Mixed views on impact of Brexit for African oil and gas

oil pumpjack skeezeIn the short-term the impact of Brexit on African oil and gas is not expected to be significant. (Image source: skeeze)“Brexit means Brexit”, according to Theresa May, the UK’s newly appointed prime minister

Though what this means for trade still remains speculative, experts watching the African oil and gas industry believe that Brexit will not significantly affect the sector.

Yann Alix, a partner in leading global law firm Ashurst, who has a focus on deals and projects in the African oil, gas and mining sector, said that while currencies and stocks tumbled in a number of African jurisdictions immediately after the referendum result, “Brexit is unlikely to have a significant impact on the African oil and gas industry”.

Stuart Carter, partner and head of oil and gas at European law firm Fieldfisher, agrees, but argues that in the longer term some effects may be felt. “The UK could be subject to some tariffs on oil and gas from the EU, so may be more likely to import petroleum from Africa”. However, Carter stresses that this is still highly unlikely.

Speculation over the prospect of a second Scottish independence referendum brought about by the Brexit result might also prove to have an effect on the African oil and gas industry. Carter believes that projects could be delayed in the Scottish area of UKCS (United Kingdom Continental Shelf) and Africa could “potentially be one beneficiary” from a slowdown in the UKCS as teams become available for other projects”.

Leaving the European Union has implications of fewer trade restrictions for UK business from the EU, and this could make working with African trading partners “more attractive”, according to Andrew Speers, CEO of Petroplan, oil, gas and energy recruitment specialists, which have offices in South Africa.

However, against the backdrop of a UK withdrawal from the EU is the upcoming “African Union passport”. The passport will grant free visa-free movement to citizens of all 54 member states. Set to be launched at the AU summit in Rwanda later this month, the passports will be initially issued to heads of state and senior officials, with the aim to distribute them to all African citizens by 2018.

News of the passport is welcomed by those watching the industry. Speers believes this step towards “Pan-Africanism” will encourage the mobility of talent in Africa and encourage organisations to expand projects in territories they have been unable to invest in.

Alix says the passport “sends a positive message to investors” and will be particularly helpful for cross-border projects. But the high number of expatriates employed in the sector will make the impact “limited”, he says.

But the passport could have a negative impact as well. Carter warns it could “potentially impoverish” those African countries that cannot offer competitive financial rewards to its educated workforce, causing many to “up sticks and move away”. He wants to see mutual support across African nations to ensure that all nations prosper from the increased mobility.

David Mpanga, a Uganda-based partner at Bowman Gilfillan, a leading law firm headquartered in South Africa, is skeptical about the success of the passport project. “While the idea is a good one, implementation across the 50-plus states will be fraught with practical difficulties.”

Mpanga points to the “slow and sporadic” lifting of travel barriers between states that are in close proximity and in functional regional blocs such as the EAC (East Africa Community) and the ECOWAS (Economic Community of West African States).

He says: “I do not expect that the far less cohesive African Union will be able to pull off a passport project in a way that has a measurably positive effect on the oil and gas sector in the short or even medium term”.

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