# **1. Introduction**

About a decade ago, as a result of new petroleum finds and with commodity prices at all-time highs, a group of countries in Sub-Saharan Africa were identified by experts as being on the brink of becoming wealthy from their oil or gas deposits. These countries went from being described as resource poor to “prospective exporters” (International Monetary Fund, 2012a) or “new producers” (Chatham House, 2019). Such hopes were reflected in policy documents published by major institutions such as the Africa Progress Panel (2013), African Development Bank (AfDB) (2015) and the International Monetary Fund (IMF) (2012). Our analysis, which covers the period from 2001 to June 2020, looks back at the historical oil and gas sector forecasts of international organizations (namely the IMF and World Bank), governments and companies across 12 countries, and compares them with the actual results that emerged in terms of resources discovered, sector development and government revenues.

We find that all 12 countries fell short of the forecast expectations. The economic outlook of these countries has changed following these disappointments, especially following the slump in commodity prices that began in late 2014. Our study takes stock of the lessons and provides some recommendations to help countries navigate the path to becoming resource rich without succumbing to the ‘presource curse’ (Cust and Mihalyi, 2017; Frynas and Buur, 2020). These lessons and recommendations are even more important after the recent price crash, with oil prices reaching a record low in March 2020.<sup>1</sup>

# **2. Countries of focus**

We identified our focus countries by using two criteria. The first criterion measures whether countries are truly new producers, as opposed to established ones. We defined such countries as those for whom the share of oil and gas resource volume discovered between 2001 and 2018 represents at least three-quarters of the total oil and gas resource volume discovered since 1945 in said country (based on data from Rystad Energy’s Ucube). This criterion excluded all countries that were already deemed significant producers, while allowing us to include countries such as Ghana, Mozambique and Tanzania, which already had modest production but made potentially transformational discoveries. Using resources found rather than proven reserves allowed us to include countries like Liberia, whose oil finds were ultimately found to be commercially unviable.<sup>2</sup> The second criterion measured whether the resources found would, if extracted in their totality at the price average over the period, be large enough to significantly alter the country’s economic future. We measured this by multiplying the total size of the resources found between 2001 and 2018 by the average Brent oil and US gas prices from 2001 to 2018 measured in 2000 real USD.<sup>3</sup> We divided this value by 20 years to account for the fact that the GDP reported is for a single year, whereas production typically happens over an extended period of 15 to 30 years.<sup>4</sup> Where the resulting amount is equivalent to at least 5 percent of the country’s GDP in 2000 (before our study period), we included the country in our sample.<sup>5</sup> This allowed us to distinguish between countries

> 1 Our study is based on information that was public up to June 26, 2020.

> 2 This measure comprises of proven, probable, and possible recoverable economical volumes at the time of discovery, as measured by Rystad Energy’s Ucube database.

> 3 The average Brent oil price was $52.4 per barrel (bbl) and average US gas price was $3.87 per million British thermal units (mmBtu).

> 4 This is clearly a simplification as it ignores what amounts of resources found are recoverable, the costs and profits of extraction, etc. However, it provides a ballpark estimate of their maximum revenue potential. 5 We had to use 2011 data for South Sudan because it did not exist before then.

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