When it comes to emerging markets and oil production, most investors have turned to Brazil's vast offshore salt fields as the world's next huge find. It's true that these deepwater sites are full to the brim of hydrocarbons and represent a great boon to Brazil's economy. Petroleo Brasileiro (NYSE:PBR) has become a market darling as investors have sought to cash in on the fields. Equally rich, but less known, is the emerging oil story in Africa. As worldwide oil consumption continues to grow, these abundant reserves have the potential to be a game changer for the continent. With an estimated $7.3 trillion worth of oil in East Africa alone, investors should take notice.
TUTORIAL: Economic Indicators To Know

Long-Term Potential
Africa is a region where most investors never tread. Years of corruption, in-fighting and violence have tainted perceptions of the continent. However, while some places do experience strife, Africa as a whole has become more politically stable. The regions rich abundance of natural resources is leading to its revival. These resource dollars are beginning to see their way back into African infrastructure and telecommunications, thus increasing growth even further. While it's mineral resources have powered its past and present, its new found oil reserves will power its future.

Africa's proven oil reserves have increase by 116%, steadily growing since 1989. These reserves have grown from nearly 59 billion barrels to 127.5 billion barrels, today. Overall, the region is host to 13% of the world's oil reserves. Deepwater fields off the coast of West Africa are home to some of the largest and most prolific oil and gas fields discovered over the past two decades. Some energy analysts have also postulated that these sites could dwarf Brazil's offshore potential. In addition, exploration is taking place in a number of other countries that aim to increase their output or become first time producers. Countries such as South Africa, Mozambique and Tanzania are working on new wells to begin oil production. Kenya has seen a "land grab" in recent years, as E&P firms have looked towards the politically stable nation and the oil rich Somalian Plate. The International Energy Agency, estimates that by 2035, 20% of the world's total oil production will come from sources that had yet to be found, including those in Africa.

Africa's oil future lies with exporting its harvest. China's hunger for commodities has it already attracted to the region. In 2009 Africa's oil exports to China represented 60% of total Sino-Africa trade. Currently, a variety of nations including, Angola, Chad, The Democratic Republic of the Congo (DRC) and Equatorial Guinea are net oil exporters.

Playing the Boom
For retail investors, Africa represents the final frontier. Funds like the SPDR S&P Emerging Middle East & Africa (NYSE:GAF) and iShares MSCI South Africa Index (NYSE:EZA) can provide access to the continent and its future prosperity. For those who want to bet directly on Africa's energy resurgence, here are a few picks.

Ghana's reserve estimates are about 5 billion barrels of crude oil. A few foreign companies hold significant acreage in this region including U.S. producers Anadarko Petroleum (NYSE:APC) and Hess (NYSE:HES). However, for a pure play on Ghana's growth, newly listed Kosmos Energy (NYSE:KOS) fits the bill. The company's Jubilee offshore field promises to be a monster.

Despite terrorism and fears of violence, Nigeria's massive oil reserves are too good to pass up. Majors Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX) and France's Total (NYSE:TOT) have all taken the plunge into the nations fields. Investors may also be interested in English firm Afren PLC (OTCBB:AFRNF). The company has purchased a variety of smaller fields off of the Nigerian coast that were discovered by major international oil companies, but deemed too small for the majors to profit from.

The Bottom Line
Africa is quickly moving to become the next oil and gas superstar nation. These huge finds have the ability to transform Africa's fortunes and its status in the investing world. For investors, adding some of Africa's energy to a portfolio can be a great long term play. The previous stocks, along with Tullow Oil (OTCBB:TUWOY) are great ways to add that exposure. (For additional reading, see Evaluating Country Risk For International Investing.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  3. Mutual Funds & ETFs

    ETF Analysis: BioShares Biotechnology Products

    Learn more about the BioShares Biotechnology Products fund, an exchange-traded fund that is focused on producers of FDA-approved drugs.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraShort Nasdaq Biotech

    Learn more about an innovative inverse-leveraged sector exchange-traded fund, or ETF, the ProShares UltraShort Nasdaq Biotechnology fund.
  6. Chart Advisor

    Value Stocks Offer Stability in a Volatile Market

    With volatility on the rise, investors are turning to segments of strength such as value stocks. We'll take a look at several ETFs that could be worth a closer look.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Market Vectors EM High Yield Bd

    Learn more about the Market Vectors Emerging Markets High Yield Bond ETF, a fund dedicated to subinvestment grade foreign debt issues.
  10. Mutual Funds & ETFs

    ETF Analysis: First Trust Tactical High Yield

    Find out more about the First Trust Tactical High Yield fund, a debt security-focused ETF designed to produce high income.
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. Lion economies

    A nickname given to Africa's growing economies.
  6. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!