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African oil companies should evolve in light of disruptive environment

National oil companies (NOCs) across Africa have an enormous opportunity to secure a more sustainable future by transforming into “national energy companies” (‘NECs’), escaping the economic trap of a lower oil price and embracing the disruptive forces unleashed by climate change and a low carbon world.

According to PricewaterhouseCoopers, a new era of lower oil prices is challenging business models that have long relied largely on exploration and production of hydrocarbons, particularly ‘black gold’ oil.

This, according to the network service provider, is likely to prompt African countries dependent on their NOC as a key source of revenue, to rethink the “nation-building” role that their NOCs have played.

“Globally, the energy sector is experiencing significant change and upheaval. Whether it is in oil and gas or utilities, we are witnessing tectonic shifts in strategies, business models and ways of working, said Chris Bredenhann, Africa Advisory Oil & Gas Leader, PwC.

“Whether we are talking about fledgling NOCs with limited hydrocarbon resources or established NOCs sitting on large reserves, all of these companies will need to work out how to seize the opportunities emerging from this disruption.”

PwC said the sustainability of NOCs will depend on their ability to transform into NECs, responding to the demands placed on them by consumers, governments and non-governmental organisations (NGOs) and to climate changes and the new energy future.

An analysis by PwC titled ‘The new Nation Builders: Creating the African national oil company (NOC) of the future, looks at the challenges of disruption facing African NOCs, what it means to them and how they should position themselves for a sustainable future.

The report identifies three key factors which established NOCs should consider in order to diversify and grow beyond the historical reliance on oil: rapid moves globally towards an increasingly low-carbon energy industry; meeting the burgeoning demand for domestic power; and a need to meet crude and refined product requirements through storage and transport in domestic African countries.

“To move towards this vision, NOCs may need to adopt partnership models to transform and operate successfully as NECs. In a budget-constrained environment with reduced access to resources and capabilities, partnering with IOCs will be key to delivering change. NOCs will also need to engage more widely with regulators and governments in order to ensure that they are playing an active role in the industry,” said the analysis report.

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