Despite anticipated rise in demand for oil from the current 1.8 million barrels/day in 2015, major producers in sub-Saharan Africa including Nigeria and Angola could face fiscal constraints because of recent fall in global oil prices “since more than 70% of these nations’ revenue stems from oil production,” according to Frontier Services Group (FSG).
Angola would need an oil price of around $98 per barrel to balance its budget while Nigeria would need $120 per barrel to balance their spending plans in 2015 according to FSG.
“Current forecasts for 2015 don’t provide much room for optimism. Global oil output is rising, and the International Energy Agency recently reduced its oil demand forecast for 2015 due to lower expectations for economic growth,” says FSG.
“In the case of Nigeria, risks are multiplied by crucial elections coming up in February, declining oil exports that started even before the decline in prices due to oil-theft and supply disruptions, as well as overall less international investment into exploration activities. While the oil price drop also impacts Angola’s budget, robust economic growth and large oil exploration investments by international companies that will increase Angola’s oil output by 2017 have given the country a better starting point for the challenges ahead.”
Performance of the region's coal industry is likely to be hampered by remoteness, inadequate port infrastructure and suitable railway, especially in South Africa where it accounts for more than 70% of the primary demand for power generation.
Meanwhile, the biggest challenge for sub Saharan countries in achieving the 5% to 6% economic growth in 2015 lies in their ability to address constraints to electricity generation to meet the current demand estimated at 352TWh which is projects to increase on the back of growth in manufacturing, industrial automation and control technologies according to International Energy Agency’s Energy Outlook report that was released last February.
Current installed grid-based power generation capacity in sub Saharan Africa is estimated at 90GW with South Africa accounting for 50% of it.
Growth in residential and commercial sectors is expected to trigger expansion of usage of more air conditioners, water heaters, appliances, computers and smart devices, some of the largest consumers of electricity in the expanding middle class in sub Saharan Africa.
Embracing of public private partnership models in the energy sector and U.S. President Obama’s Power Africa initiative would also drive the region's energy sector in 2015.
For example, in Ethiopia, the government is implementing a 5-year growth transformation plan which comes to a close at the end of this year targeting generation of between 8,000MW and 10,000MW.