Claire Lawrie – Partner & Oil & Gas Advisory Leader for Africa, India and Middle East, EY
Claire Lawrie, partner and oil and gas advisory leader for Africa, India and the Middle East, highlights Africa’s E&P potential and how EY is working to support the industry.
Could you introduce yourself and what falls under your responsibility?
” Africa is on a trajectory of urbanisation and expected to have many megacities such as Cairo, Lagos, Kinshasa, Johannesburg, Luanda and Dar es Salaam.”
I’ve worked in advisory for the oil and gas sector for over 18 years serving IOCs, NOCs, independents and the public sector. I’ve worked extensively in the US, Europe, Middle East and Africa. I’m based in Johannesburg. I lead the oil and gas advisory practice at EY for Africa, India and the Middle East. My role is to bring the best of our advisory capabilities and people to clients in oil and gas in these geographies.
What are the current scope of services for EY oil and gas?
EY have integrated our advisory business in Africa, India and the Middle East. This means we have united our people, knowledge and services to serve clients in oil and gas to help support them with their biggest challenges in emerging markets. The importance of Africa, India and the Middle East, – which is now 40 percent of the world’s population and consists of large producers and consumers of energy – is such that companies give tailored focus in these three regions. EY offer a range of advisory services ranging from strategy, business restructuring, digitization, cybersecurity, process improvement, people capability development, supply chain management, performance management to name just a few.
EY are experts in many areas of business. What is the overall importance of oil and gas for the company?
Oil and gas is one of the priority sectors in the organization. We have a global practice of over 10,000 professionals who are connected with one another and dedicated to working in the sector. 49 percent of those people are working in emerging markets. EY requires its people to have both sector knowledge and experience in addition to consulting skill sets.
The E&P demand in Africa is growing, with traditional nations still staying strong, but equally an influx of new players onto the market. Where do you see demand coming from in the future?
Africa is resource rich and a net exporter of both oil and gas globally and this is set to continue. E&P demand within Africa will depend on rates of urbanisation, car ownership and industrialisation. Africa is on a trajectory of urbanisation and expected to have many megacities such as Cairo, Lagos, Kinshasa, Johannesburg, Luanda and Dar es Salaam.
For oil, growth is likely to come from developments in Nigeria, Angola and Ghana. New developments for future growth is expected to come from East Africa, such as Kenya. Gas is a major opportunity in Africa. The demand for gas continues to grow and especially in larger economies such as South Africa and Nigeria. In the near term, plans for gas production are from Ghana, Nigeria and Angola. For longer term, Mozambique and Tanzania are expected to grow. However, the gas market will need to overcome infrastructure challenges such as for pipelines and gas processing plants to capture this opportunity.
Cutting costs is a concept that was crucial during the downturn in the oil price. How has this been applied to Africa?
The oil price fell significantly and quite unexpectedly in 2014 and there has been a partial recovery in 2017. For the highly resource dependent countries such as Nigeria and Angola, government revenues declined and currencies were volatile. Cutting government expenditure and/or increasing borrowing took place to help support the struggling economies. Many countries in Africa import petroleum products so this helped the balance of payments for those countries. For the industry, they responded by upgrading their portfolio’s and there were a few divestments in Africa. Capital allocation and cost efficiencies were in focus as the industry improved their balance sheets. After the slowdown, the recovery is on its way as companies have raised cash and are ready to re-focus on their growth agendas and replenish upstream reserves.
What are the factors that make it Africa’s time for E&P?
The oil price has partially recovered. Investor confidence started returning to Africa in 2017. In mergers and acquisitions, there was a 62 per cent increase in total deal value from 2016 to 2017. In 2017, there were 65 deals with a total value of $8.6 billion. The upstream sector dominated deal activity totaling $7.3 billion, up from $4.6 billion in 2016. One major upstream deal was ExxonMobil’s $2.8 billion acquisition of a 25 per cent stake in Eni’s operations in Mozambique. Companies have more cash to spend now and deal activity has been focused on exploration assets. E&P deals are happening across several countries rather than being concentrated on just one or two countries.
What opportunities are there specifically in South Africa?
South Africa’s main sources of energy are imported, and the country’s energy mix is going through a transition. South Africa has historically been coal-dominated to produce electricity and synthetic fuel for the country. The country is rebalancing the energy mix to increase the share of petroleum, renewables and natural gas. South Africa is promoting private sector investment such as investment in renewables and electricity generation. There are plans for increasing the importation of liquefied natural gas (LNG). There is opportunity for the exploration of offshore gas and onshore shale gas.
How will EY adapt its services to keep up with the shifting ecosystem of oil and gas?
EY continues to provide its traditional services of helping clients improve performance, mitigate risks and be technology enabled. The major trend is digitization and its implications. Clients are looking for services in managing big data and the analytics that help their decision making. They are interested in further automation of processes to reduce costs and increase speed. Their risk strategies include responses to cyber-attacks. This is an area which EY has invested in heavily through acquisition and partnerships so we can provide services around digitization. It’s also changing how EY works internally as we digitize our own business – our employees now include both people and robots.
How does EY differentiate and continue to have a strong market position?
EY are differentiated in a number of ways. We offer services from strategy to implementation. We offer a full range of professional services in advisory, assurance, tax and transactions. However, the main differentiator is in the way we work. We seek to understand client issues and help find solutions. We work in a very collaborative way to jointly solve problems yet remain fully independent.