Posts Tagged ‘ghana’

Militants in Niger Delta … bad for Nigeria, could be good for Angola & Ghana

oilrig_1515_18918777_0_0_7306_300Like many developing nations with vast natural resources, Nigeria has seen a massive influx in Foreign Direct Investment (FDI), particularly in the energy sector. However, civil unrest, particularly in the Niger Delta, may be a catalyst for potential investors to look to other West African Nations as investment opportunities. Added to this are the ever present problems of ineptitude & “graft” within both state & federal government, which has brought some unwelcome news for Africa’s largest economy.

Last week, Russian giant Gazprom (OTC : OGZPY) announced that it was in discussions to inject up to $2.5 Bn into a joint venture enterprise with state owned Nigerian National Petroleum Corp (NNPC), with a view to developing domestic gas production, processing, and transportation.” Nigeria has an estimated 187 trillion cubic feet of natural gas reserves. Industry experts see the deal as a positive move by the federal government to utilize the country’s huge gas resources that have hitherto been wasted, it is estimated that Nigeria flares off as much as 14% (24 billion cubic feet) of global gas wasteage.

The Russian gas company is attempting to become involved with the Trans-Saharan gas pipeline (TSGP). The pipeline, which would connect the Niger delta in Nigeria and Niger, to existing gas transmission hubs to the European Union at El Kala or Beni Saf in Algeria’s Mediterranean coast, is expected to cost $10 billion, of which Gazprom will initially invest $2.5 billion. The project is due to commence in 2009 and isplanned to complete in 2015, when Nigeria hopes it will become one of the biggest sources of natural gas for continental Europe.

Livi Ajounuma, General Manager at NNPC, confirmed that “we have signed a Memorandum of Understanding [MOU]”. He commented further on the deal saying, “It’s a good thing. It means that a giant company like Gazprom can come to Nigeria.”

All is not as rosy as it may seem however, as the Russian Ambassador to Nigeria, Alexander Polyakov, staged a withering blow at Nigerian confidence this week. Polyakov has called on the Nigerian authorities to create a stable environment for foreign nationals who come to work in the country, to continue the flow of foreign investment and development of the economy. Over 200 foreigners and countless Nigerians have been kidnapped in nearly three years of rising violence across southern Nigeria. Some militants claim to be fighting for greater control over the Niger Delta’s oil wealth, however, other gangs of armed, jobless youths make money from extortion and kidnapping.

Polyakov urged prompt release of all hostages, including some Russians,currently being held by militants in Nigeria’s southeast Niger Delta region.”Everybody in the region and the government should play their role to ensure that all hostages are freed,” he said.

There are strong indications that investment inflow to the upstream sub-sector of the Nigerian oil industry has started dwindling as foreign investors now choose Angola and Ghana as preferred destinations over Nigeria. Which in turn, threatens Nigeria’s capacity to grow its crude oil reserves as planned, it is targeting 40 billion barrels proven reserves by 2010. Analysts have identified insecurity in the Niger Delta and weak fiscal policy as key reasons why investors are beginning to leave for more stable business opportunities in Africa. Recently due to militant activity Royal Dutch Shell (NYSE : RDS:A) has seen its production dropping from one million bpd to about 380,000 bpd at its Bonny terminal in the south of the Delta. Exxon has also experienced increased insurgent activity in its Nigerian operations.Last week, local union officials threatened to call a strike which would shut down crude exports from the River state, until such time as the issues are addressed by State & Federal officials. Nigeria is already suffering from production slow down due to militancy, currently the Niger Delta is only exporting 1.8 million bpd, compared with a targetted 2.2 million bpd.

Near neighbour Angola has now  begun to attract more investments from oil companies as International Oil Companies are making long term expenditure commitments in the African oil ventures. Total (NYSE : TOT) said last week that it would continue with a $9 billion investment to raise production in Angola, despite the huge drop in crude prices since July last year. Total plans to stick to its major investments in Angola, even as it expects crude prices to recover, the company’s top official in Angola said.

“We are living through a crisis that has pushed oil prices to very low levels. Therefore, we are being extremely strict with all our investments,” Olivier Langavant, Director General in Angola, was quoted as saying in an interview with Reuters. “But the big projects (in Angola) like the Pazflor, which is a $9 billion investment, will be maintained.”

Pazflor, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil in 2011 from water depths of up to 1,200 metres, according to the company’s website. Total is the third biggest oil producer in Angola after Exxon Mobil Corp. and Chevron, pumping, on average of over 500,000 barrels per day.

Chevron, Total and Eni are currently developing a $4 to $5 billion liquefied natural gas plant in Soyo, Angola. Whilst in contrast, Nigeria’s flagship Olokola, Brass LNG and NLNG Train 7 projects are yet to take off. Because of the high spend of the oil majors in Angola, oil service companies have begun to win big contracts. BP has awarded Halliburton more than $600 million in contracts for up to four projects in Angola.

Meanwhile, in Ghana, offshore oil finds in 2007 have led analysts to look at the small nation as becoming an “African Tiger”. Three vast blocks off of the West Cape Three Points are believed to hold vast reserves that may well outshine those enjoyed by Nigeria. The Jubilee field, one of West Africa’s biggest oil strikes in years, likely containins recoverable reserves of at least 1.2 billion barrels of oil equivalent, with first output scheduled for the second half of 2010. IOCs are lining up to take advantage, as smaller independent firms such as Kosmos Energy struggle to find capital to devlop proven resources in the area. Kosmos is reputed to have a $3Bn stake in the area up for grabs, according to industry website Rigzone. The current breakdown of partnership/ownership across the three blocs which can be viewed here at AfDevInfo, also includes US independent Anadarko (NYSE : APC)  & the UK’s Tullow (LON : TLW), along with various Ghanaian government run corporations.
This at a time when foreign investors in the Nigerian capital market withdrew some $4 billion from the Nigeria Stock Exchange kick starting a decline of over 50% in three months, according to its Director General, Professor Ndidi Okereke-Onyiuke. Coupled with an ever rising inflation rate, the highest for more than 5 years, is a major setback for Nigeria’s hopes of becoming a local economic giant.

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Consolidation hits Rainbow Nations telecom sector

800px-flag_of_south_africasvg1Even though merger and acquisitions (M&A) in South Africa were down at least 50% in deal value last year compared with other emerging markets, the telecom sector has seen much activity in the last year, which has also spilled into 2009. A veritable wave of consolidation & a drive towards convergence seems to be the way forward for major players such as Vodacom, Telkom SA & MTN Group.

The largest deal in South Africa was Vodafones (NYSE – VOD) acquisition of a further 15% of Vodacom for R22,5bn ($2.3Bn), bringing control along with atotal holding of 65%, Telkom as part of the deal will divest the remaining 35% to shareholders. Analysts had feared that Vodafone had paid a premium for this stake, however value can be seen in the continued push for consolidation & a genuine effort to move towards converged services. In late December it was announced that the mobile carrier had acquired African network and satellite services firm Gateway Communications for $700 million. The Gateway transaction includes Gateway’s core carrier and business network units, which provide satellite, business and interconnect services to African and multinational companies in 40 countries, but not its broadcasting division.

“As mobile phone penetration levels increase in South Africa, we are actively repositioning Vodacom as a total communications provider with new avenues for growth,” Pieter Uys, Vodacom’s chief executive said in a statement.

Vodacom Group will be listed on the Johannesburg Stock Exchange in 2009, once the Vodafone deal to buy an additional stake is completed. As part of the deal, the Vodacom identity will remain visible on the African continent and it will be the exclusive investment vehicle through which Vodafone will make acquisitions in sub-Saharan Africa, excluding Ghana and Kenya where the group has existing presence via stakes in Ghana Telecom & Safaricom respectively.

Meanwhile, pan-African player MTN Group have not been caught napping, having recently snapped up Verizon’s African businesses, which it is buying to add muscle to its data division. MTN which is Africa’s biggest cell phone operator by subscribers, is buying a 69.38 percent stake in Verizon South Africa, a unit of U.S.-based Verizon Communciations, for an undisclosed amount to help it better compete with rivals such as Dimension Data & Internet Solutions in the corporate communications market.Verizon Business South Africa provides telecommunications to corporate customers in South Africa, Namibia, Botswana, Zambia and Kenya. Also, in response to Vodafone’s move on Vodacom, MTN has bolstered its SA operations by acquiring the remaining 59% of iTalk Cellular that it did not own, iTalk is an MTN exclusive distributor, with over 100 retail outlets across South Africa

“These acquisitions are in line with our strategic vision and will add value to our business,” said MTN SA MD, Tim Lowry. “Through these deals we are enhancing our value proposition, building capacity and broadening our reach to enhance our product and service offerings to customers and clients. The i-Talk Cellular acquisition will strengthen our distribution across South Africa,” Lowry said.

In a counterpose, fixed line operator Telkom (NYSE – TKG) has begun the roll out of a national  3G W-CDMA network. Telkom will initially focus on providing fixed voice and fixed-mobile data and, in the near future, nomadic voice services. This is in part a play to enter into competition with the two mobile players, but also is a side effect of the disastrous state of SA’s copper based telecoms infrastructure. Telkom has also swung into action by spending $63m to acquire MWeb Africa and 75% of MWeb Namibia to help it become a pan-African voice and data supplier.

 

“Our revenues have been under significant pressure from declining voice services due to competition and further impacted by the effects of copper cable theft. Three years ago, we announced we are investing in next generation network (NGN) based technologies to provide new generation customer services and products. It isn’t about a single network but using various NGN technologies, such as W-CDMA, to provide customer-focused services”, explains September.

Network upstart NeoTel has been making decisive inroads into Telkom’s fixed line business since its launch in 2006, Tata Communications backed NeoTel provides converged services in the fields of basic voice and data services, high-speed internet (as well as true broadband access), virtual private networks, network management and hosting services for both corporate & retail customers. One area where it has been very succesful is in providing alternative backbone services to Telkom via its wholly owned transit network. Recently it has announced an agreement with MTN to co-build a national fiber optic network, which will break the stranglehold that Telkom has had on the sector.

Last but not least, Kuwaiti based Zain (formerly MTC) is promising major pan-African expansion with a short-term goal of launching in at least three more countries this year. Since few countries are issuing fresh licences, that will mostly come by acquiring smaller players. Zain Africa’s CEO, Chris Gabriel, predicts that consolidation among Africa’s 100-plus cellular networks will be so intense that only three to five will survive. Smaller players will come under pressure to be absorbed by those behemoths if they offer telecoms or technology-related services.

With all this activity, the South African telco sector is contracting with regards to opportunity & growth, which will, in my opinion spur Vodaone/Vodacom, MTN, Telkom & Zain along with France Telecom/Orange, Orascom & Oger into a set piece which is remiscent of Thomas Pakenhams excellent book Scramble for Africa. Interesting times indeed.