UNCTAD, together with the Government of Namibia is organizing the Fourth African Oil Trade Conference in Windhoek from 27 to 30 April. This major international conference on modern trade and financing tools for the oil and gas sector will be opened by the President of Namibia, H.E. Dr. Sam Nujoma.
As H.E. Toivo ya Toivo, Minister of Mines and Energy of Namibia, told an earlier UNCTAD Conference, in Harare: "The key issue is the pivotal role that the oil trade plays in our respective countries, and the weight it carries in balancing our finances in the budgets..... In times of tight budgets and deregulation, these (new financial) instruments can be useful - and we should make an effort to learn to use them."
Some 200 representatives of the private sector and government officials are expected to participate in this year’s Conference. Among the dignitaries are: H.E. Serge Wafio, Minister of Energy and Mines of the Central African Republic; H.E. Pierre Victor Mpoyo, Minister of Petroleum of the Democratic Republic of Congo; H.E. Tati Loutard, Minister of Hydrocarbons and Mines of the Republic of the Congo; H.E. C.B. Okemo, Minister of Energy of Kenya; H.E. Jesaya Nyamu, Minister of Mines and Energy of the Republic of Namibia; H.E. Ahmed M. Behi, Minister of Energy and Mines of Somalia; and Mr. Maxime Obiang-Nze, Executive Secretary, Association of African Petroleum Producers.
The Conference will focus on those areas where the financial and oil industries overlap. As all aspects of the oil industry are capital-intensive, the ability of producing and importing countries to obtain low-cost, longer-term finance is of great importance.
UNCTAD estimates, for instance, that sub-Saharan African oil importers could save over US$500 million a year if they improved their procurement practices - and financing practices make up an important part of that.
Developing countries are vulnerable to sharp revenue fluctuations due to commodity price changes. The problem is particularly acute when it comes to oil product trading because of oil’s important share in foreign trade, especially in Africa. Since 1994, oil products have therefore become a focus of UNCTAD’s research and policy work on market-based techniques to manage commodity price volatility.
The ability to raise sufficient long-term funds at competitive rates can also allow producers to develop new facilities. Small improvements in the credit rating of investment projects represent big savings in financing costs. For example, if a project is rated BB+, rather than BB, by Standard & Poor’s, the estimated savings on a ten-year loan amounts to seven per cent of the initial financing.
Unlike conventional oil industry meetings, the UNCTAD African Oil Trade Conference does not focus on upstream technology. And, it provides more than just an opportunity to meet key decision-makers.
In Windhoek, the Conference will thus explore the frontiers of modern financial tools for the oil sector, allowing participants to evaluate how these tools can be of use to them. High-level panels on Africa’s oil potential, its refinery needs and domestic distribution policies will be followed by a series of presentations by experts on structured finance and risk management in the oil sector.
At the Conference, UNCTAD will also launch a multi-donor Trust Fund for training and capacity-building in the oil and gas sector in Africa, with the aim of improving trade and finance practices. The new Trust Fund is expected to receive pledges from international oil companies and commercial banks.
Matching the investment opportunities in Africa´s oil industry with the potential interest of institutional investors in Africa is one of UNCTAD’s objectives. But, to do so, there is a need to build a proper legal, regulatory and institutional framework for accessing modern commodity marketing and financing tools.
Participants at earlier Conferences agreed on the urgent need for African countries to adopt risk-management strategies. But they also noted the existence of political and institutional resistance. Despite revenue losses which, over a year, can run into tens or even hundreds of millions of dollars, it seems that some policymakers are not yet seem convinced of the scale of the problem.
However, given the current high volatility of oil prices (after a high of US17 a barrel last year, since February average prices of crude have risen from US$10 to US$16), decision-makers will find it more urgent than ever to tackle the problem of managing rapidly changing budgets and daily cash flow considerations.
Bringing together key players from most African companies in the oil sector, major banks involved in oil financing, and senior representatives of large international oil companies, the Conference is funded through the sponsorship of businesses involved in the oil sector, as well as by registration fees. This large private-sector interest is the result of a partnership that has developed between UNCTAD, the various bodies involved in structured commodity finance, and the African oil industry.
The 1998 Conference attracted some 230 delegates from more than 30 countries, including Africa, Europe, and the United States. Seven countries were represented by Government Ministers.
In light of its growing success, the UNCTAD African Oil Trade Conference has become an annual event. The first and second Conferences were held in 1996 and 1997 in Harare (Zimbabwe), and the third in April 1998 in Abidjan (Côte d’Ivoire).