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Energy, construction and services to benefit most from Sao Tome and Principe’s oil industry [ 2007-09-17 ]


Washington, United States, 17 Sept – The oil boom in Sao Tome and Principe, expected to take place over the next few years, is mainly expected to benefit the energy and water, construction, retail and services sectors, according to a study published by the International Monetary Fund (IMF).

The statistical projections of four IMF economists – Ulrich Klueh, Gonzalo Pastor, Alonso Segura and Walter Zarate – show that the Sao Tome economy will see average annual growth of 10 percent in teh period between 2001 and 2021, if “modest” prospects for oil exports come to fruition, and the government is successful in craeting "links" that make it possible for revenues to be spread to the rest of the economy, allowing for the development of other sectors.

“In the case of Sao Tome and Principe, a comforting development is that the best practices - employment, added value, investment – are being discussed in a wide-ranging manner in the context of exploration of the Joint Development Zone (JDZ) with Nigeria and in the Economically Exclusive Zone,” the authors of the study said.

The economists’ projections are based on the discovery in the JDZ of a commercially viable oil well, with reserves of 500 million barrels.

In 2021, production is expected to total 70,000 barrels per day in the JDZ, after reaching a peak of 160,000 barrels in 2015, with Sao Tome netting 40 percent of revenues, under the terms of a production agreement signed with Nigeria.

In this scenario, the Sao Tome economy will be worth approximately US$8.4 billion in 2021, making it one of the country’s with highest per capita income on the African continent, considering its small population.

The sectors to benefit most, according to the authors, would be energy and water (average growth of 11.5 percent between 2001 and 2021), construction (9.9 percent) and retail and services (9.4 percent), as well as the oil sector itself (37.2 percent).

According to the IMF document, expansion of retail and services would be “very important for the economy, given their links to other sectors of the economy and intensive working practices.”

“Our projections show that the oil and mining sector becoming predominant in the economy, but secondary (energy and water, construction) and tertiary sectors (retail and services, including tourism) also increasing their weighting in total production, at the expense of agriculture and manufacturing industry,” they said.

In 2001 agriculture and manufacturing were the most important sectors for the economy, accounting for 15.7 percent and 34.8 percent, respectively, and these are expected to fall to 5 percent and 21.3 percent of the total, if projections for the development of the oil sector are correct.

The projections also point to a reduction of the weight of the State on the economy, from 6.8 percent to 3.6 percent.

“The excellent policies for the expected oil boom should involve some type of government involvement in promoting local content to encourage oil revenues to be channelled into the economy," the four economists said.

“Unfortunately,” they added, “this is not always the case, with countries such as Nigeria for example, still dealing with how to profit substantially from development of their domestic oil and gas production.”

Compared with oil giants such as Angola and Nigeria, which have much potential, Sao Tome “may come to have a single opportunity to focus on investment projects” in activities directly and indirectly related to the oil industry, the authors of the study said. (macauhub)

http://www.macauhub.com.mo/en/news.php?ID=4055