Monthly Archives: August 2012

Africa Surrounded! Oil exploration on all sides

English: Map of the African continent ქართული:...

English: Map of the African continent ქართული: აფრიკის კონტინენტის რუკა (Photo credit: Wikipedia)

 

 

 

The recent wave of oil exploration has resulted in drilling concessions in virtually every region of the continent – both offshore and further inland. I have maintained that the long term trend of energy price has to be upward as huge populations in fast growing economies such as India and China consume more energy as they industrialize and urbanize their societies. This increase in demand combined with improved drilling technology and geopolitical concerns has caused the industry to venture beyond the traditional production centers in Angola, Nigeria, and North Africa.

 

Listed here are some the projects either underway or about to start:

 

    ESTIMATED
REGION LOCATION RESOURCE BARRELS
East Africa    
1 Lamu Basin, offshore, Indian Ocean 4,900,000
2 Blocks 9 & 12A – Offshore Kenya
3 Western Kenya
4 Uganda
5 Puntland, Somalia 300,000,000
West Africa    
Offshore, Sierra Leone
Southern Africa    
Offshore, South Africa

 

 

 

We are fast approaching a point where most countries on the continent are either producing, exploring or considering exploration of oil and/or gas. This has major implications in several areas:

 

 

  • Global energy market – While I maintain that the general price trend is upward, it is not necessarily in a straight line. The addition of oil from these new sources is bound to put a brake on any price increases. However, there is also a relationship between prices and the industry’s willingness and ability to find new sources of supply.
  • Geopolitical – As the African continent, more than just a few countries, becomes identified as a source of oil it will attract the attention of major powers, who are also major consumers of oil. They are already taking an increasing interest in the politics of several countries.
  • Commercial – How will African companies and entrepreneurs take advantage of the current oil boom? What is the nature of foreign investment taking place. A few companies – Tullow of the UK, Africa Oil of Canada, Anadarko of the US, Kosmos of the US are frequently mentioned as playing a major role in exploration.
  • Development – What will be the impact on economic growth? How will the benefits of any subsequent extraction be share among the people of the producing countries? Will the new oil resource contribute the achievement of the Millenium Development Goals or will it become a curse leading to corruption and political instability?

 

 

Here are links to additional information on specific projects:

 

http://www.reuters.com/article/2012/08/17/petrosa-anadarko-idUSL6E8JH8M420120817

 

http://www.marketwatch.com/story/africa-oil-signs-farmout-with-marathon-oil-2012-07-23

 

http://www.reuters.com/article/2012/01/17/somalia-oil-idUSL6E8CH15720120117

 

http://www.examiner.com/article/west-silent-on-oil-rich-sierra-leone-cholera

 

 

 

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Emerging Market Private Equity Investing in the First Half of 2012

The Emerging Markets Private Equity Association has just released its private equity industry statistics for the first six months of 2012. In the first half of the year emerging market fundraising is on pace to be slightly lower than 2011. Several pan-regional funds had very large closes while funds investing in Latin America or Africa had a smaller share of the emerging market total.

Definition of Sub-Saharan Africa, according to...

Sub Saharan Africa

The story in Africa is one of deals closing amid a sluggish fundraising climate. Africa’s share of emerging market fundraising is down slightly in the first half of 2012. Meanwhile contrary to emerging markets as a whole, investments in Africa are on pace to increase in 2012 compared to 2011. One could speculate that there is excessive risk aversion towards Africa caused by concerns about institutional strength and political risk. Consequently general partners are finding a steady stream of deals in the pipeline and available funds are quickly invested. Given the growth potential in energy and other sectors and the urgent need for improvement in housing and all manner of infrastructure, there will be no shortage of potential deals to be constructed.

The African investment landscape suggests a need to better inform investors and assist them in evaluating and managing

 

Latin America and the Caribbean

 

Latin America & Caribbean

After a strong 2011 PE fundraising in Latin America has been much slower in 2012, though probably still ahead of the 2010 pace. 2011 was probably a bit inflated by a few large fundraises for Brazil.

Investment in the region also appears to be at a slower pace than in 2011. After a big year in 2010 investment fell in 2011 and this year looks weaker still. The weak global economy is probably a factor, but also the threat of nationalization in some countries has to be a cause for concern.

Brazil in contrast with the rest of the region is seeing healthy levels of investment in 2012 as investors see the country as investor-friendly and a decent long term bet despite the current slowdown in economic growth.

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The concepts in this paper have interesting implications for developing country capital markets in Latin America and Africa. They suggest a recognition of the importance of markets beyond BRICS.

eFrontierJournal

Authors:  Dr. Nasser Saidi at DIFC Economics

Aathira Prasad

Vineeth Naik

Date:  January 2012

Abstract:  This paper discusses the possibility of the reclassification of certain frontier markets to emerging market status by the main index providers.  In addition, the paper assesses historical index upgrades to emerging market classification and concludes that, in some cases, index upgrades have caused country stock markets to outperform during the period after the initial announcement but prior to the actual inclusion of the country in the emerging market index.  This paper has particular ramifications for the equity markets of the UAE, Qatar, and Saudi Arabia, which may have the greatest current potential for upgrade to the MSCI Emerging Markets Index if liberalizing market reforms are continued in those countries.

Full Article:  From Frontier to Emerging: Does Market Reclassification Matter? (“Download This Paper”)

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