The Role of Independents

Paul McDade is the CEO, of Afentra Plc
Frontier Energy Network member

Over the last 12 months we have witnessed a marked shift in sentiment and growing acknowledgement that oil and gas demand is both resilient and likely to remain a critical component of the global energy mix for decades to come despite the structural evolution of the global energy system towards a lower carbon future.

In particular, we have seen an increased focus on delivering a fair and orderly energy transition that does not deprive developing nations of much needed revenues to deliver essential socio-economic development, while maintaining stability and security of global energy supply.

The African continent is a prime example, possessing an abundance of proven, developed and undeveloped oil and gas resources which equate to many billions of dollars of potential revenues and taxes. Many always hoped that this critical revenue source would play an important role in enhancing the quality of life for millions of people living on the continent – indeed, while the West has benefitted from decades of cheap hydrocarbon-fuelled energy, Africa has yet to realise similar benefits.

Considering that Africa contributes only c.4% of global emissions, one can understand why the governments and people of Africa, as well as the private sector, are calling for a “Just Transition”. Such a transition would allow Africa to benefit from revenues from existing oil and gas resources in the medium term, thereby providing an essential source of funding to support the broader long‐term development of regional economies and allow for the provision of essential infrastructure to support domestic and regional transition strategies.

When we speak of a transition, it is important to recognise that alongside the global energy transition, a parallel regional industry transition is taking place in Africa where, as transpired in the Gulf of Mexico and the North Sea in previous decades, smaller independent operators are acquiring mid-to-later-life assets from IOCs and NOCs as they seek to rationalise and now also decarbonise their portfolios. This industry transition is already well underway in Africa and will only accelerate as IOCs and NOCs ramp up their own transition strategies.

In this context, divesting companies have a responsibility to ensure they transact with credible counterparties that can assume the operating responsibilities of assets and maintain the same commitment to ongoing, transparent disclosure of environmental data. This in turn highlights the importance of stewardship and transition of asset ownership, increasing the pressure on new entrants to bring experience, responsible management, and the ability to form aligned partnerships with all local stakeholders to support industrial development in the oil and gas sector.

Afentra, whose name stands for ‘African Energy Transition’, was established in 2021 to fill the void left by exiting companies and support the responsible transition of assets from divesting companies to a credible, responsible, and experienced counterparty.

The company was founded and is led by a team with vast experience of operating across Africa and that recognises the importance the industry plays in the continent — from job creation through to a significant contribution to GDP in producing nations.

Angola is an example of a jurisdiction that has laid strong foundations “ in recent years to become an attractive destination for investment and Afentra is delighted to have established our business in the country through the acquisition of our foundational assets in Blocks 3/05 and 3/05A. Allied to the country’s exceptional resource base is a stable macroeconomic and political environment, and the economy continues to evolve as the recently re-elected administration of President Laurenço implements reforms designed to continue the improvements to the policy and investment environment seen since 2017.

“Divesting companies have a responsibility to ensure they transact with credible counterparties that can assume the operating responsibilities of assets and maintain the same commitment to ongoing, transparent disclosure of environmental data.”

While IOCs and Sonangol continue to dominate market share in Angola, the transition strategies identified above are continuing as these companies rationalise portfolios to allow for a focus on core assets. This presents a material opportunity for a nimble, credible independent with the local knowledge and established network to acquire and optimise non-core assets and is itself an encouraging validation of Afentra’s founding strategy. As such, Angola will be a core region for Afentra’s near-term growth in parallel with its ambitions to establish activities in other target markets that present similar dynamics and opportunities.

Overall, the global energy transition is rightly accelerating and the oil and gas industry has a duty to ensure it is done in a responsible manner. Host governments in Africa — previously courted by the majors — are sensibly adapting their policies to the ongoing change and recognising the growing importance of smaller and responsible independents in taking on operating responsibilities in order to support the industry transition and the associated positive impact on their economies and the quality of life of their citizens.

“Overall, the global energy transition is rightly accelerating and the oil and gas industry has a duty to ensure it is done in a responsible manner.”