A natural fit: OBG talks to Geoffrey White, Director and CEO, Lonrho

To what extent is the build and operate model an efficient way to encourage private investment in Africa’s transport networks?

WHITE: Africa suffers from a massive lack of infrastructure. Some infrastructure is being developed against off-take agreements for natural resources on a government-to-government basis with China, however, there are still significant opportunities for the private sector to address niche markets that are commercially attractive. In the energy sector, for example, the commercial model is appealing, where infrastructure can be built by private operators and then leased to large oil-related companies. This type of foreign direct investment (FDI) results in development, and governments can benefit without having to invest public funds.

Lonrho has an oil services logistics terminal in Equatorial Guinea, and is currently building a similar facility in Ghana while considering two more projects in eastern Africa. The oil and gas industry is an important driver of economic development in Africa given that as much as 25% of the world’s oil and gas resources are found there. Proper infrastructure for developing these resources is crucial for the continent’s economic growth.

Most ports in Africa are congested and struggle to meet existing demand, so they don’t have the space or capacity to take on a new industry on the scale that the growing African oil and gas industry will require. There is an immediate need to develop the infrastructure and facilities for this new industry. Governments are supporting the infrastructure build, since appropriate facilities allows the oil companies to produce more oil more quickly, increasing state revenues.

How far do you expect demand in Ghana’s nascent oil and gas industry to grow in the coming years?

WHITE: Ghana’s initial finds are expanding at a steady pace. The resources located offshore West Africa are still in the early stages in terms of exploration and production, and as these expand, the country’s output will only increase. Countries see oil and gas as a strategic economic leverage, and consequently want to have their own industrial production capacities.

Ghana benefits because it is an attractive location for FDI and is a country where companies and investors are keen to develop projects. In Ghana we are planning to build an international rig repair facility as part of the oil services terminal that will be capable of servicing rigs from all over West Africa. This facility is currently missing in West Africa, and oil rigs have to be towed either to Las Palmas in the Canary Islands or down to Cape Town – a 25-day tow in either direction – for maintenance. There is inevitably a number of services, such as rig repair, that will service the whole of West Africa and Ghana, and with the right infrastructure, Ghana has the potential to transform itself into a focal point for all of West Africa’s oil and gas industry.

When can the oil services port be expected to come on-line, and how will it affect the local economy in terms of employment and skills development?

WHITE: We plan to have the free trade zone and the concession agreements for the port’s development signed before the end of 2012. We have completed the environmental assessments, employment, relocation study packages and site surveys. The tender for construction is down to a shortlist of three, and the site selection process, which began with 10 locations, has concluded with the selection of Atuabo as the port’s placement. Next follows a two-year construction phase before the port begins operating.

Atuabo is a rural area, so this project will be a significant economic stimulus to the Western Region. The concession area is 2000 acres, which means we will have not just logistics, but also ancillary oil-related industries attracted to the area, and Atuabo will become a central focus for West Africa’s oil industry. Although from an employment perspective we will be starting with a largely unskilled workforce, we are already designing training programmes to educate and prepare local employees to work according to oil industry standards.