Competing Regions: What are the options beyond North Africa?

Transcription

1 Our knowledge is your strength Competing Regions: What are the options beyond North Africa? Dr. Charles Gurdon Managing Director Menas Associates Algeria's 'Perfect Storm'; Prof. Jeremy Keenan, The Arab Spring: Menas Associates;

2 Our knowledge is your strength 2

3 MENAS ASSOCIATES: THE FIVE P s POLITICS PARTNERING PEOPLE PORTFOLIO» Country entry strategies» Political and social risk assessments» Due diligence on countries and regions» International border disputes» Analysis of business environment» Stakeholder analysis» The best strategy for local partnerships» Due diligence on agents, partners and clients» Human Resources (HR) strategy» HR risk management» Intercultural consulting and training» Anti-corruption compliance and monitoring» Ideal portfolio for new markets/regions» How to deal with host country expectations» Strategic analysis of company s portfolio» International sanctions compliance» Integrated Impact Assessments» Operational risk assessment and management» Local strategies coping with the unexpected» Local Content regulations and management PROJECT MANAGEMENT 3

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6 MENAS ASSOCIATES: THE FIVE P s MENAS ASSOCIATES: THE FIVE P s 6

7 AGENDA» Why North Africa appears less attractive for IOCs» Political, economic and investment impact of the Arab Spring on North Africa» Investment challenges facing both the new governments and the IOCs» The oil industry s herd mentality. 7

8 OIL INDUSTRY LIKES/NEEDS STABILITY/CERTAINTY» The oil sector is not risk averse» It can evaluate below-ground technical risk» But it can t control or quantify above ground risk or radically change it» Political and social risk» Commercial risk» Resource nationalism» North Africa was politically stable but was already commercially tough and resource nationalism was becoming more of a bigger problem 8

9 ARAB SPRING = > PERCEIVED POLITICAL RISK» Revolutionary triumphs (so far): Tunisia, Egypt, Libya and perhaps Yemen» Fighting back: Syria and Bahrain» Pre-empting: Saudi Arabia (and UAE)» Less affected: Kuwait, Qatar» Adjusting: Morocco, Jordan and Oman» Evaded: Iraq, Palestine, Lebanon & to a lesser extent Algeria and Iran» We are seeing the start of a process that may take years. 9

10 FAILURE OF THE REPUBLICS» Impact of population growth and youth bulge on both education & employment.» Regimes did not address their people s needs most were incompetent and slow on economic reform.» Regimes with strong security/military forces and patronage networks embracing the business elites.» Repressive techniques were undermined by satellite television and then the internet and social networks.» Wide perception that regimes/leaders failed to meet people s needs.» Spread of political Islam and a growing disillusionment with 20 th century secular ideologies and liberalism.» Regimes lost their cohesion after the turn of the century. 10

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13 EGYPT (AND TUNISIA)» Crucial role of military and its split from Mubarak.» Protests was led by young and often secular revolutionaries.» Elections showed power of Muslim Brotherhood & the Salafists.» Centre, liberals and the left are divided and unorganised.» President Morsi is elected.» Army returns to barracks but is still a major political force.» Uncertainties ahead: new constitution and new parliamentary elections.» MB leadership is pragmatic but does it represent its rank & file?» Balanced government will it remain so after the next elections?» Huge economic and social expectations, and limited resources.» Very painful decisions on economy (e.g. fuel and food subsidies).» Events in Egypt will have major impact on rest of region. 13

14 MUSLIM BROTHER PICKS THE FRUIT FROM THE SHOULDER OF THE REVOLUTIONARY 14

15 LIBYA: AN INCOMPLETE REVOLUTION» Country liberated and Qadhafi killed over a year ago but the revolution is incomplete and progress has been very slow.» Some remarkable progress: no civil war; no large scale revenge or blood letting; political transition moved ahead with remarkable speed; national elections for GNC held in June.» Oil production is back up to 1.6 million b/d.» BUT there are still major issues to resolve: Weakness of the centre local powerbrokers; weakness of central government; militias and tribes. Regional issues east vs. west; federalism; south. Security areas of tensions, minorities, Islamists. National Reconciliation still taboo subject but necessary. Development jobs, services, opportunities. 15

16 ALGERIA» Regime hoped after 1990 s bloodletting = no appetite for revolution» Very healthy trade surplus but living standards falling (uncaring state)» Vicious spiral - demonstrations & riots so regime threw money at the problem, which leads to more riots and strikes and budget deficit» Population no belief in constitutional change and press freedom» May (Nov) elections illegitimate, low turnout; regime-created parties. Major problems are coming to the boil:» President Bouteflika s health (and that of General Mediène)» Clan politics growing divisions in FLN and rest of le pouvoir» AQIM is a problem in north but is contained the Mali crisis is not. Outlook» Increasing internal discontent and growing divisions within elite» Desperate need for new Hydrocarbons Law. 16

17 MOROCCO» King made early concessions to stem the demos» Justice & Development Party (PJD ) political Islam 11/11» PJD leads a coalition government» Istiqlal now led by Fes populist mayor Hamid Chabat» King has been able to move out of the limelight» Still major economic and social problems but country has weathered the storm very well» Significant IOC interest in Morocco. 17

18 MAURITANIA» Was shooting of President Mohamed Ould Abdel Aziz an accident or a botched coup?» He still faces major opposition - social pressure, demos» Mali crisis will have major impact on Mauritania. 18

19 LESSONS FROM THE SQUARE» Spring led by young, skilled and highly educated using social networks and internet to organise.» Forced open the republican regimes existing cracks & their flawed control systems.» Essential role of armed forces: Egypt & Tunisia.» Gave the opportunity for traditional religious influences to re-emerge.» Democratic elections have not yet, however, led to liberal regimes.» Economic and social problems have got worse as a result of political instability.» Huge hopes but can the new regimes deliver? 19

20 POLITICAL OUTLOOK: ARAB SPRING HAS ONLY JUST BEGUN» Different trajectories, timelines and outcomes in each country» Egypt may have the most influence» Revolutionaries marginalised by the military and the Muslim Brotherhood / Salafis.» An understanding between Brotherhood and the military.» Secular liberals will get nowhere until they re-organise & unite.» Muslim Brotherhood is not a problem: its leadership is made up of pragmatic middle class professionals.» The Salafists may, however, be a problem. 20

21 INVESTMENT CHALLENGES For the new governments:» Meeting the huge expectations of a liberated people» No matter who is in power the economic problems are the same» They lack administrative experience of how to run a country» Democracy and accountability; generally slow decision-making» People will expect less favourable terms for foreign companies» Will old corruption be replaced by new corruption? For Western investors:» How to deal with more nationalist and more Islamic governments» No more exclusive relations based on old defence/strategic interests» Take more account of local stakeholders (e.g. local content)» Will have to help new local partners who may be inexperienced. 21

22 EPSA IV 1ST ROUND JANUARY 2005 Area/Block Company/Consortium Production Signature Bonus Share % US$ millions 1st Round Area 106 Oxy / Liwa Area 131 Oxy / Liwa Area 124 Oxy / Liwa Area 163 Oxy / Liwa Area 059 Oxy / Liwa Area 036 Woodside / Oxy / Liwa Area 052 Woodside / Oxy / Liwa Area 053 Woodside / Oxy / Liwa Area 035 Woodside / Oxy / Liwa Area 054 Hess Area 177 Chevron Area 086 Oil India / Indian Oil Area 018 Petrobrás / Oil Search Area 065 Sonatrach Area 047 Verenex / Medco

23 EPSA IV 2ND ROUND OCTOBER 2005 Area/Block Company/Consortium Production Signature Bonus Basin Share % US$ millions Area 176 (4) Japex Murzuq Area 146 (1) Norsk Hydro (i.e. Statoil) Murzuq Area 81 (2) Mitsubishi / Teikoku Ghadamès Area 82 (3) Mitsubishi / Teikoku Ghadamès Area 161 (2&4) ENI Murzuq Area 2 (1&2) Nippon / Mitsubishi offshore Area 40 (3&4) Japex / Nippon /Mitsubishi offshore Area 161 (1) ENI Murzuq Area 123 (3) Pertamina Sirte Area 147 (3&4) Turkish Petroleum Murzuq Area 176 (3) ENI Murzuq Area 82 (4) Tatneft Ghadamès Area 102 (4) Oil India / Indian Oil Sirte Area 123 (1) BG Sirte Area 17 (3) Pertamina offshore Area 81 (1) ONGC Videsh Ghadamès Area 123 (2) BG Sirte Area 186 (1,2,3,4 ) ENI Kufra Area 171 (1,2,3,4) Statoil / BG Kufra Area 94 (1,2,3,4) Statoil Cyrenaica Area 42 (2&4) Total / Inpex Cyrenaica Area 44 (1,2,3,4) ExxonMobil (?) offshore Area 17 (4) CNPC offshore 23

24 EPSA IV 3RD (DEC 2006) & 4TH (DEC 2007) ROUNDS Area/Block Company/Consortium Production Signature Bonus Basin Wells Share % US$ millions 3 rd round Area 69 Tatneft Sirte 3 Area 137 PetroCanada/Repsol Sirte 0 Area 82 Tatneft Ghadames 3 Area 98 Tatneft Ghadames 3 Area 162 Chinese Petroleum (CPC) Murzuq 2 Area 19 Gazprom Offshore 4 Area 201 Wintershall/Mitsui Kufra 0 Area/Block Company/Consortium Production Signature Bonus Basin Wells Share % US$ millions 4 th round Area 64 Gazprom Ghadames 4 Area 113 PGNiG Ghadames 4 Area 95/96 Sonatrach/Oil India/IOC Ghadames 5 Area 89 Shell Sirte 4 24

25 PRODUCING COMPANIES PLUS OTHERS NOC SUBISIDIARIES NOC FOREIGN PARTNER Sirte Oil Company (SOC) NOC N/A Arabian Gulf Oil Company (Agoco) NOC N/A Zueitina NOC Oxy Waha Oil Company NOC ConocoPhillips / Hess / Marathon Mellitah Oil & Gas NOC ENI Mabrouk Oil Operations NOC Total / Statoil Akakus Oil Operations NOC Repsol / OMV / Total Harouge Oil Operations NOC Suncor OTHER FOREIGN OIL COMPANIES IN LIBYA Wintershall RWE OMV Shell BP 25

26 WILL THE HERD MOVE ON TO NEW AND GREENER PASTURES?» OPEC s resource nationalists assume that IOCs will accept whatever terms they are offered and that they can bully them. MENA attracted IOCs but the current commercial terms and operating environment are now unappealing (e.g. Libya, Algeria, Iraq, Iran).» Major new opportunities e.g. Kurdistan, Eastern Mediterranean and now, above all, East and West Africa.» NOCs and people must realise that geologically and commercially attractive operating environment plus political stability are essential or the oil industry herd will soon move to newer and greener pastures.» A vibrant oil industry is essential for other non-oil investment. New democracies therefore have narrow window to re-attract investors or the they will miss the boat for the next 5-10 years. 26

27 For more information, contact 4 Bloomsbury Square London WC1A 2RP United Kingdom +44 (0) Iraq: and now? 27 The Arab Spring: Menas Associates;