THE profile of the African hydrocarbons market is set to change as emerging African oil and gas companies acquire marginal oil and gas assets from multinational groups.
Africa is fast emerging as an investment destination of note. Robin Vela, CEO of JSE-listed oil and gas company SacOil, says that by 2020 Africa will account for 20% of global oil and gas discoveries. "There is a scramble for African acreage," Mr Vela says. Africa is the new frontier, he says.
Upstream activities, which entail the search for, recovery and production of crude oil and natural gas, are known for their high costs and complexities. Add the fact that known oil and gas locations in Africa are not in the most stable of countries. Stories coming out of the Nigeria's Delta region are enough to send a chill down a prospective investor's spine.
But the rewards in the upstream market can make the financial risks and complex challenges worthwhile, and multinationals Shell, Total, Chevron, Agip and ExxonMobil have been exploring for oil and gas in Africa for decades.
Now smaller, so-called indigenous oil and gas companies are getting their piece of the cake.
Unlike the multinationals, which have head offices in overseas countries, these emerging players, which see a role in the upstream market, are local companies set up and run by Africans.
Some, such as SacOil and Oando, are listed on the JSE - listings that come in handy when these companies want to raise cash for their ambitious projects. Most importantly, these companies know the upstream market in Africa well and realise their own limitations.
SacOil, for one, has set its sights on near-producing and producing oil and gas fields, according to Mr Vela. There are plenty of these.
In Nigeria, marginal assets present attractive opportunities for acquisition. A marginal field is a discovery that is recognised by Nigeria's petroleum resources department and which has remained unproduced or undeveloped for more than 10 years.
SacOil and Oando are following in the footsteps of exploration and production group Tullow, which has built up an impressive hydrocarbons portfolio in Africa in the past decade. Listed on the London and Irish stock exchanges, Tullow has assets at just about every hydrocarbons address in Africa - Gabon, Côte d'Ivoire, Liberia, Sierra Leone, Mauritania, Senegal, Democratic Republic of Congo, Tanzania, Madagascar, Namibia and Angola.
Great vision and enthusiasm can only take upstream projects so far. Investors must burn cash before they see rewards. Somebody must be prepared to dig deep into their pockets to fund these initiatives. SacOil has already raised R48m through a general issue of shares for cash from Stanlib Asset Management and Metropolitan Asset Managers.
This explains the announcement yesterday that SacOil is seeking a secondary listing on London's Alternative Investment Market (AIM) by the end of the first quarter of next year. The mooted listing will give SacOil the necessary financial resources to pursue its aggressive acquisition drive.
AIM will provide it with a platform to raise its public profile and allow investors in the UK the opportunity to participate in the growth of the business.
Mr Vela says the listing in London will enable the investment community to compare SacOil with similar companies.
In SA, the company is listed in the oil and gas subsector alongside petrochemicals giant Sasol and integrated oil and gas firm Oando of Nigeria. But the varying operations of these three companies makes comparison difficult.
Oando is historically a downstream market player that has shifted its sights towards the upstream market. The JSE-listed company has been acquiring upstream assets as it diversifies from fuel distribution and retail into oil refining and production.
Oando wants to boost its portfolio with near-term oil and gas assets. In 2008, it became the first Nigerian firm to secure oil production assets from a multinational operating in that country.