The Chief Executive Officer of the Botswana Oil Limited, Willie Mokgatlhe says that in the “near future”, the national oil company will engage oil-producing countries, among them Angola.
“This, in my view, will enhance our supply strategy as it is part of implementation of alternative supply routes and sources which we are currently pursuing,” Mokgatlhe says.
Angola is a special case in that it is the second major oil producer in Africa after Nigeria.
The two countries alone account for three-quarters of total sub-Saharan oil production. Nigeria has consistently been the largest oil producer in sub-Saharan Africa while Angolan oil production has quadrupled since 1990, reaching 1.8 million barrels per day in 2013, and accounting for 30 percent of total sub-Saharan production. Projections by the International Energy Agency (IEA) are that by 2040, Angola will temporarily overtake Nigeria as the largest sub-Saharan Africa producer of crude oil. This is attributed to regulatory uncertainty in Nigeria, militant activity and oil theft in the Niger Delta which will negatively impact production in the turbulent West African country. Angola overtook Nigeria in May this year when monthly exports from Nigeria dipped due to oil theft and sabotage-related outages.
The rise of Angola in international oil trade should be good news for Botswana. The two countries are neighbours and Botswana could benefit from low prices. On the other hand, Mokgatlhe says that while being closer to source could yield cost advantages, there are other equally important factors to consider. The ones he cites are cost of production, refining capacity and capability, international prices and logistics.
In its 2014 Africa Energy Outlook report, the IEA says that Sub-Saharan Africa’s refining operations are severely constrained by the state of the refining assets.
“These are mostly decades old and in relatively poor condition due to years of under-investment and neglect, making their operation less economic,” IEA says.
Ever enterprising, China has expanded its refineries to cater for additional markets. These refineries have proved particularly important for Angola, whose exports to China account for almost half of the country’s total crude output.
These are early days yet but an Angola-Botswana oil deal would likely feature a cross-border pipeline. Speaking generally about the construction of a pipeline, Mokgatlhe says that BOL recognises the need for adequate primary transport and secondary distribution infrastructure to ensure security and efficiency of fuel supply to both urban and rural communities.
“A cross-border fuel supply pipeline would support the realisation of this objective. However, due to the diversification of sources of fuel product, coupled with current budget constraints, delivery of this project will most likely be executed at a later stage, potentially through a private public partnership,” he says.