Like the Salmon of Capistrano, Oil Majors Return to North Africa
In a tale that follows the ebbs and flows of the oil cycle, big energy companies are making a splashy return to an area that they have turned their back on in recent years: Africa.
Background: North Africa contains sizable oil and gas resources, but has been historically underexplored due to political risks and government bureaucracy. Not to mention the shale oil boom in North America meant that companies’ hands were full with sure-fire production in one of the most stable political environments on the planet.
But all that appears to be changing.
What’s happening: Honeywell and Halliburton are working on a US$1.4 billion refinery and an oilfield deal in Libya, while Chevron and Eni are working on major investments in Algeria.
Why now: For decades, Russia was a nearby and secure provider of oil and gas to European consumers, but – for some strange reason – that changed last year, and countries are scrambling for alternative sources.
Libya and Algeria fit the bill nicely, being a short hop across the Mediterranean from major consumers. Additionally, the political climate in North Africa – while not perfect – has improved meaningfully in recent years, making long-term investments attractive again.
Zoom out: It’s been a while since North Africa saw a major oil a gas investment boom, which just goes to show: if you have oil and just hang out by the bar putting out the vibe, eventually the investments will come.