Africa’s upstream investment rebounds, hits $41bn forecast

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Africa’s oil and gas sector is set for a fresh wave of investments in 2026, with offshore projects expected to power the continent’s projected $41bn upstream spending, according to the State of African Energy 2026 Outlook Report released by the African Energy Chamber.

The report obtained by our correspondent on Friday showed that Africa’s share of global exploration and production expenditure will rise as international and indigenous operators deepen activities across deepwater and ultra-deepwater basins.

This comes at a time when global capital spending is forecast to edge up to $504bn in 2026, slightly above the $500bn projected for 2025.

According to the report, E&P spending in Africa has steadily recovered over the past three years following the crash triggered by the COVID-19 pandemic in 2020. The continent is expected to attract $40bn in 2025, before rising to $41bn in 2026, signalling a renewed appetite for upstream investment.

However, the chamber noted that while African spending is on the rise, global investment trends remain conservative. Many international oil companies are prioritising balance-sheet repair, cash preservation, and shareholder returns over aggressive reserve replacement, a pattern that has slowed spending growth despite strong cash flows.

It noted that countries such as Nigeria, Angola, and Libya are projected to receive the bulk of new African capex, supported by their large hydrocarbon reserves, existing infrastructure, and ongoing reform efforts. Analysts warn, however, that political stability and predictable regulatory frameworks will be key to sustaining investor confidence.

The report read, “Global E&P capital spending (capex) is expected to reach $500bn in 2025, with Africa accounting for $40bn. Upstream capital spending has been on the rise in the continent over the past three years, recovering from the pandemic-induced lows of 2020.

“However, globally, growth rates have materially lagged increases in upstream cash flow, as companies have prioritised financial objectives over reserve replacement and production growth. This cautious approach reflects a broader trend within the industry globally, where operators are focusing on improving balance sheets and returning capital to shareholders rather than aggressively pursuing new E&P opportunities.

“In 2026, global E&P capital spending is expected to reach $504bn, with Africa having $41bn.

This anticipated increase in capex represents a marked recovery over the expenditure levels of 2023 and 2024, signalling a renewed interest in investment in the African oil sector.

“Key producing nations such as Nigeria, Angola, and Libya are expected to attract a significant share of these investments, driven by their substantial hydrocarbon reserves and established production infrastructure. Political stability and favourable regulatory environments will be crucial to attract further investments in these regions.”

The chamber forecasts that onshore spending will remain stable at around $22bn in 2026, as operators focus on optimising production from mature fields rather than embarking on new large-scale expansions.

In contrast, offshore investment is expected to surge to $19bn in 2026 and grow at a 6.6 per cent compound annual growth rate through the forecast period. Though Africa accounts for a relatively small slice of global offshore capex, the continent is projected to record stronger growth than other regions.

“Onshore spending in Africa is expected to remain relatively stable. It is projected at $22bn in 2026. This reflects a cautious approach among operators as they manage assets and optimise production from mature fields. Companies are likely to focus on enhancing efficiencies and minimising costs rather than pursuing aggressive expansion in onshore operations.

“In contrast, offshore spending has experienced significant growth, with estimates of $19bn in 2026. Growth will continue through the forecast, rising at a compound annual growth rate of 6.6 per cent. Although Africa represents a small portion of the global offshore capex, the region will have stronger growth compared to other regions, highlighting a renewed interest in offshore exploration and production activities.

“The surge in offshore spending can be attributed to several factors, including advances in technology, favourable geological conditions, and the potential for substantial discoveries in deep-water and ultra-deep-water regions. Companies will continue investing in projects, positioning themselves to capitalise on favourable project economics in the African offshore,” it added.

The push into deepwater and ultra-deepwater basins is being driven by improved technology, favourable geology, and increased appetite for high-impact exploration. New discoveries in countries such as Namibia and Tanzania are also expanding Africa’s attractiveness to global explorers.

The report further highlighted a major restructuring in Africa’s upstream ownership patterns. While IOCs continue to dominate the supply chain, many are exiting mature or non-core assets, creating space for NOCs, regional independents, and new entrants.

Nigeria and Angola, in particular, are witnessing increasing operatorship by indigenous companies. This shift aligns with local content policies that have become central to upstream sector development across the continent.

Local content frameworks have enabled new service providers to emerge and created thousands of jobs; Ghana alone recorded 7,000 direct oil and gas jobs, the chamber noted. Yet challenges persist, including limited industrial capacity, skills gaps, financing constraints, and concerns over technology transfer.

“Local content implementation also faces significant challenges. Many African countries lack the industrial base, technical skills, and financial resources needed to fully meet local content targets. Indigenous companies often struggle to compete with established international service providers due to limited access to capital, technology, and management expertise.”

A business, investment, infrastructure and property correspondent currently with The PUNCH, Aina is a media professional with over three years experience

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