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The impact of COVID-19 on African Oil Sector: A special report by AFREC on the implications on African Countries

The impact of COVID-19 on African Oil Sector: A special report by AFREC on the implications on African Countries

01 Jun 2020

The Coronavirus (COVID-19) is bringing unprecedented changes to the world.

Its impact and the necessary response of governments will mean that the next one to two years at least will be very challenging for economic and social development in all countries of the world. One of the sectors that will see significant challenges is the oil sector, globally and in Africa.

For African crude oil exporting countries, the expected fall in demand means that exports of crude oil in 2020 will be down by at least 10% on average compared to recent years. Prices are also expected to fall. At $40/barrel or lower, the value of African oil exports could fall to levels last seen 20 years ago. These lower prices coupled with reduced output could see Africa’s larger oil producers facing $20 billion or more of lost oil value in 2020. For consuming countries, the low per capita consumption of oil for transportation in many African countries will not significantly gain from lower prices which limited by low demand and a very likely limitation on storage.

This report looks at the impact of the COVID-19 pandemic on production, revenue and demand across Africa. It does so by first examining the sector in Africa, before looking at the global economic situation and the response taken across the oil sector. It then considers the impact for Africa as a whole and for specific regions and example countries. It concludes with some possible opportunities as well as some challenges for the future.

The report uses high-level analysis to illustrate the potential impact of what might happen to oil production and consumption in Africa in 2020 and beyond. It does not make specific detailed predictions of what will happen in individual countries, nor will the identified actions and opportunities apply to all countries. The actions and recommendations proposed in this report need to be studied in details at a country level. The report aims to raise awareness to help facilitate the correct choice of action in all countries, now and in the longer term.

The evolving situation provides a further opportunity for countries with an oil sector to explore:

  • How economies can be diversified away from an reliance on oil;

  • How to maximise the local value added of the whole oil chain including exploring the merits of:

    • Investment in refining facilities;

    • Increasing cross boarder trading between African countries and investment in its relevant infrastructure; and

    • Reducing oil demand in the power sector by expanding renewables.

All countries can take this opportunity to explore how to improve the efficiency of oil consumption; where possible, take the advantage of lower prices to see if fuel subsidies can be reduced or eliminated; and strengthen National Energy Information Systems to support decision making and investment at the national level.


The African Energy Commission (AFREC) is a specialized agency of the African Union in charge of developing, coordinating and harmonizing the energy policies with an objective of protection, conservation, development, rational exploitation, commercialization and integration of energy resources on the African continent. The report uses the AFREC’s Africa Energy Database as the main source of information for Africa. This reflects the work underway across African countries to enhance their energy data.

Source African Union | AFREC
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Date 01 Jun 2020
 
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