TMF World Energy Map: Africa

Oil and natural gas currently dominate the African energy story. The continent is home to a mix of developed and emerging economies, many of which have recently found an awful lot of natural resources on their doorsteps.

Nuclear
Right now, South Africa is the only country on the continent with nuclear power. It has two reactors, which account for about 5% of the country's electricity.

In September of last year, Nigeria announced it also planned to pursue a nuclear program.

Solar
Investments in solar power on the continent don't occur on any grand scale, but they do exist and have existed for some time. In the 1990s, a program in Zimbabwe distributed 9,000 solar power systems across the country to improve the standard of living and cut down on pollution.

Today, governments, nonprofits, and even privately held companies aim for the same change on a smaller scale. Some small solar systems may only charge batteries, but those batteries power lanterns and ceiling lamps that can make a significant difference in someone's life. Ninety percent of people living in rural Africa do not have electricity, and this patchwork approach may be the best bet to reach them.

More formally, South Africa's Department of Energy determined that 3,725 megawatts of renewable energy should be generated by independent producers by 2016. Twenty-eight bids were approved, and 20 of them were solar projects.

Coal
Coal production in Africa is more or less relegated to South Africa. The country accounts for 98% of the continent's production and has the only significant reserves, estimated at 53 billion metric tons. Perhaps unsurprisingly, about 95% of the country's electricity comes from coal-generated power plants operated by the state-owned company Eskom.

South Africa's neighbor Mozambique also has some coal deposits, and mining giants Rio Tinto (NYSE: RIO  ) and Vale (NYSE: VALE  ) have invested in the region.

Oil
As recently as 2010, the four African members of OPEC (Nigeria, Algeria, Angola, and Libya) produced 73% of the oil on the continent. The next four largest producers are Egypt, Sudan, Equatorial Guinea, and Congo.

Country

2011 Production

Reserves

(bbls/day)

(billion bbls)

Nigeria 2,528,000 37.2
Algeria 1,884,000 12.2
Angola 1,839,000 9.5
Egypt 706,100 4.4
Libya 495,600 46.4
Sudan & South Sudan 436,300 5.0
Congo 308,100 1.6
Equatorial Guinea 302,500 1.1

Source: EIA

Big oil has been in Africa for over 50 years, and while resources continue to be discovered and developed, operations are increasingly interrupted because of geopolitical reasons.

Natural gas
Though oil takes center stage in Africa, the continent is home to significant natural gas reserves as well. Nigeria and Algeria have the eighth and 10th largest reserves in the world, respectively.

Country

Production
(tcf)

Reserves
(tcf)

Nigeria 1.02 187
Algeria 2.99 159
Egypt 2.17 77
Libya 0.594 55

Source: EIA and CIA World Factbook. Production data is from 2010, the most recent year available. Reserve data is 2011.

The natural gas game in Africa has gone from zero to 60 over the past year. Enormous deposits of natural gas were discovered offshore East Africa last year, and some estimates put the total payload in the region at upwards of 400 trillion cubic feet of natural gas. The countries that lay claim to these resources -- Tanzania, Kenya, and Mozambique -- had almost no energy production prior to the discoveries.

Geopolitical risk
The risks are many and varied when it comes to energy investment in Africa. Perhaps there is no stronger evidence of that than Libya, a country that averaged nearly 1.8 million barrels of oil per day in 2010, and dropped to less than 500,000 bpd in 2011 as an uprising and subsequent overthrow of the government forced energy companies to shut down operations temporarily.

Onshore, operations are often targeted for oil theft and sabotage. Attacks on oil companies in Nigeria resulted in a 28% production decline between 2006 and 2009.

Offshore, tankers and rigs are victims of piracy. The International Maritime Bureau reported a sharp rise in such attacks off the coast of West Africa over the past year. Last year the U.S. government sent military trainers over to the Gulf of Guinea to work with local navies. Increasing natural gas exploration and production combined with the close proximity to Somalia means that security is increasing offshore East Africa as well. It's estimated that the violent piracy that originates off the coast of Somalia costs the world $7 billion annually.

Many African governments are at best unstable, and at worst corrupt. Citizens see oil companies making profits, but rarely see the effects of royalty payments -- poverty is frequently the driving force behind these crimes.

But there is also evidence that things have the potential to be different moving forward. After the large discoveries off the coast of Tanzania, the government quickly began drafting a "master plan" to govern the treatment of revenue. Whether the plan is implemented successfully or not remains to be seen, but it is certainly a step in the right direction.

Players
Royal Dutch Shell (NYSE: RDS-B  )
Shell increased upstream spending in Africa from $1.6 billion in 2010 to $1.7 billion in 2011. Both numbers are down from the $2.4 billion the company threw down in 2009. It is now the second-smallest region of capital expenditures after South America for the company.

That being said, on the production side the company reported an average rate of 326,000 barrels per day in 2011. That rate is the second-highest region after South America.

Shell produced 840 million cubic feet of natural gas per day in Africa in 2011.

Total (NYSE: TOT  )
Total's production in Africa dipped in 2009, but has since roared back and sales were just shy of $21 billion in 2011 -- more than double what they were five years ago.

Unlike Shell, Total consistently has increased capital expenditures in Africa every year since 2007, topping out at $7.3 billion last year. That number was about 21% of the company's total capital expenditures last year.

The company has control of proved reserves of roughly 3 million barrels of oil equivalent on the continent.

Eni
More than half of Eni's liquids production comes from Africa. Last year, the Italian energy company produced 278,000 barrels per day in Sub-Saharan African countries and 209,000 barrels per day in North Africa.

Eni also produced 1.8 billion cubic feet of natural gas per day on the continent in 2011. That number will likely increase dramatically in coming years after the giant natural gas discoveries off the coast of East Africa come on line.

All told, 44% of Eni's oil and gas reserves are in Africa.

Statoil (NYSE: STO  )
Statoil's hydrocarbon production in Africa is the lowest it has been in three years. Crude oil production has declined from 63 million barrels per day in 2009 to 46 million barrels per day at the end of 2011.

Oil and gas proved reserves in Africa totaled 390 million barrels of oil equivalent at the end of 2011. Again, the company's exploration offshore East Africa will pull that number up next year.

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Fool contributor Aimee Duffy owns shares of Statoil A, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. 

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