For most investors, Africa is a place where many don’t tread. Years of bribery, military coups and violence have tainted positive perceptions of the continent. And even in many emerging market funds, Africa plays third or fourth fiddle to Asia, Latin America and Europe when it comes to exposure.
However, for many international oil stocks, Africa is seen as the modern day gold rush.
That’s because the untouched continent features a vast amount of shale and offshore energy deposits — in some instances rivaling our deposits here at home. And with many African nations eager to spur development of their own economies, accessing this bounty is becoming easier and easier for many oil stocks.
Given the sheer size of its reserves, the rewards in African oil could just outweigh the potential risks.
For long-term energy investors, the oil stocks tapping its bounty could be one of the best opportunities over the next decade.
Big Potential for African Oil Stocks
Mineral mining has traditionally driven Africa’s economic growth in the past, particularly with gold and platinum. Today, that growth is being driven by the oil and gas sector.
Like here in North America, horizontal drilling, fracking and advanced deepwater drilling have changed the game for Africa. Technological drilling advances have lengthened the list of nations who are now significant producers of petroleum beyond the long-established players like Nigeria, Libya and Algeria. New oil discoveries in places like Ghana, Cameroon and the Congo are rewriting African history.
Overall, energy production in Africa has moved south and eastward from the once dominant west.
That shift now includes tapping Kenya’s oil rich Somalian Plate and prolific natural gas fields in offshore Mozambique. From South Africa to Tanzania, exploration efforts by major oil stocks in Africa continue to grow. And with many governments offering friendlier mineral concessions — Uganda’s recent profit sharing move to attract international oil stock investment is just the latest example — the continent has changed the way it produces energy.
And it sure will produce.
By 2015, Africa will account for roughly 13% of the world’s total oil output. Yet that could be a drop in the bucket when looking at its total potential. In its latest survey of Africa’s energy sector, consultant PriceWaterhouseCoopers shows that Africa holds nearly 132 billion barrels of oil and nearly 513 trillion cubic feet (Tcf) of natural gas. That’s roughly 8% and 7% of the world’s supplies of the two energy sources, respectively.
But the continent isn’t without risks….