Africa - Next Major Oil Importer

on
May 20:

Summary

  • Africa has a huge population but has limited oil consumption.
  • The continent has limited reserves that will drive imports - the Middle East Represents an ideal source.
  • Overall Africa has huge future growth potential.

Introduction

Africa is the world's second largest continent that also has the world's second-largest population. As of 2013, the content had a population of 1.111 billion, and the continent has seen its population grow faster than pretty much any other continent in the world.
However, despite its massive size, Africa is a relatively poor continent. In March 2013, Africa was defined as the world's poorest continent. However, the world bank expects that most African countries will reach middle-income status in 2025. This represents a significant new market.

Current Situation

Before we can talk about Africa's future potential, we must first talk about where it currently stands.
Here, we can see Africa's daily crude oil production in 2008. As of 2013, Africa as a continent produced roughly 8.5 million barrels per day accounting for roughly 10% of the world's crude oil production.
Here you can see the world's petroleum consumption by region in terms of millions of barrels per day from 1980 to 2000. With 16% of the world's population, you would expect Africa to consume more crude. The continent consumes 13% of the crude of North America.

Future

Now that we have talked about historical African crude oil production, it is time to talk about Africa's future production.
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The first important thing to note when looking at oil reserves by region is that Africa has only 8% of the world's oil reserves. While this is unevenly distributed, it still means that as Africa's production increases it will need to take in more oil.
However, good news here. Directly to the north-east of Africa is the area with the largest oil reserves in the world - the Middle East. With 49% of the world's reserves, the Middle East represents the ideal source of oil for Africa.
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Now that we have determined Africa has an ideal source for crude oil located nearby, the next thing to look at is who will be using this oil. Africa currently has a population of 1.111 billion, more than every other continent, but significantly less than Asia. In fact, China and India each alone have more people than Africa.
However, Africa population is expected to grow rapidly at what is effectively a straight line trajectory upwards. As the year 2100 approaches, the population of Africa is expected to top 4 billion. In fact, the population of Africa may eventually be greater than the population of Asia.
Now that we have determined Africa's limited reserves and rapid population growth it is time to look at the country's actual crude imports.
(click to enlarge)
Africa has significant demand that is expected to grow. In fact, looking at Africa's demand by region and product, we see that the total amount is expected to almost double by 2025. And that is slightly over a decade away when Africa's population is expected to still be roughly 1.5 billion people.
Much of this demand is expected to be driven by new cars in Africa. Cars represent one of the top uses of oil - a use of oil that is growing quickly. As Africa becomes wealthier - especially Nigeria which now has the highest GDP in Africa, I expect cars to become a bigger part of daily life. This will lead to huge production.
The most major thing to pay attention to is Africa's crude exports. Over the past two years, Africa's crude exports to the U.S. have experienced a significant decline, compared to the start of 2013, exports are down 80%, and exports are down 45% compared to last April.
While some may attribute part of this to political instability, that is not all of it. In fact, I would attribute the majority of this to increasing Africa internal production. Why would countries export oil when there is internal demand for it.
This points to a very clear trend. Since Africa crude production has not decline significantly, we now that the oil must be going somewhere. That somewhere is internally. Africa's crude oil demand is rapidly growing.
When those exports decline to 0, imports to Africa will start increasing and fast.
The last thing I want to talk about is petroleum in Africa. Generally, petroleum is not used to create electricity - from a worldwide perspective it represents just a few percent of the world's consumption.
However, Africa is growing quickly and struggling to provide oil to its people. As a result, especially with the recent oil crash, African countries will turn into oil for electricity.
In fact, on top of African overall energy consumption growing until 2030, the use of petroleum products in this is expected to grow from 14.51% to 23.00% a significant growth.

Conclusion

Africa is a rapidly growing continent. Even if Africa's population was not increasing it would still have significant room for oil consumption growth as the standard of living increases.
However, looking at a continent with an increasing standard of living and population and you get a continent that will rapidly increase its oil consumption.
Combine that with the fact that Africa has relatively limited reserves and Africa becomes the untapped oil market.

Source: http://seekingalpha.com/article/3199916-africa-next-major-oil-importer

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