Foreign investments in mining, oil and gas to drive future growth

Located between Liberia and Ghana in the northwest corner of Africa, the predominantly agricultural Côte d’Ivoire, with its population of 24 million, is now also emerging as one of the continent’s leading players in mining and in oil and gas production. Together, these two industries represent 25% of the country’s GDP though they are still in their infancy, relatively speaking, and production levels are modest – more on a par with Mali and Burkina Faso than with big guns like South Africa and Zambia.

Recent events have not made it easy for Côte d’Ivoire to expand in this sector. But after a decade-long Civil War that ended in 2011 and had all but crippled the economy – further burdened by embargoes placed on the country in 2005 by the UN which have only recently been lifted – things are finally beginning to look brighter. In 2014, 140 exploration permits and 11 production licenses were issued. Gold, a major mining product, rose from 14 tons in 2012 to 25 tons in late 2015.

Jean-Claude Brou, the country’s Minister of Industry and Mining, has evaluated the current situation in this area. He acknowledges that for many decades the real force behind the economy has been agriculture, with Côte d’Ivoire holding its position as the world’s largest cocoa producer and coffee and palm oil exports continuing to flourish.  The mining industry, in turn, was given a real boost with the appearance of the revised 2014 Mining Code. “In order to create the conditions for increased investment in the sector it was absolutely necessary to review this code,” Mr. Brou explains. “The operators require a good return that provides an adequate fiscal income for mining activity. It has to be an economic activity, and the revised code allows the communities to benefit from the output from this, providing a compass for investors, giving clear and specific references to environmental constraints, the dimensions related to community development and governance framework.”

The Chamber of Commerce’s role, meanwhile, is seen by Mr. Brou as a partnership between the state and operators, aimed at strengthening relationships with all investors. “This department serves as a crucible for the promotion and development of the sector,” he observes.” It also plays a role in job creation and is especially beneficial for agriculture because it engages in added-value transformation. Agribusiness is very important. The Chamber of Commerce acts as a support to other sectors as well.”  

The country boasts a rich and lucrative abundance of minerals that include iron, nickel and gold – “more gold, in fact, than neighboring Ghana and Mali,” Mr. Brou is quick to point out.

“Our iron reserves total 4 billion tons,” he adds, “and we have nearly 260 million of laterite nickel and 60 million tons of copper nickel.”  Diamond mining is also a major industry in Côte d’Ivoire and a recently successful audit into this sphere of operations ensured integration into the Kimberley Process which has greatly benefited progress in extracting the much-treasured mineral.

Overall, it’s gold that’s proving one of the most potentially progressive areas, and over the next two years one of several interested international companies, Amara Mining, is scheduled to invest around $430 million in building one of the continent’s largest gold mines at Yaoure, where they expect to extract over 325,000 ounces a year (spot gold is currently trading at around $1,200 an ounce).

Mr. Brou hopes that U.S.-Ivorian business relations, in particular, will continue to expand as the country handles its international dealings with a new dynamism and strengthens its bonds with all its investors.  At the same time the country is carefully monitoring the standard of all its industrial and agricultural products in line with a 2013 quality control ruling.

Oil and gas investments
In spite of a series of recent severe problems, Côte d’Ivoire’s oil and gas industry is also now tentatively moving ahead. Its guiding hand is the Petroci company, founded in 1972 and re-structured 23 years later into Petroci Holding, with three subsidiaries: Petroci Exploration-Production which handles upstream gas and oil activities; Petroci Gaz, which is responsible for the natural gas sector; and Petroci Industries-Services which manages all other related services. Currently Petroci offers up to 49% interest to private sector investors. It also covers the development and maintenance of the main data base for the country’s oil assets.

The greatest of Petroci’s setbacks was a 75% loss of revenues in 2015 when global oil prices plunged in just two years (2014-2015) from around $110 a barrel to just $30 a barrel. To ward off total financial disaster and safeguard its future the company accordingly agreed to sell its petrol distribution network to Puma Energy, a Swiss-based private firm. As a prelude to this, and following the recommendations of a thorough audit, 50 of Petroci’s 600 employees were made redundant and a further 150 are expected to follow. Indignant workers recently launched a three-day strike protest at these radical steps, but from the management’s viewpoint their tactics have paid off: projected earnings have now reached $30 million, a figure that’s expected to put Petroci back on the right track economically.

The newly streamlined industry has further ambitions to boost its output, says managing director, Ibrahima Diaby. “From a modest production of around 36,600 barrels a day we now expect to increase this to 100,000 and then double that figure by the end of 2020, thanks mainly to resources that have been discovered in our territorial waters.”

Such an achievement would make Côte d’Ivoire a viable competitor to neighboring Ghana who are aiming at an output of 250,00 barrels by 2021. He’s optimistic about the company’s future despite the recent withdrawal of their powerful Russian partner Lukoil, and feels the government’s decision to privatize Petroci will help it regain its former stature thanks to the Puma Energy intervention which has helped the company acquire several service stations.     

Mr. Diaby sees Petroci as performing an important social and economic role for the country during the next half decade. “One of our key projects is the future acquisition of an offshore gas field, which will provide a significant supply of electricity to the country’s business centers.”  His strategy is to concentrate on the exploration and production of petroleum and maintain the presence of petroleum oriented companies in off shore activities. “These measures don’t stem from me,” he’s careful to explain, “but from the recommendations of a variety of different official audits carried out in 2013 and 2014.”

Mr. Diaby also aims to relaunch natural gas projects with a view to continuing the supply of thermic centers some of which - such as those of Contourglobal and Starenergie - are either already in operation or about to be set up. Other companies, including RAK and Foxtrot, are also currently involved in marketing Côte d’Ivoire petroleum products, and, most significantly, two U.S. giants, Anadarko and Exxon Mobil are about to invest $30 million and $400 million, respectively, in key oil projects for which productive partnership contracts (CPPs) have already been signed. Anadarko will operate in an area of 1,028 kilometers in deep waters south of Abidjan. Exxon, making a welcome return to the Côte d’Ivoire after a 32-year absence, is providing an investment to cover initial exploratory periods in various areas. These ambitious new projects all augur well for Petroci and the country’s future.