Download Sub-Sahara Africa Scenarios

NS4054
Fall Term 2015
Sub-Saharan Scenarios
Main Trends I
• Commission on Energy and Geopolitics, Oil Security
2025, Sub-Saharan Africa Scenarios
• Key Fundamental Trends
• Trend 1
• Reliance on oil as a source of government revenue will
persist through 2025 and extend beyond established oil
producers like Angola and Nigeria to additional SubSaharan African countries
• All countries will remain highly exposed to negative
impacts of oil price volatility.
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Main Trends II
• Trend 2
• Sub-Saharan Africa’s Growing oil trade with China will
• Deepen bilateral economic ties, and
• Could have long-term geopolitical implications, particularly if
there is a receding U.S. presence in the region
• Sub-Saharan Africa’s oil trade has already begun shifting
away from demand centers in the West and toward
emerging markets in Asia, particularly China
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Main Trends III
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Main Trends III
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Scenario Assumptions
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Scenario Impacts
Scenario Impacts
• Core concern for oil-exporting countries in sub-Saharan
Africa is their ability to generate revenues necessary to
• Meet budgetary needs and
• Facilitate economic growth
• Region is also considered a relatively high risk security
environment for the IOCs to operate there
• Disruptions to oil production are commonplace
• U.S. boom is forcing established countries to seek new
markets
• Across sub-Saharan Africa the four scenarios could have
very significant impacts on
• government revenues,
• economic growth, and employment and
• consequently the likelihood of domestic unrest
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Scenario A
Scenario A Reference – Baseline Demand/Constrained
Supply
• Prices remain close to breakeven levels
• Stressing government budgets and
• Economic growth is constrained
• Moderate levels of investment in new oil production
capacity
• Oil export volumes are increasingly oriented toward Asia
• Transition is challenging as new relationships must be
built
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Scenario B
• Scenario B Flush – abundant supply/baseline demand
• Prices fall below fiscal breakeven levels
• Public spending needs are likely not met
• Economic growth is significantly impaired
• Low levels of investment in new oil production capacity
as projects are either cancelled or deferred
• Finding new markets even more difficult than reference
scenario due to strong growth in Middle East supplies
although eastward shift for exports still expected
• With reduced government revenues, Nigeria’s ability to
participate in peace and stability operations on the
continent could be diminished
• -- or at lease become a lower priority in comparison to
addressing domestic concerns
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Scenario C
• Scenario C Grind High Demand/Constrained supply
• High prices generate government revenues and promote
strong economic growth
• Perhaps paradoxically, possible increased potential
• for unrest as movements seek a greater share of resource
wealth
• And or remain frustrated by ongoing corruption
• Highest level of investment in new oil production
capacity – although disagreements over contract terms
will likely persist
• Countries face little difficulty finding new markets
• Primarily Asian but also domestic and other Sub-Saharan Africa
ones for displaced U.S. bound exports
• Government fuel subsidies become costly
• However economic growth and increased revenue from oil
exports could aid their gradual removal
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Scenario D
• Scenario D Hyper growth – abundant supply/high
demand
• Although prices once again remain closer to fiscal
breakeven levels
• Higher sales help generate higher revenues and promote
moderate economic growth
• Moderate levels of investment in new oil production
capacity
• As in Grind Scenario high prices and high growth mean
less difficulty finding new buyer markets than in either
the Reference or Flush Scenarios
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Flashpoint I
• Flashpoint I
• Domestic unrest prompted by
• economic challenges and or
• grievances about corruption, oil revenue-sharing or
•
environmental degradation
• Develops into greater political instability further reducing
oil production and potentially leading to regime change
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Flashpoint II
• Flashpoint II
• Governments in Sub-Sahara attempt to remove fuel
consumption subsidies to help them reduce fuel
vulnerabilities
• When successful fuel subsidy reduction has been
accomplished it has been gradual with a commensurate
increase in government support to the poorest
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Flashpoint III
• Flashpoint III
• China’s increased regional influence could result in the
reorientation of oil exports eastward in the event of
supply disruption to meet Chinese demands, potentially
creating shortages in other markets.
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