world production. One of APPO’s important missions is the promotion of joint initiatives – projects, infrastructure – in management policies and strategies across the entire oil industry value chain, to enable its member countries to draw better profits from the activities of this non-renewable resource.

After more than a quarter century of existence, it was recognized that despite some progress, APPO did not meet the expectations of its member countries. The Organisation had entered a serious weakness and non-visibility. Observers were constantly wondering what it was for. The long lethargy in which it has been languishing for years has also resulted in a very low level, if not a complete lack of cooperation among member countries in the oil sector, a lack of control of activities across the entire value chain of oil industry in Africa; this, among other things, did not allow it to establish a sharp and confirmed African expertise, a total lack of visibility of the organisation at national, regional and international levels and a very noticeable absence in the major centres of international decisions. The organisation which was sinking on sight, in total ignorance of the global oil context, needed to be reframed on the global oil and energy scene to meet the challenges of the day. As rescue measures, the Council of Ministers decided on its deep reform. Thus, as soon as we took office, we were confronted with this reform. After many meetings of Committee of Experts and Council of Ministers, the draft of this reform was adopted in Luanda in Angola in January 2018. The resolutions that were adopted included the new Vision and Mission, the new Strategic Objectives of the Organisation, its Guiding Principles and Values, the General Structure, a new Organisational Chart and the temporary transfer of its activities to Abuja, Nigeria for one year, effective April 1, 2018. APPA was also renamed the African Petroleum Producers’ Organisation (APPO). The establishment of a Summit of Heads of State of APPO of member countries was also endorsed in principle as and when necessary. Note that emphasis in reform will be placed on close coordination and new synergy between member countries. It will focus on creating a united African front on the global energy stage – which will certainly increase the power of the African voice – and on increase, intra-African cooperation on projects, trans-border infrastructure, joint refineries and other major infrastructure projects.

The activities of APPO are tentatively transferred to Abuja in Nigeria. Why such a decision?

It should be noted that the activities of the organisation was relocated from Brazzaville, Congo to Abuja during a transition period which started, as I said above, April 1, 2018 and ending March 31, 2019.

The Council of Ministers made this transfer decision for technical and strategic reasons. Our primary objective is to see APPO align with the global oil and energy directions set out by the United Nations, with the SE4All Initiative; the World Petroleum Council, the World Energy Council, with the resolution of the World Energy Trilemma; the African Union, with the Africa Mining Vision; the African Development Bank, with the “New Deal” for Energy in Africa, NEPAD, among others. It must have a positioning in the energy, oil and gas sectors in Africa and promote its activities like other similar institutions, such as Organisation of Petroleum Exporting Countries (OPEC), International Energy Forum (IEF), Gas Exporting Countries Forum (GECF), etc.

The fundamental basis for this success is, of course, the political will of African leaders and a real change of mentality among some actors in the organisation; those must go beyond their purely personal interests and see only those of our common organisation. The methods of governance and management of the Secretariat as they have been since the creation of APPA, are obsolete and have never been effective. We need a fresh start and today Nigeria, given its position on the African and world oil scene, its leadership and for various other reasons, offer better, political, technical, financial and diplomatic guidance to accompany this reform.

Since arriving in Abuja last year, the organisation has received the special attention of the highest Nigerian authorities, and I believe that this transition period has involved a total change in the institution and the foundations of a new organisation are thrown the new pride of Africa. From 22nd to 26th January 2019, we held series of meetings here in Abuja, including the very first meeting of the Executive Council (this is a new instance of the organisation) and an extraordinary meeting of the Council of Ministers. The opportunity has therefore been given to validate all the organic texts that we have worked during the transition. Formally the new APPO is effective, but its official launch will take place on next April 2nd in Malabo in Equatorial Guinea. This means that the machine of the new APPO is in full swing and our goal is to make this organisation one of the largest and most powerful on a continental scale. We are on this path and we will get there.

This year, APPO is organising its statutory meetings in Malabo, followed by other events including those coming under the “Year of Energy in Equatorial Guinea”. What does it inspire in you?

It should also be remembered that in August 2018, the Equatorial Guinean Minister of Mines and Hydrocarbons, Gabriel Mbaga Obiang Lima, launched the initiative ‘’2019, Year of Energy in Guinea Equatorial’’ whose objective is to position Malabo as the African Capital of Energy throughout the year 2019. For the Equatorial Guinean government, this initiative aims first and foremost to promote investment opportunities for energy projects of prime importance plan in Equatorial Guinea and Africa, and secondly, the government, to use its energy diplomacy at the service of the African continent. Much has been given to APPO, whose activities stretching from March 28th to April 2nd, 2019, will enable it to play an eminently important role on the African and global oil and energy scene. Thus, the first ordinary post-reform meeting of APPO Council of Ministers will be organised, which will be preceded by the very first ordinary meeting of the Executive Council, the meeting of the Ad Hoc Legal Committee and the meeting of Directors General of the African National Oil Companies. From 3rd to 5th April 2019, will be held the 7th edition of CAPE; an APPO activity that is held every three (3) years and which Equatorial Guinea has the honor to host. It is also the place to recognize the important role played by Minister Gabriel Mbaga Obiang Lima in positioning APPO on the same alignment as the major international energy organisations. This policy recalls the creation in September 2018 in Cape Town, South Africa of the “Energy Coalitions”; a way to advance energy sectors in Africa, through energy coalitions. The highlight of this event on the “Energy Coalitions” was the meeting of Secretaries General of OPEC, GECF, IEF and APPO. Discussions then focused on the actions of these organisations with African countries, the development of cooperation between OPEC, IEF, GECF and APPO in coordinating the future needs of the African and international oil markets. It is in this spirit therefore that ‘’the Year of Energy’’, will also see the organisation in Equatorial Guinea of the 5th summit of GECF. For 2019, Equatorial Guinea already has a distinguished track record in organising regional and continental events and in promoting strong diplomatic links between African and international partners in the energy sector.

What place can be granted today and tomorrow to the APPO in Africa and perhaps even in the world?

The global energy and oil geopolitics is constantly changing and we need to reframe our organisation in this new context. Africa must find a new paradigm to generate real benefits for the hydrocarbon development interface on the one hand and for sustainable development on the other. APPO could become the fulcrum for making this new paradigm a reality. With its potential, one of the largest in the world and a better framework for cooperation and integration, Africa can validly align with the oil powers of today; to have a say in the global oil and energy spectrum and APPO to be a major partner of the world’s major energy and oil institutions. This unity and these ambitions for Africa, which we lacked in the past; may well be a reality today, and our organisation, which needs special attention from the highest authorities in our countries, is the ideal instrument to meet this challenge. APPO can be an instrument of security and fight against energy and economic poverty. The promising prospects are there and I think that after the challenge of physical safety, that of food security, it is the challenge of energy security that must be the concern of our governments. Also, oil is a highly sensitive sector that commands coordinated and highly specialized strategic approaches. In isolation, African countries are unable to fight against international oil capital. We therefore need a framework with a real device for economic and strategic intelligence. This is the role our organisation intends to play. In this, I believe that APPO must in the years to come, be one of the organisations on which Africa can count.

African countries are becoming increasingly engaged in the global oil and gas conversation through bodies like OPEC and GECF. Do you see this new coordination outlasting the low oil prices and OPEC led production cuts?

I believe the low oil prices ushered in a new era of coordination throughout the oil and gas industry, from the private sector to governments to organisations like OPEC and APPO. OPEC’s Declaration of Cooperation is a key indicator of the need to cooperate across borders and across alliances, and the entire world has now seen the power of such coordination. In this dynamic, ‘’Africa Oil & Power’’ has organised in September 2018 a conference in South Africa, which focused on “Energy Coalitions” and whose presentations and debates focused on the best way to advance energy sectors in Africa, through energy coalitions. I am delighted that ‘’Africa Oil & Power’’ has managed to bring together at this conference the Secretaries General of OPEC, IEF, GECF and APPO around this theme. The discussions focused more on Africa’s growing role in OPEC, IEF and GECF, the role that APPO now has to play on the world oil scene, the OPEC and APPO missions in coordinating the future needs of African and international oil markets, I see in this concept of “Energy Coalitions” a subsystem of a more global system that I will call “Socio-Economic Coalitions”. It is in this logic that I place the creation by African Union Commission of the Continental Free Trade Area (CFTA); a project that is an opportunity to reduce the marginalization of Africa in world trade and significantly increase intra-African exchange and trade. That’s what we want to be in the oil and energy sector in Africa.

Gabon joined OPEC in 2016, followed in 2017 by Equatorial Guinea, and last year Congo-Brazzaville. Why this craze of African producers for this organisation?

We were in Vienna in December 2018 at the OPEC Council of Ministers, where a very large presence of African delegations was visible. In addition to the seven African member countries of OPEC namely Algeria, Angola, Gabon, Equatorial Guinea, Libya, Nigeria, and Congo-Brazzaville which had just joined the cartel, five other countries: Egypt, Uganda, Sudan, South Sudan and Chad were also present as observers; and also the Secretary General of APPO. In his closing speech, the Secretary General of OPEC, Mohammad Sanusi Barkindo, warmly welcomed the massive presence of Africans and asked the APPO to work for that at the next meeting of OPEC, the African presence will be more noticed. Today, almost all African countries are in the research and/or hydrocarbon exploitation phase. The producing countries have a total production of close to 10 million barrels per day, and the whole continent has an eminently abundant potential. From this consideration, the African presence could consolidate OPEC’s policy and position on the world oil scene. A greater presence of African countries in the cartel could, tomorrow, better than today, influence favourably the price of a barrel of oil. The missions of OPEC and those of APPO are complementary and our Organisation now intends to focus on understanding, cooperation and partnerships with sister institutions both inside and outside the African continent. Ultimately, our role should be that of a strategic focal point for hydrocarbon development in Africa. And in this, I find a certain convergence of views between OPEC and APPO. Given this convergence of policies, we have therefore agreed with OPEC to work to translate the new vision of the APPO into tangible and beneficial results for our member countries. Together, we must promote the efficiency and sustainable development of our hydrocarbon resources and maximize the individual and collective socio-economic value of the oil industries of our countries. The envisaged strengthening of cooperation between the two institutions would be very beneficial for our member countries.

Your Excellency, some African oil-producing countries are not members of APPO. What will be your attitude towards them?

Membership in APPO is not systematic of the status of producing country. This question has been studied in the framework of the reform and arrangements are being made to arouse the interest of these brother countries to join the organisation, which is ultimately a fighting tool for the joint control of the oil activities, the maximization by our oil revenue countries and promoting local content. Africa needs unity and synergy in all sectors of its economy, for a harmonious development. Unlike OPEC whose member countries come from three continents (Latin America, Africa and Asia), the APPO member countries come from the only continent….Africa. So we have above all, a dimension of cooperation and African integration. We have a concern for energy solidarity among all African countries; whether they are members of our organisation or not. Better still, one of the APPO’s missions is to promote the energy security of Africans in the face of endemic energy poverty and precariousness that have a very negative impact on the continent’s economic and social development. The frameworks for consultations and decisions of the new APPO have been reviewed, enlarged and improved. For example, the convening of a Summit of Heads of State of the Organisation’s member countries was held as soon as it was needed. As soon as APPO really takes off, I am sure that there will be a craze for all African states. Today, out of the 54 African countries, about 50 are identified as oil producers or conducting prospecting and research with very good prospects. Then, in the new statutes, it is stipulated that an African country with proven reserves in hydrocarbons (not necessarily in the production phase) can be a full member of APPO. Our concern for the time being is, therefore, to bring African countries to more synergy of actions in their oil and gas industries, and APPO is the ideal framework for this federation of efforts. In the 9th APPO Action Programme, many continental projects and studies are inscribed. This is the case of our initiative to undertake with the ARA (Association of African Refiners and Distributors) a study on the organization of an African market for crude oil and petroleum products should be encouraged and supported. With nearly 12 percent of global crude oil production, a physical market for oil and petroleum products would shelter us from scarcity and ensure our energy security and perhaps later evolve into a financial crude oil and oil products market; which would protect us from strong fluctuations in the price of a barrel. We are also in the process of launching a study on the harmonization of the stratigraphic nomenclature of the sedimentary basins of APPO member countries; but you know that sedimentary basins are transboundary and can therefore affect all countries. APPO is in the process of developing a “Guide for the Promotion of Local Content in the Oil and Gas Industry in Africa”. This guide, which has already been presented at the 2nd Conference on Local Content Promotion in the Oil and Gas Industry in Africa on November, 2018 in Luanda, Angola, will be formalized as a working document of APPO member countries at the APPO statutory meetings and CAPE VII to be held from March 28th to April 5th, 2019 in Malabo, Equatorial Guinea. The goal we are aiming for is for our countries to achieve a 30 percent ownership rate of activities across the entire oil industry value chain by 2030. There, we strongly encourage, African countries not yet members of our organisation to join it for synergies of actions and better African energy integration.

What is the future of the oil industry in Africa?

When you take a look at the world’s oil geography, one realizes that certain regions, North America, near and Middle East, North Sea, once pioneers of oil production are today either in the phase of depletion, or in that of the exploitation of unconventional hydrocarbons, the so-called gas and oil shale. In Africa, however, only four countries began a modest exploitation in the 1960s. Today, about 20 countries are identified as oil producers – the 18 member countries of APPO, South Sudan and Tunisia – and about 30 others are conducting prospecting and research operations. Offshore and onshore basins, both off East Africa, the African part of Indian Ocean, West Africa, and the hinterland countries are little explored and have very good prospects; they are mainly located in Tunisia, Morocco, Mozambique, Kenya, Uganda, Tanzania, Senegal, Sao Tome and Principe, Niger, Mali, Madagascar, Comoros. Africa has proven global oil and gas reserves that are variously estimated but for sure very abundant.

Certainly, the continent has more than 13 percent of the world’s hydrocarbon reserves (even if Western statistics tend to underestimate and devalue the potential of the black continent), and better, in the last 15 years, one-third of the world oil discoveries have been in Africa. The underestimation by certain institutions and multinational oil companies of the reserves and the hydrocarbon potential of Africa shows a properly neo-colonial joke! And yet, there is no doubt that Africa’s oil and gas potential can compete today with that of any other region in the world. This leads me to say that if Africa were to be considered as a single producer, it is certain that our continent will challenge Saudi Arabia, Russia and the United States. To do this, we must put an end to the disunity and hyper-balkanization that characterize today’s Africa and further promote its integration. Anyway, the potential is there and, in the years to come, believe me, Africa will have very big surprises in the oil and gas sector.

Can Africa develop through its oil resources?

In recent decades, Africa has been at the heart of all kinds of debates, both on the misery in which its populations are vegetated and on its immense potential and incomparable natural wealth that could bring in more than 30 billion US dollars in revenue per year over the next two decades. Just for the oil reserves of African countries, some statistics estimate them to a hundred billion barrels, as much as Saudi Arabia. In general, it is recognized by all that the African subsoil is full of abundant fossil energy resources (oil, gas, coal, uranium) and those of renewable origins (hydraulic, solar, wind, biomass, geothermal). In addition, Africa is today inhabited by nearly one billion inhabitants, 60 percent of whom are young, while Europe, America and Asia are becoming increasingly ‘’aging’’. If with all these richness, Africa cannot get off the ground, I am not sure that the oil resources are the only ones responsible or that in the current socio-economic situation they can meet the challenges of underdevelopment. The causes of Africa’s lag are more elsewhere than in oil. While the existence of extractive resources never fails to raise controversy and the use of negative clichés for Africa, you hear, here and there (and very often for good reason), superlatives terms such as “paradox of abundance”, “curse of natural resources”, “geological scandal”, etc. Let’s acknowledge that we have somewhere flanked to be treated in this way! While the prospect of huge revenues from our natural resources may seem intoxicating, it also raises the issue of governance in this sector, a crucial element because almost all our countries, even endowed with abundant extractive and energy resources, have not yet borrowed, far from it, the road of development. Never before, have the primary sector and human resources been considered in Africa as the fundamental levers for true sustainable development. It is precisely in this respect that those who describe our situation as the “paradox of abundance” are not entirely wrong. However, a macroeconomic approach has shown that the recent decline in oil prices has had recessive effects in almost all African net hydrocarbon exporting countries (falling currencies, sharp drop in tax revenues, slowing investments and projects diversification, re-debt, adjustment of the budget to a price twice as high) and more modest expansionary effects in other net importing countries. Only a few countries have seized the opportunity to support their growth in a slightly more diversified economy; if not for the most part they have not been able to stand out from the over-dependence of the oil rent; which made them suffering the sad fate of “Dutch Disease”. Added to all this, the lack of basic infrastructure, the shortage of skilled labour, poor governance, chronic and endemic corruption, etc, we face the greatest danger; that of non-development, not to say ‘’refusal of development’’. If the African producing countries have suffered and are still suffering from the recent fall in oil prices (the threat of a relapse is not definitively ruled out), it is because they have always lived an unhealthy dependence on oil production and their savings still too little or not diversified. Yet, often mentioned as a solution to increase their resilience, the diversification of the economy and sources of budget revenue is struggling to be implemented. However, all the political speeches of recent years revolve around the diversification of economies. With the gradual rise in oil prices, we are very likely to witness yet another postponement of the economic diversification policy so much advocated (until the next crisis certainly!); Opportunity of the next election campaigns.

Can we say that the rise of the African continent will depend on solving its problematic energy?

As stated earlier, it is recognized that the African subsoil is full of abundant fossil and renewable energy resources. But the paradox is that despite this abundance of resources, the annual energy consumption level of the African citizen hardly exceeds 0.6 toe (tonnes of oil equivalent), against nearly 4.0 toe per year for European, 7.8 toe per year for American and a world average of 1.6 toe. Excluding North Africa and South Africa, this rate of primary energy consumption falls between 0.3 and 0.4 toe for the rest of the continent; and up to 0.1 toe for some countries where political rhetoric often echoes the slogan of ‘’economic emergence’’.

Really emerging economies (South Korea, Singapore, Malaysia, etc.) have primary energy consumption ranging from 2.5 to 3.5 toe. Worse, the countries of sub-Saharan Africa show a consumption of wood fuels which is close to 60 percent in their energy balance. This inefficiency linked to the abundant and abusive consumption of energy biomass explains why Africa is the most energy-hungry continent in the world. Africa consumes twice as much energy as Europe to produce one US dollar of wealth. There is no doubt that modern energy is a powerful vector for both economic and social development, as the correlation between energy consumption and GDP growth has always shown. So, I doubt very much that an economy can claim to emerge with the energy of biomass (wood and straw for the most part) or with an average annual energy consumption per inhabitant as ridiculous as 0.4 toe. Far from it, no one can develop, for example, the iron and steel industry with the energy of wood. Development is with large hydroelectric dams or nuclear power plants.

If Africa wants to achieve sustainable economic growth and avoid falling into a fatal economic disrepair, it must in the decades, even years to come, face the energy challenges essential for its survival. In a simplified way, these challenges consist, on the one hand, of ensuring the needs of Africans in a modern energy, at a lower cost, while reducing the environmental impacts and, on the other hand, to ensure a good governance of our extractive resources. Addressing challenges of such magnitude implies strong political will, well-designed energy strategies, much greater international, inter-African and regional cooperation, building of strategic and institutional capacities, skills training in the sector and the ability of countries to attract the required investments.

Your Excellency what’s your assessment of the international oil market today?

We can say that the international oil market is doing much better. It is recovering because it is coming out of a long period of instability, which persists and hurts the economies of the producing countries too much. This situation has practically started since almost six years since in 2013, the barrel of oil was next to US$140, then to US$115 in June 2014, slightly below US$30 in mid-January 2016, to rise above the US$50 mark in June 2016 and remain in this state of instability to this day. So from 2015 to today, a barrel of crude oil ‘’did not fall sustainably’’ below US$40 and conversely, it did not exceed US$80. However, the desire of the OPEC+ countries is to see it rise above US$80, and despite efforts to consolidate the international oil market, this has not been possible for the moment. Since this vertiginous plunge, oil prices vary between brutal fall, temporary stability, rebound, relapse. And this up and down fluctuation in oil prices is closely linked to a number of factors, including world demand, itself a true reflection of global economic activity, but also the rise in oil production in Saudi Arabia, which has heard repeated calls from Donald Trump to lower prices; the strong expansion of American shale oil production, whose production reaches record levels each month; and the easing of US sanctions against Iran, which can continue to export a large part of its crude. Faced with this situation, which began in June 2014, the 14 members of OPEC, led by Saudi Arabia, had agreed in late 2016 with 10 other oil-producing countries, led by Russia, to limit production. Thus, these two groups of large producers have engaged in the conclusion of the “very long term” Declaration of Cooperation for 10 to 20 years of cooperation in order to supervise their oil production. This agreement, which came into effect in 2017, was extended in November until the end of 2018. The historic “Declaration of Cooperation” has been widely credited for saving the oil industry from its downfall, and restoring economic security for the nation’s dependent on oil, many of which are African. The now OPEC+ (the 14 OPEC countries and the 10 non-OPEC countries led by Russia) at their last meeting, agreed to reduce their oil production from January 1st, 2019 to 1.2 Mb/d, of which 800,000 b/d by OPEC and 400,000 b/d by non-OPEC countries. Since the beginning of this year, oil prices have gradually started a new rise, with today the barrel, oscillating between 65 and 70 US dollars. But besides, the agreement of the OPEC+ countries, other factors have justified this rise in prices. These include US sanctions on Iran’s oil exports, and Venezuela’s economy that continues to collapse as oil production declines. But as I said above, the wish of the OPEC+ countries is to see it rise above 80 US dollars. Oil markets are currently quite optimistic about the evolution of trade negotiations between the United States and China and an agreement between the two countries would remove the risk of a trade war and would be positive for global economic growth and, therefore, for oil consumption. Added to this is the lack of investment in oil production that could lead to an imbalance of the world market in the medium term and therefore favour a rise in prices and production difficulties increasingly strong in Libya and Canada. In the current oil, political and economic context, oil prices in the range of 70 to 80 US dollars could be a good compromise between the interests of the major players in the world oil game. But in the longer term, some experts agree that prices could rise much more. A return of the courses up to 80-85 or even 100 US dollars for the end of 2019 – beginning of 2020 is quite possible, but it must be kept in mind that the oil market is very ‘capricious’; It is very difficult to forecast oil prices, even in the short term, but there are factors, such as those mentioned earlier, that can have a significant influence on prices.

So you hope for a significant rise in the price of a barrel of oil?

As I often understand, the economic crisis for capitalists is not when prices fluctuate dramatically upwards or downwards ; it is rather when the profits do not increase anymore and therefore the capital does not value anymore and does not reproduce anymore. Fluctuating prices for commodities in general and crude oil in particular do not matter to them. In the case of a fall or a rise in the price of raw materials, they are always the ones who benefit from it, and unfortunately the losers are always the southern countries. Manufactured products from our raw materials will never be sold at a good price… the price of gasoline will never fluctuate more than 10 percent, while the price of crude oil has varied for example in 2008 from 147 at less than 50 US dollars, more than 200 percent down. But there is a relative awareness of the producing countries… the recent decision of OPEC member and non-OPEC member countries to reduce their production to raise prices is an illustration of this. Saudi Arabia is working through its Vision 2030 to put some order in its economy; which will definitely raise oil prices for a long time. For many other reasons, I hope that prices will rise again. However, the crisis from which we shyly emerge should serve as a lesson and what is to be retained is the political will and firmness of the diversification of our economies, the good governance, the integration of the African energy sectors and the revival of APPO and the implementation of its policy.