Without bold fiscal reforms, Africa is doomed to further lose its global market share of oil and gas investment and production. This is a major takeaway from the Africa Energy Outlook 2021 released this month by the African Energy Chamber.
According to the AEC, as oil prices settle around the $60 per barrel threshold in a few years, the end of the “super-profit” era is over and adopting competitive fiscal frameworks will become increasingly central to maintaining investment in the sector.
It noted, however, that changing fiscal regimes “do come with challenges” and it caused uncertainty.
Explaining further, it stated, “It distorts the expected revenue profile for the state, and it is hard to arrive at what the fiscal parameters should be. Capital is nevertheless fungible, and to attract capital to possible future projects, African nations with petroleum resources will most likely have to adapt their fiscal regimes similar to how other nations have adapted them in light of the current era. Failing to do so can lead to stranded resources and outcompeted projects.”
