UNCTAD, together with the Government of Côte d’Ivoire, is organizing a conference on modern trade and financing tools for the oil sector, in Abidjan from 21 to 24 April.
This Third African Oil Trade Conference will bring together key players in the oil sector from most African companies, all major international and regional banks involved in oil financing, and senior representatives of the large international oil companies. More than two-hundred participants are expected and so far fifteen countries have confirmed participation at ministerial level. The Conference will be held under the auspices of H.E. Mr. Konan Bédié, President of the Republic, and be opened on his behalf by H.E. Mr. Daniel Kablan Duncan, Prime Minister. Part of the Conference will be chaired by H.E. Mr. Mohammed-Lamine Fadika, Minister of Mining and Petroleum Resources.
This Conference has been organized in light of the success of two previous ones, held in Harare, Zimbabwe in 1996 and 1997. It is entirely funded by oil companies, banks and other companies involved in the oil sector, and by participants’ inscription fees. This large private sector interest is the result of a real partnership which has developed over the years between UNCTAD and the entities involved in structured commodity finance, and Africa’s oil sector.
The Conference will focus on areas where the finance and oil sectors overlap. The oil sector is capital-intensive, with respect to exploration, production, refining, and trade. The ability to obtain low-cost, longer-term finance can be of great importance for African countries. It has been estimated, for example, that sub-Saharan African oil importers could save more than US$500 million through improved financing modalities in procurement practices. The ability to raise sufficient long-term funds at competitive conditions can allow producers to develop new facilities. Even small improvements in the credit rating of investment projects represent big savings in financing costs. For example, if a project could be rated BB+ rather than BB in Standard & Poor’s rating system, the likely savings on a ten-year loan is about seven per cent of the initial financing.
Discussions will also take place on the changing environment for regions oil industry, new oil producing countries and oil refineries. They will be followed by a panel on marketing and distribution strategies which is expected to shed some light on a question left unresolved at the previous conference. At Harare an intensive debate took place on the modalities for deregulation of the oil industry, in particular as regards domestic pricing policies. Outside pressure towards changes in policies is felt, by many governments in the region, to be contrary to the interests of consumers.
A high-level panel on Africa’s oil potential will then be followed by a series of presentations on structured finance and risk management in the oil sector. In previous conferences, participants agreed on the urgent need for African countries to adopt risk management strategies, but noted the large political and institutional resistance against this, with policy-makers still not convinced there is a problem, despite revenue losses which, from one year to the next, can amount to hundreds of millions of dollars.
Some of the practical solutions to obtaining low-cost finance for Africa’s oil sector will be presented - including the pathbreaking Mobil Producing Nigeria deal, which allowed a 330 million US$ investment at terms much better than those commonly paid by Nigerian entities.
There is a clear need for matching the investment opportunities in Africa´s oil sector with the obvious interest of European and American institutional investors. At the same time, there is a need to build up a proper legal, regulatory and institutional framework for accessing modern commodity marketing and financing tools; the important role of local and regional banks in this should not be overlooked.