Diezani Alison-Madueke turns heads, not only because of her sartorial elegance. With a record-breaking career of many firsts, she is a force to reckon with in Nigeria’s corridors of power and among titans of industry.
Her list of career firsts could fill up an entire chapter in Nigeria’s book of powerful people.
Alison-Madueke is the country’s first female Minister of Petroleum Resources, a post she has held since 2010. She was the first woman to lead a country delegation to the annual Organization of Petroleum Exporting Countries (OPEC) conference. She was Nigeria’s first female minister of the mega Transportation Ministry and the first woman to be appointed to the board of Anglo-Dutch oil giant, Shell Petroleum Development Company of Nigeria. She recently added more feathers to her cap when elected the first female president of OPEC, and also the Gas Exporting Countries Forum.
Alison-Madueke’s rise to the top in an aggressive male-dominated industry has been studied by critics and admirers alike.
As sliding crude oil prices (expected to go down to $30 a barrel according to a recent Goldman Sachs report) send volatile tremors across economies and sectorial bottlenecks linger, there is no hotter seat than Alison-Madueke’s.
OPEC’s decision (largely driven by Saudi Arabia) to maintain production in the face of decreasing oil prices has been called a double-edged sword. One that defends the market share of member countries, yet hurting a few key economies, Nigeria included.
In the scheme of things, Alison-Madueke’s optimism is unmistakable – and unshakeable. She is confident and articulate.
“I am not shaken by the vagaries and viciousness that surrounds the sector, the economy and the politics of Nigeria,” she says when we meet her in February in Abuja, Nigeria’s capital city.
She says this with gusto; you can tell she has had this attribute all her professional life. She admits her early experience as an architect provided the foundation.
“When you study architecture, you fundamentally have to make structures stand up, the integrity of a building is crucial; it is otherwise a failed project,” she says.
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Early life
Being a creative person, Alison-Madueke decided a career in architecture, at Howard University in the United States (US), would complement her personality. Studying her chosen subject well, and with an MBA from Cambridge, she moved very quickly into construction, facilities and project management in the US, before returning to her home country Nigeria. There is where she understood the nuts and bolts of the oil and gas industry.
“I returned to Nigeria to take up a job in the civil infrastructure section of Shell at the time. I moved into public affairs and soon joined venture relations which [found] me working directly with the major governmental organizations in the oil and gas sector under my domain now. I had to learn the hardcore operational details of the oil and gas industry during that period. Having understood the operational details, I took the position of External Affairs Director – the first time a woman had been made a director in Shell Nigeria in over 70 years of it being in operation.”
With each new step, came even bigger global – and social – responsibilities. The topic of women’s empowerment is not far from her mind.
“All the firsts, each time they came, were very humbling and a great privilege. When you realize that the steps you are taking and the glass ceilings you are breaking open the door for other women to enter into that arena, it is something very pleasing to me. I believe that as women, it is important to remember that there are many other women who have been shut out of many areas of professional expertise and as you rise up the ladder, always remember to turn back and give a helping hand to other women to rise along with you,” she says.
Alison-Madueke identifies her parents as early influencers. Her father had been a teacher in colonial days and attained a scholarship to study in the United Kingdom whilst her mother joined him to study nursing and midwifery. Her father returned to Nigeria to take on a senior position with Shell-BP. To their young daughter, they were strong role models.
“I don’t see how I would have had the innate confidence and strength that I had without that sort of a background and influence,” says Alison-Madueke.
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Confronting challenges
As Nigeria’s Minister of Petroleum Resources, Alison-Madueke sits at the helm of a sector that has been plagued by operational challenges. When she took on the role, her mission was to change the narrative of Nigeria’s core revenue-producing sector, and boost investment.
“This is a period [rife] with challenges as we have seen with the drop in the price of crude over the last few months which has of course, affected the federation’s budget quite drastically as well as [that of] many other crude-producing countries around the world. We are grappling with that, reviewing our processes in the oil and gas sector here to make us much more competitive, to have a much more enabling environment for investors and to begin to look at future investment and ring-fence them now to ensure we have them over the medium to long term,” she says. Nigeria is Africa’s foremost oil producing country and Alison-Madueke’s ministry oversees the Nigerian National Petroleum Corporation (NNPC), one of Africa’s largest state-owned petroleum enterprises. A lot of hope is pinned on the sector to take the country forward.
Alison-Madueke’s tenure has recorded some transformatory highs in Nigeria’s oil and gas sector. Her drive to empower local enterprises saw her champion the passage of the Nigerian Oil &amp; Gas Industry Content Development Bill.
The bill was signed into law by Nigerian President Goodluck Jonathan in 2010, influencing indigenous participation and the development of local capacities thus changing the face of the sector. It saw a notable growth in the number of Nigerian-owned exploration and production companies and indigenous entrants, which was a first for the industry. Importantly, it created more jobs.
“The act has ensured that well over 300,000 jobs have been created because of the trickledown effect it has had on the economy but more than that, it has brought into play a whole host of new players, across society, into the downstream service sector of the oil and gas industry – from supply, fabrication of parts for the downstream service sector, fabrication of pipe mills, a massive rise in ownership of rigs and marine gold vessels for use in the oil and gas sector. It has given Nigerians first consideration in many areas of the oil and gas sector.”
Stability of supply, distribution of petroleum products and a uniform price regime in Nigeria are still challenges. Alison-Madueke’s leadership has seen to the revamp and rehabilitation of key depots to restore product supply.
The Petroleum Industry Bill (PIB), a bid to ensure the oil and gas industry is more transparent in order to attract investment, is yet to be promulgated. While Nigerians wait with bated breath, the Minister sheds more light on its intricacies.
“Despite the fact that the PIB has not been promulgated, the Gas Master plan and areas of fundamental reforms in major oil and gas parastatals such as the NNPC and the NPDC (Nigerian Petroleum Development Company) have been pulled out. The Gas Masterplan is being worked very stringently and has ensured we have not only moved for gas to power but also for gas to industry and to ensure we get value for our gas to export. Quite a lot of reforms have taken place in this area in the last three years to ensure we are not only creative about putting in place the formerly non-existent infrastructure for gas to power, but at the same time, the framework that will allow Nigeria in the next four to five years to become a regional hub for industrialization based on gas.”
In a quest to boost Nigeria’s position as a global oil and gas powerhouse, Alison-Madueke’s ministry has had to deal with the scourge of illegal refineries, crude oil theft, as well as the issue of over 5,000 kilometers of vandalized pipelines.
But Alison-Madueke remains resolute.
“There are no bottlenecks that cannot be overcome,” she says, “but we need to very carefully delineate aggressive responses to a number of issues that we have to deal with. We are working very hard with security services to mitigate this bottleneck. Over the last three years, we have been able to drop the rate of bunkering from 200,000 to about 60,000 barrels per day. It is one of the most irresponsible issues we are faced with as a government because it affects the entire country.”
Identifying pricing frameworks in the gas sector is the next frontier for Nigeria and Alison-Madueke says the sector needs to equip itself better with infrastructure.
“We have put in place over 400 kilometers of pipelines in the last three and half years. We have another over 470 kilometers as we speak for gas infrastructure. We are also trying to attract the necessary investors to help us with that,” she adds.
How does she do it all?
On juggling an incredibly busy professional life with family responsibilities, Alison-Madueke offers a simple formula, which is achieving the right balance.
“Women have really come into their own in all spheres of expertise in this day and age. A woman not only has professional responsibilities to deal with, she is a mother, she is a wife, and she is a sister. A woman handles many roles rolled into one. All my professional roles don’t stop me from playing my other roles. I still have my family-related obligations that I attend to.”
In spite of a hectic schedule, Alison-Madueke takes time off whenever she can.
“The most precious things in life are not the things money can buy. What give me satisfaction in life are the things you cannot pay for: the love of a family, seeing them do well as they grow into their professions and start their own families. When I am standing by a football pitch in the mud and rain, screaming out for our youngest son to make that goal, or just enjoying time out or indoors with them is very refreshing,” she says.
The African woman
Alison-Madueke sees the African woman’s place in society as evolving and her presence now acknowledged with a “no-limit view” on how far she can go. She thanks the Nigerian leadership for effecting the mind-set change in gender issues – at least in government.
“For the first time in the history of Nigeria, we have had a president confident enough to place over 35% of women in top nominated positions in his government. Women are not in tokenism positions anymore. It has been very rare for women to be placed in key positions in government. The Nigerian president has gone out on a limb which is historical where women of this country are concerned and I see this happening all over the continent because African women have come into their own. The times for women have changed. I see, over the next 10 years, major progress for women across the board in Africa and I think it will be quite an accomplishment we will all live to enjoy.”
Among Nigeria’s other powerful female leaders is the globally-famous Nigerian economist and Nigeria’s Coordinating Minister for the Economy and Finance, Ngozi Okonjo-Iweala, and Arunma Oteh, who served as Director-General of the country’s Securities and Exchange Commission.
Alison-Madueke says networks and support structures amongst women are key to ascending the corporate ladder.
“Women are in competition with each other. This is highly unfortunate. Leadership is not about being liked. It is about making tough decisions for the betterment of the whole and as women rise, they should learn to begin to network among themselves. Creating clusters where other women support each other. Men do this very well.
“I envision an Africa with a lot of strong women in a lot of very powerful positions.”
By the same token, she encourages young adults to be more assertive.
“Don’t wait for your ship to sail into harbor. Swim out to it and climb onboard. Learn to recognize opportunities when they present themselves. They may turn out to be the most critical opportunities and game changers in your entire life.”
Alison-Madueke may have derived these words from her own life, seeing resources as sustainable opportunities, but how does she counter opposition and critique?
“For every stage I have come into in life, I have been responsible to a certain segment. That we can open up sectors like the oil and gas industry and allow so many Nigerians an opportunity to benefit from the natural resource that runs under their feet, and that lives can be changed completely from their involvement in a sector which hitherto was a great mystery.
“The responsibility to impact positively on the lives of so many Nigerians is what drives me. Every day, I face this work with a certain fuel and passion and I am not feeble about it. Even in the face of opposition, I channel my energy into the sector that I run.”
Energy. Power. Fuel. Drive.
The words of the oil and gas industry fit the woman.

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The Queen of Black Gold

Last November Apollo Global Management, the powerful buyout shop run by billionaires Leon Black, Marc Rowan and Joshua Harris, finished cashing out of arguably the greatest private equity deal of all time.
As they furiously sold billions of dollars of shares in LyondellBasell, a chemical maker, in several batches, they had every reason to think they were doing the right thing. By any metric it was a monstrous score. Since 2008 the firm had turned a $2 billion investment in the company, a plastics manufacturer and petroleum refiner based in Rotterdam with its main executive offices in Houston, into $12 billion, a sixfold return on investment that juiced the results of its biggest fund to a net internal rate of return of 30%. It was an astonishing result, especially in postcrash Wall Street, landing Apollo atop the lucrative private equity world and helping to launch an initial public offering of the firm, which is now valued at $10.5 billion. Harris earned $397 million from his work at Apollo last year alone; Black made $546 million.
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But even as Apollo’s billionaires were exiting from LyondellBasell, another billionaire investor was continuing to double down. In 2013 Len Blavatnik spent $575 million purchasing 8.5 million of Apollo’s LyondellBasell shares, an unparalleled bet on an investment that had already helped make him one of the richest men in the world, and one that had many scratching their heads at the time.
“It’s an easy argument against it: If Apollo is selling, why are you buying?” Blavatnik tells FORBES in a rare interview. “Before every one of my additional purchases of stock in LyondellBasell, some people around me told me it was a mistake and that I should sell instead of buying more.”
But so far Blavatnik has been right—seriously right. Shares of LyondellBasell have soared by more than 50% since he bought his last block of stock from Apollo.
In the history of Wall Street there haven’t been too many moneymaking machines quite like LyondellBasell, which has seen its shares return 500% since it emerged from bankruptcy four years ago. And that’s been especially lucrative for Blavatnik, 57, who cobbled the company together, saw it fail and plunge into bankruptcy court, and then doubled down on the same assets, personally investing another $2.37 billion in LyondellBasell the second time around.
His investment is now worth more than $10 billion, generating $8 billion in mostly unrealized personal profits. As it stands, FORBES believes it’s the biggest individual score from a single deal, ever. While Blavatnik usually makes headlines these days for his media holdings, like Warner Music or his stake in Beats Electronics, those parts of his portfolio are a sideshow compared to the LyondellBasell redemption that has pushed his net worth above $20 billion—making him the world’s 33rd-richest man.
“It is an historic transaction,” says Mark Epley, managing director in Nomura’s private equity banking unit. Says Stuart Gilson, a Harvard Business School finance professor who has studied LyondellBasell’s restructuring: “It’s outstanding given the return, but recalling what we were all feeling in 2008—it was the end of the world—makes the outcome even more remarkable given the enormous risk.”
Blavatnik, who owns 16% of LyondellBasell through his Access Industries, thinks there’s still more room to run, wagering that LyondellBasell’s stock will continue to rise. “So far I feel vindicated and proud of my investment decisions,” he says. “The question is whether the luck will continue.”
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When Len Blavatnik was first handed an investor memorandum for Dutch chemicals company Basell, it had the number 64 on the cover, prompting one of Blavatnik’s associates to caution him about jumping in. Why bid for a company that 63 other players were already considering? Blavatnik waved him off—he wanted to create a global chemicals empire, and this was his way in. A Ukrainian-born American citizen who grew up in Russia and immigrated to the U.S. in 1978 at the age of 21, he later got his M.B.A. at Harvard. Blavatnik made his first fortune with a former classmate in Russia, Viktor Vekselberg, in oil and aluminum deals during the anything-goes post-Soviet days.
Blavatnik’s biggest scores in Russia were oil company TNK-BP, a joint venture with British Petroleum that was eventually bought by Rosneft for $55 billion, and Sual, an aluminum producer that merged with the larger Rusal. Chemical companies that had nothing to do with Russia would be his next big thing. He paid full price, putting down $1.1 billion to purchase Basell in a $5 billion leveraged buyout in 2005. Then he tried, and failed, to buy other chemical companies, including Huntsman International.
In 2007 Blavatnik decided to buy Lyondell, a Houston-based company—not particularly well run—that produced commodity chemicals used in making plastics and that also had refining assets. Blavatnik had been stalking Lyondell, buying up the right to purchase 8%. When he decided in July 2007 to use Basell to buy up a controlling stake in the company at $48 a share, a 45% premium to the market price, Blavatnik’s associates got nervous. Alan Bigman, a trusted lieutenant who’d been working for Blavatnik for a decade, woke up at 4:30 one July morning, unsettled by the deal.
“I know you’ve already made up your mind,” Bigman wrote to Blavatnik, according to a court document. “But I am uncomfortable with the valuation.” Blavatnik waved him off and did the same when Philip Kassin, another colleague who also sat on Basell’s board, expressed his own worries. Ultimately, Blavatnik has told FORBES, employees can voice their opinions, but he is “risking my money, not their money.”
Basell bought Lyondell in a $20 billion leveraged buyout in December 2007 to create LyondellBasell, the world’s third-biggest independent chemicals company. The timing couldn’t have been worse. Within months the financial crisis hit and the deal looked like a debacle. Weighed down by more than $20 billion in debt, LyondellBasell hit the wall as the economy crumbled. Chemical orders stopped, a huge crane collapsed in an accident at its Houston refinery that killed four employees, and Hurricane Ike shut down its plants in Texas. Some 2,500 employees, 15% of its workforce, were laid off at the end of 2008. In early 2009 Blavatnik pushed LyondellBasell into bankruptcy. It was a humiliating moment for Blavatnik. “Filing for Chapter 11 is an experience I would never want to repeat; it was really a dark moment,” he has said of that time.
It was also his biggest-ever financial loss. How much he lost has been a subject of fierce litigation by LyondellBasell creditors, who went after Blavatnik in a lawsuit that continues to this day. At minimum, Blavatnik was out $1.2 billion. But despite the reversals, Blavatnik believed in the assets and potential earnings power of a company he felt had simply been hit by a perfect storm.
He wasn’t the only billionaire with an appetite for chemicals. Apollo had also been trolling the industry, buying and owning chemical assets like Hexion Specialty Chemicals and Momentive Performance Materials that had been similarly battered by the financial crisis, sinking Apollo’s performance. Yet, like Blavatnik, Harris, Black and Rowan knew the industry and decided to keep investing. Before LyondellBasell headed to bankruptcy court, Harris bought ­LyondellBasell term loans from a reeling Citigroup at a discount and kept buying bank debt for as low as 20 cents on the dollar, as the financial crisis raged and those loans plunged in value. Harris knew some people on Wall Street thought he had lost it, but Apollo’s analysis determined that the most secured LyondellBasell debt would perform well absent a complete global economic collapse.
“Every day we would buy Lyondell as prices fell. We had conviction, and we were buying supercheaply,” Harris tells FORBES. “We were able to pair our deep industry expertise in chemicals with a highly complex distressed process so it highlighted what we are good at in terms of distress for control.”
It was a daring $2 billion investment that gave Harris an opportunity to convert his debt into a big equity stake in LyondellBasell in bankruptcy court. That meant working with Blavatnik. Harris and Blavatnik are friends who still get together socially and whose wives know each other. Still, a minor skirmish broke out between them over who would run the “debtor-in-possession” bankruptcy financing—and in turn have more control over the company. In the end Harris won out, leading an $8 billion bankruptcy financing that included an innovative roll-up feature that allowed Apollo to move some of its debt higher in the capital structure. Harris and two other Apollo representatives jumped on LyondellBasell’s board, and they worked closely with Blavatnik and his team on the restructuring. “Overall, we had a very good working relationship with Apollo,” says Blavatnik. “Sometimes it was tense because we had somewhat different interests in the beginning.”
The bankruptcy wiped out Blavatnik’s stake in the company, but he found ways to rebuild equity in LyondellBasell, mostly through private transactions with creditors and buying stock on the Pink Sheets, where LyondellBasell’s shares traded. He also kept his new key advisor, Stephen Cooper, who guided Enron through bankruptcy as CEO, on the board. (He’s now CEO of Blavatnik’s Warner Music.)
In bankruptcy court LyondellBasell shed the weight that brought it down, including bad contracts and high-cost assets, shutting expensive plants in Texas and Germany. It reduced its debt load to $2.5 billion, slashing annual interest expenses by $1.7 billion. The company added as its CEO Jim Gallogly, who had headed Chevron Phillips Chemical Co. Gallogly got 1.8 million restricted shares and options to purchase 5.6 million shares for $17.61 apiece to run the floundering company. “It was hard to convince Jim, and it took us some time,” says Blavatnik. “We offered a very attractive package.”
In 2010 LyondellBasell emerged from bankruptcy court valued at $15 billion. That number was about to soar.
The revolution that changed everything for Blavatnik, Apollo and LyondellBasell originated in the thin fissures of shale rock filled with oil and natural gas reserves throughout the United States. Throughout the last decade drillers pioneered new techniques of exploiting rock formations with hydraulic fracturing and horizontal drilling to draw out the petrochemicals trapped within. As a result, the U.S. became one of the world’s largest sources of cheap natural gas almost overnight, with prices falling from highs of $13 per million British thermal units to a $3 to $4 range today. This dramatic drop in prices proved a huge boon to dozens of industries, none more so than the chemical business—and few more than LyondellBasell.
LyondellBasell is a top producer of ethylene, which it upgrades into the plastic known as polyethylene, used in everything from food packaging to trash bags and hard hats. The company operates six facilities (known as “crackers”) to produce ethylene in the U.S. and four in Europe. Profits from ethylene and its derivative chemicals and coproducts are the core of LyondellBasell’s earnings.
Ethane, refined from natural gas, and naphtha, a crude oil derivative, are the prime raw materials used to produce ethylene. Starting in 2007, U.S. drillers were finding natural gas everywhere. By 2012 the price of ethane had fallen from 90 cents per gallon to 30 cents, giving U.S. chemical producers a huge advantage over foreign competitors in Europe and Asia that are dependent on pricey oil-based naphtha as a feedstock. The gap between the two supercharged LyondellBasell’s profitability.
LyondellBasell’s decades-old crackers in Clinton, Iowa and Morris, Ill., for example, are the only ones in the Midwest—and are situated near natural gas liquid pipelines and a hub in Kansas, home of some of the cheapest ethane in America. Almost overnight they were transformed, churning out profit margins of 32 cents per pound compared to European naphtha-based ethylene, which is barely even profitable. “It’s improbable that anyone could have foreseen the full impact of the shale revolution,” says Blavatnik. “But Jim had some experience and insight through his work at ConocoPhillips that I think helped.”
Gallogly, 61, a lawyer by training who was born on Canada’s Newfoundland island, quickly cut $1 billion of annual fixed costs and guided the company to swiftly take advantage of the shale gas boom, converting the company’s U.S. processing facilities so that 90% of the time they can run on cheap natural gas-based feedstock.
Gallogly’s strategy has been straightforward. Instead of spending huge amounts of money and time building new crackers like other chemical companies, he incrementally expanded capacity at his existing U.S. plants. That shortened construction time and allowed the company to quickly benefit from the ethane advantage, adding capacity while others waited for new permits. Instead of it taking six years for new plants to come online, it has taken just two years to add capacity. “Perhaps you have heard the expression,” Gallogly likes to say, “ ‘The early bird gets the worm’?”
In all, Gallogly has spent just $3.7 billion over the last three years on capital expenditures. He spent $510 million to expand capacity of a steam cracker in La Porte, Tex., to be able to process 800 million more pounds of ethylene from ethane, a project that will finish this year. He spent another $200 million to increase the ethane-processing capability at the company’s cracker in Channelview, Tex. Those crackers in the Midwest? For just $30 million Gallogly added 100 million pounds of ethylene and polyethylene capacity, worth an estimated $30 million in operating profits to the company. LyondellBasell has gone from posting losses in 2009 to profits of $3.9 billion on revenues of $44 billion last year. (Gallogly’s shares of LyondellBasell are now worth $380 million.)
Just as importantly for Blavatnik, Apollo and other shareholders, LyondellBasell has been a cash machine. In the past three years the company returned $8.4 billion to shareholders via share repurchases and dividends. It’s “a beast,” says Deutsche Bank analyst David Begleiter. “They are the poster child for the renaissance of the U.S. chemical industry.”
Other big shots on Wall Street have taken notice. Billionaire hedge fund manager Dan Loeb used more than half of his first-quarter letter to his investors wondering why Dow ­Chemical Co.—where returns have trailed ­LyondellBasell significantly over the last three years—wasn’t more like its rival. Loeb’s Third Point hedge fund has taken a ­position in Dow, and the activist investor made it clear that he would push Dow to follow LyondellBasell’s lead. “Underearning is clear when one compares Dow to its North American petchem peer, LyondellBasell,” Loeb wrote in May.
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Not everyone has been convinced the party will last, of course, but so far Blavatnik continues to have made the best bet. The investment firms of some billionaire investors—including Antony Ressler, David Einhorn and James Dinan—held stakes in LyondellBasell after it emerged from bankruptcy and sold them in the early innings of its rally. Harris and Apollo held on much longer, selling their LyondellBasell shares at an average price of $62.65 a share. Still, in July LyondellBasell started trading above $100. The feeling at Apollo was that the investment was unlikely to continue providing the kind of high returns private equity investors expect. Apollo, mindful of the cyclical nature of the chemical industry, also simply thought it was time to monetize one of the greatest deals ever. “As an institutional fund we have to make private equity returns,” says Harris. “So in our view it was time to monetize.”
Of course, unlike Blavatnik, who invests on his own dime, Harris’ Apollo needs to return money to outside investors, preferably in the kind of large amounts that will help Apollo raise more money. In fact, as Apollo was selling its LyondellBasell stake, it was raising $18.4 billion for Apollo Fund VIII, the most ever for the firm—and the biggest new private equity fund raised by far since the financial crisis. LyondellBasell certainly helped, making up 15% of the profits of the wildly successful Apollo Fund VII.
Now Harris and Apollo are making bets that natural gas prices will increase, essentially going against Blavatnik’s take on the market. In June Apollo announced it was buying natural gas properties from Encana for $2 billion in a straight-up play on rising natural gas prices. Apollo has also been wagering on Energy Future Holdings, a leveraged buyout bankruptcy that is actually bigger than LyondellBasell, working to take control of Energy Future Holdings’ unregulated unit, which would benefit if natural gas prices rise because the company produces electricity using coal and uranium while most electricity in Texas is generated using natural gas.
Blavatnik shrugs off worries about rising gas prices and continues to believe fervently that changes to the energy and chemical markets are near permanent, and abundant low-cost ethane will continue to fuel LyondellBasell. “The shale revolution is continuing,” he says. “And we see the competitive advantage staying for some time.” On July 25 LyondellBasell reported record second-quarter earnings of $1.17 billion. The stock closed at an alltime high of $107.49.

The  Greatest  Deal  of All Time

From the famous words in Shakespeare’s The Merchant of Venice: “All that glitters is not gold; often have you heard that told: many a man his life hath sold.”
Put simply, things that often appear precious may not always turn out to be so. This month, however, I will explore a commodity that proves the opposite to be true. A seemingly unglamorous, not particularly attractive commodity, which has sparked the interest of many: crude oil. It is a topic that is luring huge investment opportunities on our continent.
Even though alternative energy sources abound, crude oil is likely to remain a vital source of energy across the world for many decades to come. Life without oil would be virtually impossible. It is the most important raw material; generating heat, driving machinery and fueling vehicles and airplanes. Its components are used to manufacture most chemical products, including plastics, detergents, paints and even medicines.
Most countries are significantly affected by developments in the oil market, either as producers or consumers, or both. Oil catered for about 34% of the world’s energy needs in 2008. It is expected to continue being a leading component of the world’s energy mix – 30% in 2030, according to the International Energy Agency (IEA).
About two-thirds of oil is used for transportation in the United States and Canada. In the rest of the world it is more commonly used for heating and power generation.
Brent crude oil is derived from the ‘Brent blend’. It is a combination of crude oil from 15 different oil fields in the North Sea, off the coast of the UK and Norway. This blend is used to price two-thirds of the world’s internationally traded crude oil supplies, making it an obvious choice as the benchmark of crude oil.
Brent crude oil is excellent for making gasoline, and is highly sought after, particularly in industrialized nations. It is a ‘light’ or ‘sweet’ crude oil because it contains less sulphur.
This type of ‘sweet’ crude oil is also produced in a few countries in Africa, with Nigeria being our leading exporter. In fact, Nigeria is the largest producer of sweet oil in the Organization of Petroleum Exporting Countries (Opec). Known as ‘Bonny light’, it is similar in composition to the petroleum extracted from the North Sea.
There are two widely used Brent crude oil futures: the West Texas Intermediate (WTI) and the Opec price basket.
Opec is an organization of 12 oil-producing countries that effectively controls the world’s oil. Opec members pump out 42% of the world’s annual supply, thereby controlling 61% of exports. These 12 countries hold 80% of the world’s proven oil reserves, to last for 113 years. Opec’s decisions, therefore, are critical to countries that depend on oil imports.
Opec has stated quite adamantly that its goal is “to manage the world’s supply of oil”, which it does “to make sure its members get what they consider a good price for their oil”.
Opec’s second goal is to reduce oil price volatility. Oil and energy minis-ters from Opec members meet at least twice a year to coordinate their oil production policies. Each member country must abide by an honor system, where it agrees to produce only a certain amount. But countries that produce more suffer no sanctions or penalties.
The Opec members are: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Vene-zuela. Saudi Arabia alone produces enough oil to materially impact the world’s supply.
Opec has a basket price – an average of the prices of oil from Algeria, Indonesia, Nigeria, Saudi Arabia, Dubai, Venezuela and Mexico – which is used to monitor world oil market conditions.
The WTI is a blend of several US domestic streams of light sweet crude oil. It is also considered a key driver of growing global crude oil supply because of its unique immediacy, breadth and depth of pricing. In times of uncertainty, of massive political unrest or financial crisis, the market tends to flock to the WTI instead of the Opec price basket.
Brent crude originally traded on the open outcry International Petroleum Exchange in London. But after 2005, it traded on the Electronic Intercontinental Exchange, known more commonly as ICE. Brent crude financial futures are also traded on the New York Mercantile Exchange. One contract equals 1,000 barrels, quoted in US dollars.
From the mid-1980s until 2003 Brent crude oil averaged $25/barrel.
My technical analysis shows that Brent crude oil (listed on the ICE) is consolidating within a symmetrical triangle on the monthly chart. This triangle is a horizontal cone-shaped pattern, which could break out in
either direction. It often forms after a rally or a decline. In this case, it has formed within the major bull trend.
A positive breakout of this pattern would be signaled above $120/barrel, with the long-term objective situated at $162/barrel – through the 2008 all-time high of $147/barrel. Alternatively, Brent crude oil could breach the lower slope of the pattern, which would be signaled below $96/barrel, in which case the downside objective would be at $54/barrel. I foresee an upward break through $120/barrel, and a 34% appreciation in price in one to five years – a very brave call. However, this surge won’t happen in a straight line. Brent crude may or may not fulfill that objective, but historically, the longer it takes a pattern to form, the bigger the breakout. And as my leading indicators are bul-lish, a positive breakout seems more probable.
However, the question is twofold: how will a positive breakout in the Brent crude oil price affect African economies, and how will such a breakout benefit our oil companies?
Oil is one of the most powerful tools of trade in the world, and after the Middle East, Africa is one of the world’s largest oil producers. Further analysis sees great potential in Africa, but a lot of challenges have hindered this prospect.
Sixteen African countries are oil exporters, with 500 oil companies participating in African hydrocarbon exploration. According to the EIA, Africa’s proven oil reserves have grown by nearly 120% in the past 30 years, from 57 billion barrels in 1980 to 124 billion barrels in 2012.
In 2012, the BP Statistical Energy Survey reported that the continent produced an average of 8.8 million barrels of crude oil per day in 2011, which is just over 10% of the global output.
In November 2012, Chatham House research found that only 500 wells have been drilled in East Africa to date, compared to the 15,000 wells that exist in West Africa. In 2010, Africa’s oil production represented 12.4% of the world’s total crude oil output, with exporters achieving a higher share, at nearly 20% of the world’s total exports of crude.
Africa remains largely untapped for oil, and at present, many of the oil-producing countries with great promise are finding ways to create a safer haven for investors.
The abundant oil reserves in Africa are undoubtedly the glitter that is attracting many overseas investors. It comes at a time when minerals such as iron ore and copper, which were once economic mainstays, have reached a gradual decline.
But will a higher oil price affect the African economy negatively or positively?
Bear in mind that oil prices are still lower than they were in the late 1970s and early 1980s in real terms, if inflation is adjusted. High oil prices will affect certain African economies differently, depending on whether they are net exporters or net importers.
Oil-exporting economies have a greater advantage because an increase in oil revenues improves their balance of payments. These countries will stand to benefit from the influx of foreign revenue. It can accelerate the implementation of poverty-reduction strategies and develop infrastructure, which ultimately increases employment levels.
However, the biggest challenge of the coming boom will be to ensure that these benefits filter down to ordinary Africans.
There are only 16 net oil-exporting countries in Africa, with 38 countries being net oil importers. High oil prices in these nations will have an adverse impact on businesses, consumers and government budgets in particular. Their terms of trade could deteriorate, thereby affecting their balance of payments, which could lead to lower economic growth.
For oil-importing economies, high prices could increase import bills with adverse effects on inflation, production and employment.
In July 2009, the African Development Bank found that the real impact of high oil prices on African economies is relative. African economies are changing and significant improvements in terms of macroeconomic management are being reported, especially a reduction in inflation. Governments have passed on price increases to consumers, moderated them with subsidies and tax reductions, or have placed pressure on oil companies to keep prices down.
Revenues of the big oil companies in Africa will obviously surge. The world’s population is increasing, becoming more middle class and prosperous, buying more cars and using more oil. For example, the UK reported about 30 million cars with a population of 70 million. It is evident that Brent crude oil will be in demand in the long term, which ultimately advocates my call of a positive breakout of the long-term symmetrical triangle.

All that glitters is  not gold…

China is playing a big role in African oil through its exploration companies, like Sinopec and the Chinese National Petroleum Corporation, which are showing an increased interest in the commodity.
<div id="attachment_150" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-150" class="size-large wp-image-150" src="/wp-content/uploads/2017/04/Par1912664-1024x685.jpg" alt="" width="474" height="317" />UGANDA-CONGO-OIL-CONFLICT-FISHERMEN</div>
Duncan Clarke, chairman and CEO of Global Pacific &amp; Partners, and a leading authority on African oil, says that most of the BRICS nations, along with emerging economies such as Korea, have an interest in Africa. He says there are around 500 companies involved in upstream oil production on the continent, many opting for joint venture arrangements. Africa’s long-term oil and gas potential is huge but politics may hamper growth.
FORBES/FOCUS oil in Africa “The terms are getting tougher and what may appear demanding on the investor actually smacks of resources nationalism,” says Clarke. Political instability in the East Africa region has impeded any major developments over the past 20 years in countries like Somalia, Mozambique, Uganda and Ethiopia, according to research analyst at Frost and Sullivan, Ross Bruton. Aside from political instability, there is inadequate infrastructure, especially at ports. Refining capacity is lacking in many countries, including those with a long-established track record of reliable oil reserves such as Nigeria and Angola, according to Bruton. South Africa—which has no oil reserves to speak of—currently holds 80% of refining capacity in Southern Africa.
<h3>SOUTHERN AFRICA:</h3>
Southern Africa is not a major oil producer, with the notable exception of the Cabinda region of Angola which has reserves of over 5 billion barrels and surpassed the 2 billion barrel per day average production of African oil heavyweight Nigeria in 2008.
Oil companies with clout in Angola include the parastatal oil company Sonangol, Texas-based ExxonMobil, France’s Total and British Petroleum. California-based Chevron was the first multinational to be fined by an African country when Angola punished it for unsound environmental practices in 2002.
The Southern African scene may well change in the future through the discovery in July of 11 billion barrels of oil reserves o‑ the Namibian coastline. One of the key companies involved is a subsidiary of London-listed Chariot Oil, Enigma Oil &amp; Gas. “Much deep oil opportunity exists o‑ the coasts of Namibia and Angola,” says Bruton.
The DRC is a smaller oil producer with Total and Italian Oil Company Eni dominating. ExxonMobil and Chevron are also there. Mozambique is another exciting Southern African energy producer, according to Bruton. The country is a major developer of natural gas and supplies South African oil and gas heavyweight Sasol. Most recently, Mozambique’s oil authority announced that the US-based energy company, Anadarko Mozambique, had discovered a 200 billion cubic meter gas resource in the mineral-rich Rovuma basin, where Anadarko has significant investments.
<h3>EAST AFRICA:</h3>
Few strides in oil development have been made in East Africa because of political instability in the region. But the region has vast oil potential. Somalia alone has estimated reserves of around 10 billion barrels, but the country’s troubled political climate is scaring o‑ investment. Tullow Oil, which operates in 15 African countries, is the only significant energy company with interests in East Africa. Its most notable holding is in Uganda’s Lake Albert
Rift Basin where 1.1 billion barrels have been discovered, with a further 1.4 billion expected to be found. Tullow says that it could produce as much as 200,000 bpd in the country, but has run into difficulties. Some exploratory e‑ ort has been made in relatively stable Kenya, but with little success to recommend the country as a viable energy developer. However, mineral discoveries in Mozambique have spurred hope that black gold is lurking underneath Kenyan soil. Media reports from the country claim that small, independent developers are selling their licenses to Western-based energy giants, although details on these deals are not forthcoming.
<h3>WEST AFRICA:</h3>
Nigeria has the biggest explored oil reserves in sub-Saharan Africa with a presence by most of the major oil producers. It has an estimated 37 billion barrels worth of petroleum compared to Angola, which is the next biggest oil producer in Africa at 13 billion barrels. Both countries are restricted to 2 million bpd production by OPEC. Ghana is another potential rich producer in West Africa—40 billion barrels worth of reserves are estimated and these are located deep at sea. Bruton says attention has turned towards Ghana since the Gulf of Mexico oil spill disaster, which has prompted more regulation on deep sea oil exploration in the northern hemisphere. Tullow operates in Ghana’s Jubilee Fields, which are estimated at 1 billion barrels. Production is seen reaching 120,000 bpd this year.

Tag: Petroleum

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