The single-largest structural shift in the global energy market over the past decade has been the emergence of shale gas and oil in the US. The beginning of production in states like Texas, North Dakota and Pennsylvania has reduced imports for one of the world’s largest energy consumers. This has had significant impacts for large-scale producers from Africa, in particular, who are seeing their trans-Atlantic hydrocarbons exports drop and are having to look for new potential customers amidst an environment of declining oil prices (see Energy chapter).
US Output
The post-9/11 US reliance on African exporters, reaching a peak of 20.34% of US oil imports in 2007, has sharply reversed as US output ramps up.
US shale gas production grew from 2.12trn cu feet in 2008 to 11.42trn cu feet in 2013, with the states of Pennsylvania and Texas accounting for most of the increase. Pennsylvania saw its production levels rise from 1bn cu feet to 3.07bn cu feet between 2008 and 2013, while production in Texas rose from 1.5bn cu feet to 3.88bn cu feet in the same period.
According to the US Energy Information Administration 2014 “Annual Energy Outlook” report, total US natural gas consumption will grow from 25.6trn cu feet in 2012 to 31.6trn cu feet in 2040, with the shale gas share of total natural gas production increasing from 40% in 2012 to 53% in 2040.
While Algeria is buffered from the full fallout of lower US demand due to its close ties with European markets, it is far from immune. The twin effects of lower crude prices and dropping demand from a major importer are reducing the country’s room for fiscal manoeuvrability (see analysis). However, the prospect of domestic shale production and rising European and Asian demand may help Algeria stimulate an increase in export revenues over the medium term
Strategic Interests
At the start of the millennium, all indications were that the US had become an increasingly large consumer of African oil and gas given its declining reserves of conventional gas. Rising from 15% of imports in 2004 to a peak of 22% by 2006, African oil exports to the US remained around the 19% mark until 2010, according to figures published by the International Energy Agency.
In particular, six key African suppliers – Algeria, Angola, Cameroon, Congo-Brazzaville, Gabon and Nigeria – ramped up their combined trans-Atlantic exports from 1.79m barrels per day (bpd) in 2003 to a peak of 2.47m bpd in 2007. While this fell slightly to roughly 2.1m bpd by 2010, the six countries’ combined exports to the US grew 40% from 2001 to 2010, outpacing the 16% rise in total US oil imports.
Dropping Trade
However, all African producers have been equally affected by the start of US shale production, with the order of suppliers left intact if sharply reduced, dominated by the big three of Nigeria, whose US exports dropped from 1.02m bpd in 2010 to 281,000 bpd in 2013 and 102,300 bpd in 2014; Angola, with exports that dropped from 393,000 bpd to 216,000 bpd; and Algeria, from 510,000 bpd to 115,000 bpd.
In total, US shale production has cut US-African trade from around €73.5bn a year in 2008 to an expected €11bn in 2014, according to a May 2014 study on the impact of US oil fracking on Africa by the UK Overseas Development Institute. The report estimates that African exporters have lost earnings of €1.1bn in gas and €23.5bn in oil from the US’s development of its shale oil infrastructure over the past decade – €10.3bn in Nigeria, €4.4bn in Angola and €3.68bn in Algeria alone.
New Clients
Amidst such a radical reshaping of trans-Atlantic oil flows, African producers have looked to other buyers to pick up the slack but have had to offer discounts to expedite sales. European refineries expanded their imports of cheaper, light sweet crude, although Asian buyers, China and India in particular, have been crucial in bridging the gap in demand for West African crude in particular. Equally affected by falling US demand, North African producers have capitalised on their closer proximity and infrastructure links to European buyers to expand their market share.
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